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Name, Address and Date of Birth |
| |
Position(s) Held with Trust |
| |
Term of Office and Length of Time Served* |
| |
Principal
Occupation(s) During Past Five Years |
| |
Number of Funds in Fund Complex Overseen By Trustee |
| |
Other Board Memberships Held During Past Five Years by Trustee |
|
INDEPENDENT TRUSTEES* | | | | | | | | | | | | | | | | |
J.
Scott Coleman, CFA Birth Year: 1960 |
| | Trustee | | | Since 2017 | | | President and Managing Partner of Woodland Park Consulting, LLC since 2017. President and CEO of Optimum Fund Trust from 2011 to 2015. President of Delaware Distributors from 2008 to 2015. Executive Vice President, Head of Distribution and Marketing, Delaware Investments 2008 to 2015. In addition, Head of Macquarie Investment Management EMEA Distribution from 2012 to 2015. Managing Director at Goldman Sachs & Co. from 2001 to 2008. | | |
10 |
| | Osterweis Capital Management since May 2022, Optimum Fund Trust from 2011 to 2015. | |
Nicholas Marsini, Jr. Birth Year: 1955 |
| | Trustee, Chair of Audit Committee |
| | Since 2017 | | |
Retired since 2016. Regional President of PNC Delaware from 2011 to
2016. Executive Vice President and Chief
Financial Officer of PNC Global Investment
Servicing from 1997 to 2010. |
| |
10 |
| | FundVantage Trust, Third Avenue Trust, Third Avenue Variable Series Trust. | |
Gregory
E. McGowan Birth Year: 1949 |
| | Trustee | | | Since 2017 | | | President and CEO, GEMPENN Global Consultancy, Inc. since 2016. Senior Strategic Advisor, Franklin Templeton Investments in 2016. Executive Vice President, Director and General Counsel of Templeton International, Inc. from 1992 to 2016. Executive Vice President, Secretary and General Counsel of Templeton Global Advisors Limited (a Bahamian corporation) from 1992 to 2016. | | |
10 |
| | Lifestar Holdings (Formerly Global Capital PLC a Malta Public Company), Franklin Templeton Sealand Fund Management Co. Ltd., China Life Franklin Asset Management Company Limited, Templeton Investment Counsel LLC, Franklin Templeton Trustee Services Private Limited (India), Franklin Templeton International Services S.A. (Luxembourg), Franklin Templeton Investments (Asia) Limited, Franklin Templeton Investments Japan Ltd., Templeton Asset Management Ltd. (Singapore), Franklin Templeton Holding Limited (Mauritius), Franklin Templeton Investment Services Mexico, S. de R. L., Templeton Global Growth Fund Ltd (Australia), Franklin Liberty Shares ICAV (Ireland), Franklin Emerging Markets Debt Fund PLC (Ireland), Franklin Floating Rate Fund PLC (Ireland), The Dar Group (sub-advisory board), Hammerspace Inc. (sub-advisory board). | |
Name, Address and Date of Birth |
| |
Position(s) Held with Trust |
| |
Term of Office and Length of Time Served* |
| |
Principal
Occupation(s) During Past Five Years |
| |
Number of Funds in Fund Complex Overseen by Trustee |
| |
Other Board Memberships Held During Past Five Years by Trustee |
|
INTERESTED TRUSTEES* | | | | | | | | | | | | | | | | |
Joseph
V. Del Raso** Birth Year: 1952 |
| | Trustee | | | Since 2017 (Chair of the Board until April 1, 2018). | | | Partner at Troutman Pepper Hamilton LLP (law firm) since 1998. | | |
10 |
| | Lifestar Holdings (Formerly Global Capital PLC a Malta Public Company). | |
Noreen
D. Beaman Birth Year: 1964 |
| | Chair of the Board of Trustees | | | Since 2018 | | | President of Brinker Capital Investments, LLC from 2020 until 2022. Chief Executive Officer of Brinker Capital, Inc. from 2012 to 2020. President of Brinker Capital Holdings, LLC from 2020 to 2022. President and CEO of Brinker Capital Securities, LLC from 2014 to 2022. President of Orion Advisor Solutions, Inc. from 2021 to 2022 (EVP in 2020). President of Orion Advisor Technology, LLC from 2021 to 2022 (EVP in 2020). President of Orion Portfolio Solutions, LLC from 2021 to 2022. | | |
10 |
| | Commonwealth Financial Network, Advisory Board. May of 2023 Board of Directors/Managers for following entities since 2020 and Vice Chair since February 2022: GT Polaris GP, LLC, GT Polaris Holdings, Inc., GT Polaris Midco, Inc., Orion Advisor Solutions, Inc. | |
Name,
Address and Date of Birth |
| |
Position(s) Held with Trust |
| |
Term of Office and Length of Time Served |
| |
Principal Occupation(s) During
Past Five Years |
|
OFFICERS*** | | | | | | | | | | |
Brian
Ferko Birth Year: 1971 |
| | President & Chief Operating Officer | | |
Since March 2024 and September 2023
respectively |
| | Chief Compliance Officer of Brinker Capital Investments from 2015 to 2023; Chief Compliance Officer of Brinker Capital Investments, LLC contracted through Cipperman Compliance Services from 2010 to 2015; Chief Operating Officer of Cipperman Compliance Services from 2012 to 2015. | |
Kevin
Fustos Birth Year: 1970 |
| | Chief Financial Officer & Treasurer | | | Since December 2020 | | | Vice President of Financial Planning and Analysis, Orion Advisor Solutions, since 2016; Omaha Public Power District from 2004 to 2016. | |
Peter
Townsend Birth Year: 1977 |
| |
Secretary,
Chief Compliance Officer & Anti Money
Laundering Officer |
| | Since January 2017 and March 2024 respectively. | | | Deputy Funds Chief Compliance Officer of Brinker Capital Investments since 2017; Director of Compliance of Penn Capital Management Company, Inc. from 2015 to 2017; Director of Compliance of Cipperman Compliance Services from 2013 to 2015; Associate of J.P. Morgan Chase & Co. from 2008 to 2013. | |
Kylee
Beach Birth Year: 1984 |
| | Assistant Secretary | | | Since March 2024 | | | General Counsel and Secretary, Orion Advisor Solutions, Inc., since 2019; Orion Advisor Technology, LLC, since 2014; Brinker Capital Investments, since 2020 and also General Counsel for CLS Investments, LLC, now part of Brinker Capital Investments, LLC, since 2014; GT Polaris Holdings Inc., since 2020; GT Polaris Midco, Inc., since 2020; Brinker Capital Securities, LLC, since 2020; Advizr, Inc., since 2019; Orion Portfolio Solutions, LLC, since 2018; BasisCode Compliance, LLC, since 2021; Redtail Technology Inc., since 2022; TownSquare Capital, LLC, since 2022; Associate General Counsel, NorthStar Financial Services Group, LLC from 2012 to 2018. | |
Toni
Gretsky, IACCP® Birth Year: 1976 |
| | Assistant Secretary | | |
Since June 2024 |
| | Senior Compliance and Fund Operations Manager of Brinker Capital Investments since 2023; Senior Compliance Associate at Orion Portfolio Solutions from 2020-2023; Compliance Coordinator at Brinker Capital from 2008-2020: Administrative Assistant/Supervisor for Brinker Capital from 2004-2008. | |
Name,
Address and Date of Birth |
| |
Position(s) Held with Trust |
| |
Term of Office and Length of Time Served |
| |
Principal Occupation(s) During
Past Five Years |
|
Timothy
Holland, CFA Birth Year: 1969 |
| | Investment Officer | | | Since June 2017 |
| | Chief Investment Officer of TownSquare Capital, LLC, an Orion Company, since 2023; Chief Investment Officer of Brinker Capital Investments from 2020 to 2023; Senior Vice President and Global Investment Strategist of Brinker Capital Investments, LLC from 2017 to 2020; Co-Head US Sub Advisory of Pictet Asset Management in 2016; Portfolio Manager and Partner of TAMRO Capital Partners from 2005 to 2016. | |
Rusty
Vanneman, CFA, CMT, BFA Birth Year: 1965 |
| | Investment Officer | | | Since June 2023 |
| | Chief Investment Officer and Senior Portfolio Manager at Brinker Capital Investments since 2023; Chief Investment Strategist at Brinker Capital Investments from 2020 to 2023; Chief Investment Officer at Brinker Capital Investments from 2019-2020; President at CLS Investments LLC from 2018-2019; Chief Investment Officer at CLS Investments LLC from 2012-2019. | |
Brian
Storey, CFA Birth Year: 1974 |
| | Investment Officer | | | Since June 2022 |
| | Deputy Chief Investment Officer — Destinations Portfolios at Brinker Capital Investments since 2023; Senior Portfolio Manager at Brinker Capital Investments since 2022; Senior Vice President and Senior Portfolio Manager at First Citizens Bank & Trust from 2016 to 2021; Portfolio Manager and Senior Research Analyst at First Citizens Bank & Trust from 2010 to 2016. | |
Patrick
Amerson Birth Year: 1994 |
| | Investment Officer | | | Since December 2021 | | | Investment Analyst at Brinker Capital Investments since 2021; Client Service Representative at Brinker Capital Investments, LLC from 2019 to 2021; Operations Associate at Brinker Capital Investments, LLC from 2017-2019. | |
Andrew
Goins, CFA Birth Year: 1984 |
| | Investment Officer | | |
Since June 2023 |
| | Senior Portfolio Manager at Brinker Capital Investments since 2023; Director of SMA and Mutual Fund Due Diligence at Brinker Capital Investments from 2021 to 2023; Investment Manager at Brinker Capital Investments from 2015 to 2021. | |
Name of Trustee |
| | | | |
Dollar Range of Equity Securities in the Fund |
| |
Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in the Trust |
|
Joseph V. Del Raso | | |
Destinations Large Cap Equity Fund
Destinations Small-Mid Cap Equity Fund
Destinations International Equity Fund
Destinations Equity Income Fund
Destinations Core Fixed Income Fund
Destinations Low Duration Fixed Income
Fund
Destinations Global Fixed Income
Opportunities Fund
Destinations Municipal Fixed Income
Fund
Destinations Multi Strategy Alternatives
Fund
Destinations Shelter Fund |
| |
None
None
None
None
None
None
None
None
None
None |
| |
None |
|
J. Scott Coleman | | |
Destinations Large Cap Equity Fund
Destinations Small-Mid Cap Equity Fund
Destinations International Equity Fund
Destinations Equity Income Fund
Destinations Core Fixed Income Fund
Destinations Low Duration Fixed Income
Fund
Destinations Global Fixed Income
Opportunities Fund
Destinations Municipal Fixed Income
Fund
Destinations Multi Strategy Alternatives
Fund
Destinations Shelter Fund |
| |
None
None
None
None
None
None
None
None
None
None |
| |
None |
|
Name of Trustee |
| | | | |
Dollar Range of Equity Securities in the Fund |
| |
Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in the Trust |
|
Nicholas M. Marsini Jr. | | |
Destinations Large Cap Equity Fund
Destinations Small-Mid Cap Equity Fund
Destinations International Equity Fund
Destinations Equity Income Fund
Destinations Core Fixed Income Fund
Destinations Low Duration Fixed Income
Fund
Destinations Global Fixed Income
Opportunities Fund
Destinations Municipal Fixed Income
Fund
Destinations Multi Strategy Alternatives
Fund
Destinations Shelter Fund |
| |
None
None
None
None
None
None
None
None
None
None |
| |
None |
|
Gregory E. McGowan | | |
Destinations Large Cap Equity Fund
Destinations Small-Mid Cap Equity Fund
Destinations International Equity Fund
Destinations Equity Income Fund
Destinations Core Fixed Income Fund
Destinations Low Duration Fixed Income
Fund
Destinations Global Fixed Income
Opportunities Fund
Destinations Municipal Fixed Income
Fund
Destinations Multi Strategy Alternatives
Fund
Destinations Shelter Fund |
| |
None
None
None
None
None
None
None
None
None
None |
| |
None |
|
Noreen D. Beaman | | |
Destinations Large Cap Equity Fund
Destinations Small-Mid Cap Equity Fund
Destinations International Equity Fund
Destinations Equity Income Fund
Destinations Core Fixed Income Fund
Destinations Low Duration Fixed Income
Fund
Destinations Global Fixed Income
Opportunities Fund
Destinations Municipal Fixed Income
Fund
Destinations Multi Strategy Alternatives
Fund
Destinations Shelter Fund |
| |
$50,001 – $100,000
$10,001 – $50,000
$10,001 – $50,000
None
None
None
None
None
None
None
None |
| |
None |
|
Name of Person |
| |
Aggregate Compensation from Trust |
| |
Pension or Retirement Benefits Accrued as Part of Trust Expenses |
| |
Estimated Annual Benefits Upon Retirement |
| |
Estimated Total Compensation from Fund Complex* |
| ||||||||||||
Interested | | | | | | | | | | | | | | | | | | | | | | | | | |
Joseph V. Del Raso,
Governance Committee Chair |
| | | $ | 226,500 | | | | | $ | 0 | | | | | | None | | | | | $ | 226,500 | | |
Noreen D. Beaman, Board Chair |
| | | $ | 210,000 | | | | | $ | 0 | | | | | | None | | | | | $ | 210,000 | | |
Independent | | | | | | | | | | | | | | | | | | | | | | | | | |
J. Scott Coleman |
| | | $ | 196,500 | | | | | $ | 0 | | | | | | None | | | | | $ | 196,500 | | |
Nicholas M. Marsini,
Jr., Audit Committee Chair |
| | | $ | 226,500 | | | | | $ | 0 | | | | | | None | | | | | $ | 226,500 | | |
Gregory E. McGowan |
| | | $ | 196,500 | | | | | $ | 0 | | | | | | None | | | | | $ | 196,500 | | |
FUND NAME |
| |
Share Class |
| |
Name & Address
|
| |
Form of Ownership |
| |
Percent of Class Owned |
| |||
Destinations Large Cap Equity | | | Class I | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 89.56% | | |
Destinations Large Cap Equity | | | Class Z | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 75.55% | | |
Destinations Large Cap Equity | | | Class Z | | |
Nationwide Trust Company FSB One Nationwide Plaza Columbus, OH 43215 |
| |
Record Owner
|
| | | | 12.87% | | |
Destinations Small-Mid
Cap Equity Fund |
| | Class I | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 88.80% | | |
Destinations Small-Mid
Cap Equity Fund |
| | Class Z | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 75.78% | | |
Destinations Small-Mid
Cap Equity Fund |
| |
Class Z |
| |
Nationwide Trust Company FSB One Nationwide Plaza Columbus, OH 43215 |
| |
Record Owner |
| | | | 12.67% | | |
Destinations
International Equity Fund |
| | Class I | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 89.91% | | |
Destinations
International Equity Fund |
| | Class Z | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 76.14% | | |
Destinations
International Equity Fund |
| | Class Z | | |
Nationwide Trust Company FSB One Nationwide Plaza Columbus, OH 43215 |
| |
Record Owner
|
| | | | 12.44% | | |
Destinations Equity Income Fund | | | Class I | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 90.35% | | |
Destinations Equity Income Fund | | | Class Z | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 84.36% | | |
Destinations Equity Income Fund | | | Class Z | | |
Nationwide Trust Company FSB One Nationwide Plaza, Columbus, OH 43215 |
| |
Record Owner
|
| | | | 5.16% | | |
Destinations Core Fixed Income Fund
|
| | Class I | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 89.48% | | |
Destinations Core Fixed Income Fund
|
| | Class Z | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 72.26% | | |
Destinations Core Fixed Income Fund
|
| | Class Z | | |
Nationwide Trust Company FSB One Nationwide Plaza, Columbus, OH 43215 |
| |
Record Owner
|
| | | | 13.86% | | |
Destinations Low
Duration Fixed Income Fund |
| | Class I | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 86.66% | | |
FUND NAME |
| |
Share Class |
| |
Name & Address
|
| |
Form of Ownership |
| |
Percent of Class Owned |
| |||
Destinations Low
Duration Fixed Income Fund |
| | Class I | | |
LPL Financial LLC 1055 LPL Way Fort Mill, SC 29715 |
| |
Record Owner
|
| | | | 7.32% | | |
Destinations Low
Duration Fixed Income Fund |
| |
Class Z |
| |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 74.92% | | |
Destinations Low
Duration Fixed Income Fund |
| |
Class Z |
| |
Nationwide Trust Company FSB One Nationwide Plaza Columbus, OH 43215 |
| |
Record Owner
|
| | | | 9.82% | | |
Destinations Low
Duration Fixed Income Fund |
| |
Class Z |
| |
DCGT AS TTEE and or Custody 711 High Street De Moines IA 50392 |
| |
Record Owner |
| | | | 5.61% | | |
Destinations Global
Fixed Income Opportunities Fund |
| | Class I | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 89.34% | | |
Destinations Global
Fixed Income Opportunities Fund |
| |
Class Z |
| |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 77.17% | | |
Destinations Global
Fixed Income Opportunities Fund |
| |
Class Z |
| |
Nationwide Trust Company FSB One Nationwide Plaza Columbus, OH 43215 |
| |
Record Owner
|
| | | | 10.55% | | |
Destinations Municipal
Fixed Income Fund |
| | Class 1 | | |
Nationwide Financial Services LLC 499 Washington Blvd Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 92.84% | | |
Destinations Municipal
Fixed Income Fund |
| |
Class Z |
| |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 96.40% | | |
Destinations Multi
Strategy Alternatives Fund |
| | Class I | | |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 89.56% | | |
Destinations Multi
Strategy Alternatives Fund |
| |
Class Z |
| |
National Financial Services LLC 499 Washington Blvd, Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 77.13% | | |
Destinations Multi
Strategy Alternatives Fund |
| |
Class Z |
| |
Nationwide Trust Company FSB One Nationwide Plaza Columbus, OH 43215 |
| |
Record Owner
|
| | | | 11.11% | | |
Destinations Shelter Fund | | | Class I | | |
CTC, LLC 425 S. Financial Place, 4th Floor Chicago, IL 60605 |
| |
Record Owner
|
| | | | 66.24% | | |
Destinations Shelter Fund | | | Class I | | |
National Financial Services LLC 499 Washington Blvd Jersey City, NJ 07310 |
| |
Record Owner
|
| | | | 17.97% | | |
Destinations Shelter Fund | | | Class I | | |
Charles Schwab & Co., Inc.. 3000 Schwab Way Westlake, TX 76262 |
| |
Record Owner
|
| | | | 14.81% | | |
Destinations Shelter Fund | | |
Class Z |
| |
Nationwide Trust Company FSB One Nationwide Plaza Columbus, OH 43215 |
| |
Record Owner
|
| | | | 99.52% | | |
Fund |
| |
Fiscal Year Ended February 28 |
| |
Total $ Amount of Brokerage Commissions Paid (000) |
| |
Total $ Amount of Commissions Paid to Affiliated Brokers (000) |
| |
% of
Total Brokerage Commissions Paid to Affiliated Brokers |
| |
% of
Total Brokerage Transactions Effected Through Affiliated Brokers |
| |||||||||||||||
Destinations Large Cap Equity Fund
|
| | | | 2024 | | | | | $ | 1,348,181 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 1,852,475 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 1,864,645 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations Small-Mid Cap Equity Fund
|
| | | | 2024 | | | | | $ | 1,213,018 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 1,462,012 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 1,393,228 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations Equity Income Fund |
| | | | 2024 | | | | | $ | 446,541 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 420,632 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 305,701 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations International Equity Fund
|
| | | | 2024 | | | | | $ | 1,982,915 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 2,553,961 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 2,018,033 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations Core Fixed Income Fund
|
| | | | 2024 | | | | | $ | 19,953 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 5,666 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 2,599 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations Low
Duration Fixed Income Fund |
| | | | 2024 | | | | | $ | 45,154 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 99,797 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 187,048 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations Global
Fixed Income Opportunities Fund |
| | | | 2024 | | | | | $ | 118,304 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 108,416 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 303,764 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations Municipal Fixed Income Fund
|
| | | | 2024 | | | | | $ | 0 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 0 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 0 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations Multi
Strategy Alternatives Fund |
| | | | 2024 | | | | | $ | 205,694 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 665,899 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 1,153,133 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Destinations Shelter Fund |
| | | | 2024 | | | | | $ | 9,316 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2023 | | | | | $ | 6,880 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
| | | | | 2022 | | | | | $ | 17,326 | | | | | $ | 0 | | | | | | 0.00% | | | | | | 0.00% | | |
Fund |
| |
Amount |
| |||
Destinations Large Cap Equity Fund | | | | | | | |
J.P. Morgan Securities LLC |
| | | $ | 53,767,805 | | |
Goldman Sachs & Co, LLC |
| | | $ | 26,324,679 | | |
Merrill Lynch, Pierce, Fenner & Smith
Inc. |
| | | $ | 15,078,888 | | |
Wells Fargo Securities LLC |
| | | $ | 3,464,925 | | |
Destinations Small-Mid Cap Equity Fund | | | | | | | |
Raymond James (USA) Ltd. |
| | | $ | 3,524,413 | | |
Jefferies LLC |
| | | $ | 2,622,239 | | |
BNY Mellon Capital Markets, LLC |
| | | $ | 178,030 | | |
Stifel, Nicolaus & Company,
Incorporated |
| | | $ | 32,923 | | |
Virtu Americas LLC |
| | | $ | 7,112 | | |
Destinations Internal Equity Fund | | | | | | | |
UBS Securities LLC |
| | | $ | 8,929,236 | | |
HSBC Securities (USA) Inc. |
| | | $ | 2,246,231 | | |
BNP Paribas Securities Corp. |
| | | $ | 921,996 | | |
Destinations Equity Income Fund | | | | | | | |
J.P. Morgan Securities LLC |
| | | $ | 7,144,890 | | |
Morgan Stanley & Co, LLC |
| | | $ | 4,007,313 | | |
Goldman Sachs & Co, LLC |
| | | $ | 2,927,601 | | |
Destinations Core Fixed Income Fund | | | | | | | |
Bank of America |
| | | $ | 14,166,154 | | |
J.P. Morgan Securities, LLC |
| | | $ | 11,207,660 | | |
Goldman Sachs & Co, LLC |
| | | $ | 2,711,585 | | |
Destinations Low Duration Fixed Income Fund | | | | | | | |
Bank of America |
| | | $ | 279,777 | | |
Goldman Sachs & Co, LLC |
| | | $ | 276,170 | | |
Destinations Global Fixed Income Opportunities Fund | | | | | | | |
J.P. Morgan Securities LLC |
| | | $ | 3,514,675 | | |
Goldman Sachs & Co, LLC |
| | | $ | 3,329,316 | | |
Merrill Lynch, Pierce, Fenner & Smith
Inc. |
| | | $ | 3,048,060 | | |
BNP Paribas Securities Corp. |
| | | $ | 1,890,812 | | |
BNY Mellon Capital Markets, LLC |
| | | $ | 489,541 | | |
Destinations Municipal Fixed Income Fund | | | | | | | |
This Fund did not hold any of its top
brokers as holdings. |
| | | $ | — | | |
Destinations Multi Strategy Alternatives Fund | | | | | | | |
This Fund did not hold any of its top
brokers as holdings. |
| | | $ | — | | |
Destinations Shelter Fund | | | | | | | |
Morgan Stanley & Co. LLC |
| | | $ | 483,975 | | |
Fund |
| |
2023 |
| |
2024 |
| ||||||
Destinations Large Cap Equity Fund
|
| | | | 71% | | | | | | 95% | | |
Destinations Small-Mid Cap Equity Fund
|
| | | | 125% | | | | | | 115% | | |
Destinations International Equity Fund
|
| | | | 66% | | | | | | 69% | | |
Destinations Equity Income Fund |
| | | | 46% | | | | | | 51% | | |
Destinations Core Fixed Income Fund
|
| | | | 198% | | | | | | 181% | | |
Destinations Low Duration Fixed Income
Fund |
| | | | 98% | | | | | | 98% | | |
Destinations Global Fixed Income
Opportunities Fund |
| | | | 58% | | | | | | 83% | | |
Destinations Municipal Fixed Income Fund
|
| | | | 48% | | | | | | 58% | | |
Destinations Multi Strategy Alternatives
Fund |
| | | | 70% | | | | | | 79% | | |
Destinations Shelter Fund |
| | | | 5% | | | | | | 5% | | |
| | |
Aggregate Sub-advisory Fee Paid by Brinker Capital |
| |
Portion of Advisory Fee Retained by Brinker Capital |
| |
Portion of Advisory Fee Waived by Brinker Capital |
| |
Total Contractual Advisory Fee |
| ||||||||||||
Destinations Large Cap Equity Fund
|
| | | | 0.17% | | | | | | 0.39% | | | | | | 0.16% | | | | | | 0.75% | | |
Destinations Small-Mid Cap Equity Fund
|
| | | | 0.36% | | | | | | 0.39% | | | | | | 0.03% | | | | | | 0.90% | | |
Destinations International Equity Fund
|
| | | | 0.35% | | | | | | 0.39% | | | | | | 0.20% | | | | | | 1.00% | | |
Destinations Equity Income Fund |
| | | | 0.24% | | | | | | 0.39% | | | | | | 0.10% | | | | | | 0.80% | | |
Destinations Core Fixed Income Fund
|
| | | | 0.17% | | | | | | 0.39% | | | | | | 0.08% | | | | | | 0.65% | | |
Destinations Low Duration Fixed Income
Fund |
| | | | 0.20% | | | | | | 0.39% | | | | | | 0.05% | | | | | | 0.70% | | |
Destinations Global Fixed Income
Opportunities Fund |
| | | | 0.28% | | | | | | 0.39% | | | | | | 0.14% | | | | | | 0.85% | | |
Destinations Municipal Fixed Income Fund
|
| | | | 0.14% | | | | | | 0.39% | | | | | | 0.15% | | | | | | 0.70% | | |
Destinations Multi Strategy Alternatives
Fund |
| | | | 0.48% | | | | | | 0.39% | | | | | | 0.44% | | | | | | 1.35% | | |
Destinations Shelter Fund |
| | | | 0.35% | | | | | | 0.39% | | | | | | 0.11% | | | | | | 0.85% | | |
| | |
Total Contractual Advisory Fee |
| |
Portion of Advisory Fee Waived by the Adviser |
| |
Aggregate Sub- advisory Fee Paid by the Adviser |
| |||||||||
Destinations Large Cap Equity Fund
|
| | | $ | 39,060,667 | | | | | $ | 7,992,671 | | | | | $ | 10,756,461 | | |
Destinations Small-Mid Cap Equity Fund
|
| | | $ | 12,067,822 | | | | | $ | 165,934 | | | | | $ | 6,672,502 | | |
Destinations International Equity Fund
|
| | | $ | 26,917,133 | | | | | $ | 1,038,876 | | | | | $ | 15,380,583 | | |
Destinations Equity Income Fund |
| | | $ | 3,563,869 | | | | | $ | 519,795 | | | | | $ | 1,306,686 | | |
Destinations Core Fixed Income Fund
|
| | | $ | 14,487,858 | | | | | $ | 1,815,642 | | | | | $ | 3,979,496 | | |
Destinations Low Duration Fixed Income
Fund |
| | | $ | 3,726,914 | | | | | $ | 10,498 | | | | | $ | 1,639,992 | | |
Destinations Global Fixed Income
Opportunities Fund |
| | | $ | 6,689,157 | | | | | $ | 864,912 | | | | | $ | 2,758,371 | | |
Destinations Municipal Fixed Income Fund
|
| | | $ | 6,595,937 | | | | | $ | 1,566,914 | | | | | $ | 1,354,143 | | |
Destinations Multi Strategy Alternatives
Fund |
| | | $ | 16,801,708 | | | | | $ | 5,434,539 | | | | | $ | 6,513,341 | | |
Destinations Shelter Fund |
| | | $ | 179,886 | | | | | $ | 27,178 | | | | | $ | 70,172 | | |
| | |
Total Contractual Advisory Fee |
| |
Portion of Advisory Fee Waived by the Adviser |
| |
Aggregate Sub- advisory Fee Paid by the Adviser |
| |||||||||
Destinations Large Cap Equity Fund
|
| | | $ | 34,394,192 | | | | | $ | 6,417,328 | | | | | $ | 10,094,065 | | |
Destinations Small-Mid Cap Equity Fund
|
| | | $ | 10,458,509 | | | | | $ | 128,358 | | | | | $ | 5,798,697 | | |
Destinations International Equity Fund
|
| | | $ | 22,128,539 | | | | | $ | 2,256,045 | | | | | $ | 11,246,569 | | |
Destinations Equity Income Fund |
| | | $ | 4,623,473 | | | | | $ | 557,028 | | | | | $ | 1,810,072 | | |
Destinations Core Fixed Income Fund
|
| | | $ | 12,970,533 | | | | | $ | 1,468,059 | | | | | $ | 3,720,180 | | |
Destinations Low Duration Fixed Income
Fund |
| | | $ | 3,807,534 | | | | | $ | 62,530 | | | | | $ | 1,624,135 | | |
Destinations Global Fixed Income
Opportunities Fund |
| | | $ | 6,146,855 | | | | | $ | 778,157 | | | | | $ | 2,548,303 | | |
Destinations Municipal Fixed Income Fund
|
| | | $ | 6,023,000 | | | | | $ | 1,395,362 | | | | | $ | 1,272,618 | | |
Destinations Multi Strategy Alternatives
Fund |
| | | $ | 15,281,214 | | | | | $ | 5,058,090 | | | | | $ | 5,812,171 | | |
Destinations Shelter Fund |
| | | $ | 940,389 | | | | | $ | 121,702 | | | | | $ | 387,415 | | |
| | |
Total Contractual Advisory Fee |
| |
Portion of Advisory Fee Waived by the Adviser |
| |
Aggregate Sub-advisory Fee Paid by the Adviser |
| |||||||||
Destinations Large Cap Equity Fund
|
| | | $ | 30,521,391 | | | | | $ | 6,346,928 | | | | | $ | 8,316,515.27 | | |
Destinations Small-Mid Cap Equity Fund
|
| | | $ | 7,787,552 | | | | | $ | 299,962 | | | | | $ | 4,117,472.87 | | |
Destinations International Equity Fund
|
| | | $ | 24,315,745 | | | | | $ | 4,804,003 | | | | | $ | 10,027,187.50 | | |
Destinations Equity Income Fund |
| | | $ | 5,128,913 | | | | | $ | 665,940 | | | | | $ | 1,963,759.26 | | |
Destinations Core Fixed Income Fund
|
| | | $ | 13,416,025 | | | | | $ | 1,668,338 | | | | | $ | 3,697,599.27 | | |
Destinations Low Duration Fixed Income
Fund |
| | | $ | 2,898,078 | | | | | $ | 189,064 | | | | | $ | 1,095,109.90 | | |
Destinations Global Fixed Income
Opportunities Fund |
| | | $ | 6,833,852 | | | | | $ | 1,085,313 | | | | | $ | 2,611,705.42 | | |
Destinations Municipal Fixed Income Fund
|
| | | $ | 6,163,140 | | | | | $ | 1,360,480 | | | | | $ | 1,369,267.77 | | |
Destinations Multi Strategy Alternatives
Fund |
| | | $ | 10,913,673 | | | | | $ | 3,586,098 | | | | | $ | 4,175,418.83 | | |
Destinations Shelter Fund |
| | | $ | 845,765 | | | | | $ | 111,003 | | | | | $ | 346,995.11 | | |
Recipient |
| |
Frequency |
| |
Delay Before Dissemination |
|
BBH&Co. (Administrator, Fund Custodian and Accounting Agent) | | | Daily | | | None | |
FactSet Research Systems Inc. | | | Daily | | | None | |
MSCI Inc. | | | Daily | | | None | |
Morningstar Inc. | | | Quarterly | | | 5 days after quarter end | |
Bloomberg | | | Quarterly | | | 5 days after quarter end | |
Global Trading Analytics | | | Monthly | | | Last business day | |
Ernst & Young (Passive Foreign Investment Company analytics | | |
As Needed |
| | None | |
ISS (Proxy Voting Services) | | |
As Needed |
| | None | |
KPMG LLP (Audit Firm) | | |
As Needed |
| | None | |
Name of Fund |
| |
Name of Portfolio
Manager |
| |
Dollar Range of
Fund Shares Beneficially Owned |
|
Destinations Large Cap
Equity Fund |
| |
Brian Storey, CFA
|
| |
$100,001 – $500,000
|
|
|
Timothy Holland, CFA |
| |
None |
| ||
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
$10,001 – $50,000 |
| ||
Destinations Small-Mid
Cap Equity Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
$10,001 – $50,000 None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
$1 – $10,000 |
| ||
Destinations
International Equity Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
$50,001 – $100,000 None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
$1 – $10,000 |
| ||
Destinations Equity
Income Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
$1 – $10,000 None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
$1 – $10,000 |
| ||
Destinations Core
Fixed Income Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
$50,001 – $100,000 None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
$1 – $10,000 |
| ||
Destinations Low
Duration Fixed Income Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
$1 – $10,000 None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
$1 – $10,000 |
| ||
Destinations Global
Fixed Income Opportunities Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
$10,001 – 50,000 None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
$1 – $10,000 |
|
Name of Fund |
| |
Name of Portfolio
Manager |
| |
Dollar Range of
Fund Shares Beneficially Owned |
|
Destinations Municipal
Fixed Income Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
None None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
None |
| ||
Destinations Multi
Strategy Alternatives Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
$10,001 – 50,000 None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
$1 – $10,000 |
| ||
Destinations Shelter
Fund |
| |
Brian Storey,
CFA Timothy Holland, CFA |
| |
None None |
|
|
Rusty Vanneman, CFA,
CMT, BFA |
| |
None |
| ||
|
Andrew Goins, CFA |
| |
None |
|
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Brian Storey, CFA |
| | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 5,549 | | | | | $ | 1,515 | | |
Rusty Vanneman, CFA, CMT, BFA |
| | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 23,999 | | | | | $ | 4,300 | | |
Timothy Holland, CFA |
| | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
Andrew Goins, CFA |
| | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Michael Kass |
| | | | 4 | | | | | $ | 4,812 | | | | | | 3 | | | | | $ | 200 | | | | | | 1 | | | | | $ | 702 | | |
Anuj Aggarwal |
| | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets ($mm) |
| |
Number of Accounts |
| |
Total Assets ($mm) |
| |
Number of Accounts |
| |
Total Assets ($mm) |
| ||||||||||||||||||
Rand
Wrighton, CFA |
| | | | 5 | | | | | $ | 938.3 | | | | | | 3 | | | | | $ | 627.2 | | | | | | 5 | | | | | $ | 1,294.0 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 476.8 | | | ||
Patrik
H.H. Wibom |
| | | | 1 | | | | | $ | 546.3 | | | | | | 2 | | | | | $ | 55.9 | | | | | | 2 | | | | | $ | 961.2 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 405.0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Joe
Gubler, CFA |
| | | | 7 | | | | | $ | 3,450 | | | | | | 9 | | | | | $ | 515 | | | | | | 16 | | | | | $ | 5,650 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 642 | | | ||
Arjun
Jayaraman |
| | | | 7 | | | | | $ | 3,450 | | | | | | 9 | | | | | $ | 515 | | | | | | 23 | | | | | $ | 5,650 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 642 | | | ||
MacDuff
Kuhnert |
| | | | 7 | | | | | $ | 3,450 | | | | | | 9 | | | | | $ | 515 | | | | | | 22 | | | | | $ | 5,650 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 642 | | | ||
Ryan
Myers |
| | | | 7 | | | | | $ | 3,450 | | | | | | 9 | | | | | $ | 515 | | | | | | 15 | | | | | $ | 5,650 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 580 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Don
Wordell, CFA |
| | | | 1 | | | | | $ | 2,163.8 | | | | | | 1 | | | | | $ | 21.7 | | | | | | 3 | | | | | $ | 40.4 | | |
| | | 1 | | | | | $ | 99.4 | | | | | | 0 | | | | | $ | 0 | | | | | | 12 | | | | | $ | 813.4 | | | ||
Cody P. Smith, CFA |
| | | | 1 | | | | | $ | 2,163.8 | | | | | | 1 | | | | | $ | 21.7 | | | | | | 3 | | | | | $ | 40.4 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Thomas Galvin, CFA |
| | | | 1 | | | | | $ | 1,230 | | | | | | 1 | | | | | $ | 494.32 | | | | | | 764 | | | | | $ | 1,230 | | |
Richard Carter |
| | | | 1 | | | | | $ | 1,230 | | | | | | 1 | | | | | $ | 494.32 | | | | | | 764 | | | | | $ | 1,200 | | |
Todd Herget |
| | | | 1 | | | | | $ | 1,220 | | | | | | 1 | | | | | $ | 494.32 | | | | | | 767 | | | | | $ | 1,200 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
David
K. Sherman |
| | | | 6 | | | | | $ | 2,104.9 | | | | | | 2 | | | | | $ | 76.5 | | | | | | 6 | | | | | $ | 62.9 | | |
| | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 6.1 | | | | | | 0 | | | | | | 0 | | | ||
Jonathan Berg |
| | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
Kirk Whitney |
| | | | 4 | | | | | $ | 928.5 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Jeffrey
Gundlach |
| | | | 31 | | | | | $ | 65,188 | | | | | | 21 | | | | | $ | 6,813 | | | | | | 70 | | | | | $ | 15,281 | | |
| | | 0 | | | | | $ | 0 | | | | | | 2* | | | | | $ | 909.9 | | | | | | 3* | | | | | $ | 1,271 | | | ||
Jeffrey
Sherman |
| | | | 23 | | | | | $ | 32,420 | | | | | | 14 | | | | | | 3,019 | | | | | | 18 | | | | | $ | 4,002 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | ||
Luz M.
Padilla |
| | | | 7 | | | | | $ | 8,857 | | | | | | 3 | | | | | $ | 855.6 | | | | | | 4 | | | | | $ | 1,487 | | |
| | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 840.4 | | | | | | 1* | | | | | $ | 634.7 | | | ||
Su Fei
Koo |
| | | | 5 | | | | | $ | 1,273 | | | | | | 1 | | | | | $ | 296.7 | | | | | | 1 | | | | | $ | 634.7 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 634.7 | | | ||
Mark
Christensen |
| | | | 5 | | | | | $ | 1,273 | | | | | | 1 | | | | | $ | 296.7 | | | | | | 1 | | | | | $ | 634.7 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 634.7 | | | ||
Robert
Cohen |
| | | | 3 | | | | | $ | 7,474 | | | | | | 11 | | | | | $ | 3,235 | | | | | | 3 | | | | | $ | 852.3 | | |
| | | 0 | | | | | $ | 0 | | | | | | 10* | | | | | $ | 3,231 | | | | | | 0 | | | | | $ | 0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Jeff
James |
| | | | 3 | | | | | $ | 992.1 | | | | | | 1 | | | | | $ | 101.2 | | | | | | 52 | | | | | $ | 5,900 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 5* | | | | | $ | 752.6 | | | ||
Michael
Buck |
| | | | 3 | | | | | $ | 992.1 | | | | | | 1 | | | | | $ | 101.2 | | | | | | 52 | | | | | $ | 5,900 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 5* | | | | | $ | 752.6 | | | ||
Prakash
Vijayan, CFA |
| | | | 3 | | | | | $ | 992.1 | | | | | | 1 | | | | | $ | 101.2 | | | | | | 52 | | | | | $ | 5,900 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 5* | | | | | $ | 752.6 | | | ||
Michael
Caldwell |
| | | | 1 | | | | | $ | 213.3 | | | | | | 2 | | | | | $ | 340.3 | | | | | | 0 | | | | | $ | 0 | | |
| | | 0 | | | | | $ | 0 | | | | | | 2* | | | | | $ | 340.3 | | | | | | 0 | | | | | $ | 0 | | | ||
Yoav
Sharon |
| | | | 1 | | | | | $ | 213.3 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | ||
Thomas
McCauley |
| | | | 1 | | | | | $ | 213.3 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Daniel Peris, CFA |
| | | | 4 | | | | | $ | 8,800 | | | | | | 1 | | | | | $ | 182.9 | | | | | | 147 | | | | | $ | 21,600 | | |
Deborah D. Bickerstaff |
| | | | 4 | | | | | $ | 8,800 | | | | | | 1 | | | | | $ | 182.9 | | | | | | 147 | | | | | $ | 21,600 | | |
Michael Tucker |
| | | | 4 | | | | | $ | 8,800 | | | | | | 1 | | | | | $ | 182.9 | | | | | | 147 | | | | | $ | 21,600 | | |
Jared Hoff |
| | | | 4 | | | | | $ | 8,800 | | | | | | 1 | | | | | $ | 182.9 | | | | | | 147 | | | | | $ | 21,600 | | |
| | |
Registered Investment Company |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||
Portfolio Manager(s) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||
Michael Buckius |
| | | | 5 | | | |
$8,351.1 |
| | | | 0 | | | | | $ | 0 | | | | | | 37 | | | |
$427.6 |
|
Daniel Ashcraft |
| | | | 5 | | | |
$8,351.1 |
| | | | 0 | | | | | $ | 0 | | | | | | 37 | | | |
$379.6 |
|
Kenneth Toft |
| | | | 5 | | | |
$8,351.1 |
| | | | 0 | | | | | $ | 0 | | | | | | 12 | | | |
$238.0 |
|
Mitchell Trotta |
| | | | 4 | | | |
$8,216.7 |
| | | | 0 | | | | | $ | 0 | | | | | | 20 | | | |
$282.0 |
|
| | |
Registered Investment Company |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager(s) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
R. Todd Vingers, CFA |
| | | | 6 | | | | | $ | 1,117.1 | | | | | | 20 | | | | | $ | 652.6 | | | | | | 33 | | | | | $ | 896.1 | | |
Jay C. Willadsen, CFA |
| | | | 6 | | | | | $ | 1,117.1 | | | | | | 20 | | | | | $ | 652.6 | | | | | | 33 | | | | | $ | 896.1 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
David
Weeks |
| | | | 0 | | | | | $ | 0 | | | | | | 2 | | | | | $ | 1,180.2 | | | | | | 2 | | | | | $ | 733.6 | | |
| | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 1,118.5 | | | | | | 2* | | | | | $ | 733.6 | | | ||
Ajit
Kumar, CFA |
| | | | 0 | | | | | $ | 0 | | | | | | 2 | | | | | $ | 1,180.2 | | | | | | 2 | | | | | $ | 733.6 | | |
| | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 1,118.5 | | | | | | 2* | | | | | $ | 733.6 | | | ||
Edwin
Tsui, CFA |
| | | | 0 | | | | | $ | 0 | | | | | | 2 | | | | | $ | 1,180.2 | | | | | | 2 | | | | | $ | 733.6 | | |
| | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 1,118.5 | | | | | | 2* | | | | | $ | 733.6 | | | ||
Andreas
Eckner, PhD |
| | | | 0 | | | | | $ | 0 | | | | | | 2 | | | | | $ | 1,180.2 | | | | | | 2 | | | | | $ | 733.6 | | |
| | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 1,118.5 | | | | | | 2* | | | | | $ | 733.6 | | | ||
Guillaume
Horel, PhD |
| | | | 0 | | | | | $ | 0 | | | | | | 2 | | | | | $ | 1,180.2 | | | | | | 2 | | | | | $ | 733.6 | | |
| | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 1,118.5 | | | | | | 2* | | | | | $ | 733.6 | | |
| | |
Registered Investment Company |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager(s) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Ashish Chugh |
| | | | 0 | | | | | $ | 0 | | | | | | 3 | | | | | $ | 260.5 | | | | | | 14 | | | | | $ | 18.1 | | |
| | |
Registered Investment Company |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager(s) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Daniel Solender |
| | | | 9 | | | | | $ | 16,923.37 | | | | | | 0 | | | | | $ | 0 | | | | | | 9,415 | | | | | $ | 9,211.70 | | |
Gregory Shuman |
| | | | 5 | | | | | $ | 9,901.99 | | | | | | 0 | | | | | $ | 0 | | | | | | 6,241 | | | | | $ | 6,118.47 | | |
| | |
Registered Investment Company |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager(s) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Todd Copenhaver, CFA |
| | | | 0 | | | | | $ | 0 | | | | | | 3 | | | | | $ | 102.2 | | | | | | 44 | | | | | $ | 3,733 | | |
Andrew Smock, CFA |
| | | | 1 | | | | | $ | 19.4 | | | | | | 2 | | | | | $ | 61.9 | | | | | | 31 | | | | | $ | 2,317 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Benjamin
Stone |
| | | | 9 | | | | | $ | 2,670 | | | | | | 3 | | | | | $ | 859.1 | | | | | | 10 | | | | | $ | 4.4 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 238.7 | | | ||
Philip
Evans |
| | | | 7 | | | | | $ | 26,600 | | | | | | 2 | | | | | $ | 827.4 | | | | | | 10 | | | | | $ | 4.4 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 238.7 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Richard
S. Levine |
| | | | 2 | | | | | $ | 989 | | | | | | 1 | | | | | $ | 43 | | | | | | 3,079 | | | | | $ | 4,650 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 13* | | | | | $ | 17 | | | ||
Alexandra
Pomeroy |
| | | | 2 | | | | | $ | 989 | | | | | | 1 | | | | | $ | 43 | | | | | | 3,079 | | | | | $ | 4,650 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 13* | | | | | $ | 17 | | | ||
William
D. Hunter |
| | | | 2 | | | | | $ | 989 | | | | | | 1 | | | | | $ | 43 | | | | | | 3,079 | | | | | $ | 4,650 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 13* | | | | | $ | 17 | | | ||
Shawn
Trudeau |
| | | | 2 | | | | | $ | 989 | | | | | | 1 | | | | | $ | 43 | | | | | | 3,079 | | | | | $ | 4,650 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 13* | | | | | $ | 17 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Brian
C. Ferguson |
| | | | 8 | | | | | $ | 9,037 | | | | | | 6 | | | | | $ | 416 | | | | | | 34 | | | | | $ | 5,789 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 4* | | | | | $ | 100 | | | ||
John
Bailer |
| | | | 8 | | | | | $ | 9,037 | | | | | | 6 | | | | | $ | 416 | | | | | | 35 | | | | | $ | 7,644 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 4* | | | | | $ | 100 | | | ||
Keith
Howell Jr, |
| | | | 7 | | | | | $ | 8,720 | | | | | | 6 | | | | | $ | 416 | | | | | | 35 | | | | | $ | 5,888 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 4* | | | | | $ | 100 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Adam Shane |
| | | | 8 | | | | | $ | 5,710 | | | | | | 0 | | | | | $ | 0 | | | | | | 393 | | | | | $ | 3,890 | | |
Nate Miller |
| | | | 2 | | | | | $ | 914 | | | | | | 0 | | | | | $ | 0 | | | | | | 524 | | | | | $ | 8,186 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Douglas M. Baker, CFA |
| | | | 5 | | | | | $ | 10,625.2 | | | | | | 1 | | | | | $ | 100.5 | | | | | | 3,426 | | | | | $ | 2,253.6 | | |
Brenda A. Langenfeld, CFA |
| | | | 9 | | | | | $ | 11,962.7 | | | | | | 2 | | | | | $ | 106.7 | | | | | | 3,429 | | | | | $ | 3,118.0 | | |
James T. Stephenson, CFA |
| | | | 2 | | | | | $ | 235.5 | | | | | | 1 | | | | | $ | 206.5 | | | | | | 1,481 | | | | | $ | 437.9 | | |
Thomas J. Ray, CFA |
| | | | 2 | | | | | $ | 1,252.3 | | | | | | 4 | | | | | $ | 3,536.3 | | | | | | 1,865 | | | | | $ | 1,499.4 | | |
Peter Boardman |
| | | | 2 | | | | | $ | 235.5 | | | | | | 1 | | | | | $ | 206.5 | | | | | | 1,482 | | | | | $ | 783.3 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Daniel R. Johnson, CFA, CPA |
| | | | 2 | | | | | $ | 396 | | | | | | 1 | | | | | $ | 48 | | | | | | 0 | | | | | $ | 0 | | |
Matt W. Moran, CFA |
| | | | 2 | | | | | $ | 396 | | | | | | 1 | | | | | $ | 48 | | | | | | 0 | | | | | $ | 0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in billions) |
| |
Number of Accounts |
| |
Total Assets (in billions) |
| |
Number of Accounts |
| |
Total Assets (in billions) |
| ||||||||||||||||||
Juan Acevedo |
| | | | 129 | | | | | $ | 1,090.13 | | | | | | 362 | | | | | $ | 855.29 | | | | | | 466 | | | | | $ | 513.48 | | |
Lisa Hobart |
| | | | 129 | | | | | $ | 1,090.13 | | | | | | 362 | | | | | $ | 855.29 | | | | | | 466 | | | | | $ | 513.48 | | |
John Law, CFA |
| | | | 129 | | | | | $ | 1,090.13 | | | | | | 362 | | | | | $ | 855.29 | | | | | | 466 | | | | | $ | 513.48 | | |
Karl Schneider, CAIA |
| | | | 129 | | | | | $ | 1,090.13 | | | | | | 362 | | | | | $ | 855.29 | | | | | | 466 | | | | | $ | 513.48 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Richard N. Clattenburg |
| | | | 3 | | | | | $ | 15,549 | | | | | | 3 | | | | | $ | 12,549 | | | | | | 0 | | | | | $ | 0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Dusty L. Self |
| | | | 4 | | | | | $ | 321 | | | | | | 0 | | | | | $ | 0 | | | | | | 13 | | | | | $ | 572 | | |
Phillip Hooks |
| | | | 3 | | | | | $ | 235 | | | | | | 0 | | | | | $ | 0 | | | | | | 13 | | | | | $ | 572 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Linda
Lasater, CFA |
| | | | 4 | | | | | $ | 715.2 | | | | | | 0 | | | | | $ | 0 | | | | | | 7 | | | | | $ | 1,048 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 252.8 | | | ||
Dan
Chace, CFA |
| | | | 3 | | | | | $ | 653.4 | | | | | | 0 | | | | | $ | 0 | | | | | | 11 | | | | | $ | 1,560 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 327.6 | | | ||
Allison
He, CFA |
| | | | 1 | | | | | $ | 299.5 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets in millions |
| |
Number of Accounts |
| |
Total Assets in millions |
| |
Number of Accounts |
| |
Total Assets in millions |
| ||||||||||||||||||
Joseph
Marvan, CFA |
| | | | 19 | | | | | $ | 13,125 | | | | | | 23 | | | | | $ | 10,082 | | | | | | 64 | | | | | $ | 29,972 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 289.1 | | | ||
Campe
Goodman, CFA |
| | | | 18 | | | | | $ | 12,817 | | | | | | 16 | | | | | $ | 10,151 | | | | | | 42 | | | | | | 15,896 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 289.1 | | | ||
Robert
Burn, CFA |
| | | | 18 | | | | | $ | 12,817 | | | | | | 13 | | | | | $ | 8,920 | | | | | | 39 | | | | | | 15,695 | | |
| | | 0 | | | | | $ | 0 | | | | | | 0 | | | | | $ | 0 | | | | | | 1* | | | | | $ | 289.1 | | |
| | |
Registered Investment Companies |
| |
Other Pooled Investment Vehicles |
| |
Other Accounts
|
| |||||||||||||||||||||||||||
Portfolio Manager |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| |
Number of Accounts |
| |
Total Assets (in millions) |
| ||||||||||||||||||
Jim Golan, CFA |
| | | | 2 | | | | | $ | 2,871 | | | | | | 6 | | | | | $ | 3,514 | | | | | | 36 | | | | | $ | 3,860 | | |
David Ricci, CFA |
| | | | 2 | | | | | $ | 2,871 | | | | | | 6 | | | | | $ | 3,514 | | | | | | 36 | | | | | $ | 3,860 | | |
| | |
Destinations Large Cap Equity Fund |
| |
Destinations Small-Mid Cap Equity Fund |
| |
Destinations International Equity Fund |
| |
Destinations Equity Income Fund |
| |
Destinations Core Fixed Income Fund |
| |||||||||||||||
Gross
Income from securities lending activities (including income from cash
collateral reinvestment) |
| | | $ | 453,948.47 | | | | | $ | 954,365.01 | | | | | $ | 1,134,750.91 | | | | | $ | 318,198.40 | | | | | $ | 1,641.00 | | |
Fees
and/or compensation for securities lending activities and related
services |
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Fees paid to securities
lending agent from a revenue split |
| | | $ | 33,162.80 | | | | | $ | 53,139.09 | | | | | $ | 70,765.08 | | | | | $ | 20,785.61 | | | | | $ | 15.58 | | |
| | |
Destinations Large Cap Equity Fund |
| |
Destinations Small-Mid Cap Equity Fund |
| |
Destinations International Equity Fund |
| |
Destinations Equity Income Fund |
| |
Destinations Core Fixed Income Fund |
| |||||||||||||||
Fees paid for any cash
collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in the revenue split |
| | | $ | 12,479.81 | | | | | $ | 28,414.52 | | | | | $ | 32,515.85 | | | | | $ | 8,832.71 | | | | | $ | 69.69 | | |
Administrative fees not included in revenue
split |
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Indemnification fee not included in revenue
split |
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Rebate (paid to borrower) |
| | | $ | 275,654.38 | | | | | $ | 660,246.84 | | | | | $ | 748,400.21 | | | | | $ | 205,435.82 | | | | | $ | 1,493.35 | | |
Other fees not included in revenue split
|
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Aggregate
fees/compensation for securities lending activities |
| | | $ | 321,296.99 | | | | | $ | 741,800.45 | | | | | $ | 851,681.14 | | | | | $ | 235,054.14 | | | | | $ | 1,578.62 | | |
Net Income from
securities lending activities |
| | | $ | 132,651.48 | | | | | $ | 212,564.56 | | | | | $ | 283,069.77 | | | | | $ | 83,144.26 | | | | | $ | 62.38 | | |
| | |
Destinations Low Duration Fixed Income Fund |
| |
Destinations Global Fixed Income Fund |
| |
Destinations Municipal Fixed Income Fund |
| |
Destinations Multi Strategy Alternatives Fund |
| |
Destinations Shelter Fund |
| |||||||||||||||
Gross
Income from securities lending activities (including income from cash
collateral reinvestment) |
| | | $ | 162,200.25 | | | | | $ | 113,972.19 | | | | | $ | 247,105.46 | | | | | $ | 82,613.85 | | | | | $ | 0 | | |
Fees
and/or compensation for securities lending activities and related
services |
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Fees paid to securities
lending agent from a revenue split |
| | | $ | 3,829.21 | | | | | $ | 17,273.05 | | | | | $ | 37,131.99 | | | | | $ | 2,031.52 | | | | | $ | 0 | | |
Fees paid for any cash
collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in the revenue split |
| | | $ | 5,428.76 | | | | | $ | 1,405.63 | | | | | $ | 8,053.16 | | | | | $ | 2,737.54 | | | | | $ | 0 | | |
Administrative fees not included in revenue
split |
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Indemnification fee not included in revenue
split |
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Rebate (paid to borrower) |
| | | $ | 137,625.49 | | | | | $ | 26,200.80 | | | | | $ | 53,391.47 | | | | | $ | 69,717.29 | | | | | $ | 0 | | |
Other fees not included in revenue split
|
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Aggregate
fees/compensation for securities lending activities |
| | | $ | 146,883.46 | | | | | $ | 44,879.48 | | | | | $ | 98,576.62 | | | | | $ | 74,486.35 | | | | | $ | 0 | | |
Net Income from
securities lending activities |
| | | $ | 15,316.79 | | | | | $ | 69,092.71 | | | | | $ | 148,528.84 | | | | | $ | 8,127.50 | | | | | $ | 0 | | |
BAMCO, Inc.
Baron Capital Management, Inc.
Proxy Voting Policies and Procedures
Last updated: February 16, 2023
Baron Capital Management, Inc. and BAMCO, Inc. (each an “Adviser” and collectively referred to as the “Advisers” or as “we” below) have adopted the following proxy voting policies and procedures (the "Policies and Procedures") in order to fulfill our fiduciary duty to vote client proxies in the best interest of our clients. The Policies and Procedures are intended to comply with the standards set forth in Rule 206(4)-6 under the Investment Advisers Act of 1940 and apply to client accounts for which we have authority to vote proxies.
In general, it is our policy in voting proxies to consider and vote each proposal with the objective of maximizing long-term investment returns for our clients. To ensure consistency in voting proxies on behalf of our clients, we utilize the guidelines set forth in Exhibit I (the “Proxy Voting Guidelines”). The Adviser reviews research provided by Institutional Shareholder Services (“ISS”), however, the Adviser does not vote proxies based on ISS’ recommendations.
The Advisers use guidelines that are reviewed quarterly by the Proxy Review Committee established by the Advisers. The Proxy Review Committee addresses all questions relating to the Advisers’ Proxy Voting Guidelines, which may include:
1. | a general review of proposals being put forth at shareholder meetings of portfolio companies; |
2. | adopting changes to the Proxy Voting Guidelines; |
3. | determining whether matters present material conflicts of interest; |
4. | determining how to vote matters for which specific direction has not been provided in the Proxy Voting Guidelines (i.e., “case by case” matters); and |
5. | reviewing instances in which the Advisers have voted against the Proxy Voting Guidelines. |
If a portfolio manager wishes to recommend voting against the Proxy Voting Guidelines, he or his designee must provide the rationale for that request to the General Counsel in writing. The President, in consultation with the General Counsel, will make the final decision with respect to how the matter will be voted.
In providing investment advisory services to our clients, we try to avoid material conflicts of interest. However, a material conflict of interest may arise in cases where:
(i) | we have a direct or indirect investment advisory relationship with portfolio companies or individual executives of portfolio companies the management for which is soliciting proxies and where the revenue earned from such a direct or indirect advisory relationship is greater than 0.10% of the Advisers’ total revenues. |
(ii) | we manage assets or administer employee benefit plans for companies whose management is soliciting proxies; |
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(iii) | we manage money for an employee group who is the proponent of a proxy proposal; |
(iv) | we have a personal relationship with participants in a proxy solicitation or a director or candidate for director of one of our portfolio companies; or |
(v) | we otherwise have a personal interest in the outcome in a particular proxy vote. |
The categories above are not exhaustive and the determination of whether a material conflict exists depends on all of the facts and circumstances of the particular situation. If it is determined that there is a material conflict of interest between the interests of the Advisers’ and the interests of a client, the Proxy Review Committee will review the matter and may either (i) request that the client consent to the Advisers’ vote, (ii) vote in accordance with the published recommendations of an independent proxy voting service or (iii) appoint an independent third party to vote.
We acknowledge that the authority to vote proxies is part of our fiduciary duty to our clients. There may be cases in which the cost of doing so would exceed the expected benefits to the client. This may be particularly true in the case of non-U.S. securities. Voting proxies of non-US companies located in certain jurisdictions, particularly in emerging markets, may involve a number of logistical issues that may negatively affect the Advisers’ ability to vote such proxies. Accordingly, the Advisers will not vote client proxies if the Advisers determine that the costs associated with a vote outweigh the benefits to the clients.
Client Disclosure
The Policies and Procedures are available online at www.BaronFunds.com.
Clients of Baron Capital Management, Inc. and BAMCO, Inc. can obtain a report of how their respective proxies were voted by sending a written request to the Legal Department.
The proxy record for Baron Investment Funds Trust and Baron Select Funds (the “Baron Funds”) for the most recent 12-month period ended June 30th is available online at www.BaronFunds.com and through the SEC’s website on Form N-PX. The Legal Department will file Form N-PX with the SEC no later than August 31st for each year ended June 30th. BAMCO, Inc., the adviser to the Baron Funds, will provide a quarterly proxy voting report to the Board of Trustees of the Baron Funds.
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Exhibit I
Proxy Voting Guidelines
These guidelines are divided into proposal themes that group together the issues that frequently appear on the agenda of annual and extraordinary meetings of shareholders. We generally vote proposals in accordance with these guidelines.
In addition, these guidelines are not intended to address all issues that may appear on the agenda of annual and extraordinary meetings of shareholders. We will evaluate on a case-by-case basis any proposal not specifically addressed by these guidelines, whether submitted by management or shareholders, always keeping in mind our fiduciary duty to make voting decisions that, by maximizing long-term shareholder value, are in our clients’ best interests.
The proposal themes are:
A. | Board and Director Proposals; |
B. | Auditors Proposals; |
C. | Capital Structure, Anti-Takeover, and Corporate Transaction Proposals; |
D. | Compensation Proposals; |
E. | Corporate Governance Proposals; and |
F. | Social, Ethical and Environmental Proposals |
A. | Board and Director Proposals |
1. | Director elections |
We generally support management’s nominees for directors in most uncontested elections. We may withhold votes from certain directors or members of particular board committees (or prior members, as the case may be) in certain situations, including, but not limited to:
⮚ | Failure to implement shareholder proposals that receive a majority of votes |
We believe that directors have a duty to respond to shareholder actions that have received significant shareholder support. We may withhold votes from members of the governance committee where the board fails to implement shareholder proposals that receive a majority of votes cast at a prior shareholder meeting, and the proposals, in our view, have a direct and substantial impact on shareholders’ fundamental rights or long-term economic interests.
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⮚ | Adoption of certain charter or bylaw provisions |
The board may adopt or amend certain charter and/or bylaw provisions that have the effect of entrenching directors or adversely impacting shareholder rights. In such cases, we may withhold votes from members of the governance committee (except new nominees, who should be considered case-by-case).
⮚ | Ineffective internal control over financial reporting |
We may withhold votes from members of the audit committee when a material weakness under Section 404 of the Sarbanes-Oxley Act rises to a level of serious concern, there are chronic internal control weaknesses, or when the audit committee has demonstrated ineffective internal control over financial reporting.
⮚ | Hedging and/or pledging of company stock |
We support full disclosure of the policies of the company regarding pledging and/or hedging of company stock by executives and directors. We may withhold votes from members of the audit committee if it is determined that significant pledging and/or hedging of company stock in the aggregate by the officers and directors of a company has occurred, and the audit committee has failed to adequately oversee this risk.
⮚ | Pay-for-performance misalignments |
We may withhold votes from members of the compensation committee during a period in which executive compensation appears excessive relative to performance and peers, and where we believe the compensation committee has not already substantially addressed this issue.
To the extent an executive compensation (“Say on Pay”) proposal is not presented for voting due to the board’s adoption of a triennial say-on-pay voting system, we may express our concern with executive compensation through our vote on the members of the compensation committee.
⮚ | Over-boarding |
We may withhold votes from certain directors who commit themselves to service on many boards, such that we deem it unlikely that the director will be able to commit sufficient focus and time to a particular company (commonly referred to as “over-boarding”). While each situation will be reviewed on a case-by-case basis, we are most likely to withhold votes for over- boarding where a director is: 1) serving on more than five public company boards; or 2) is a chief executive officer at a public company and is serving on more than two additional public company boards (withhold only at their outside boards).
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2. | Board and Committee independence |
We believe companies should have a majority of independent directors and independent key committees. However, we will incorporate local market regulation and corporate governance codes into our decision making. We will generally regard a director as independent if the director satisfies the criteria for independence:
(i) | espoused by the primary exchange on which the company’s shares are traded; or |
(ii) | set forth in the code we determine to be best practice in the country where the subject company is domiciled. |
⮚ | For controlled companies, notwithstanding whether their board composition complies with the criteria for independence espoused by the primary exchange on which the company’s shares are traded, we expect that at least 51% of the company’s board members be comprised of independent directors. |
⮚ | We consider the election of directors who are “bundled” on a single slate on a case-by-case basis, considering the amount of information available and an assessment of the group’s qualifications. |
3. | Qualification of directors |
We believe that the nominating committee of a board has the ability to ensure that the board remains qualified and effective. While we encourage boards to routinely refresh their membership, we are not opposed to long-tenured directors nor do we believe that long board tenure is necessarily an impediment to director independence. We generally defer to the board’s determination in setting age limits, term limits and stock ownership requirements for ensuring the board remains qualified.
4. | Classified board of directors/staggered terms |
Where boards are classified, director entrenchment is more likely because review of board service generally only occurs every three years. Therefore:
⮚ | We generally oppose efforts to adopt classified board structures and generally support proposals which attempt to declassify boards. |
5. | Majority vote requirements |
⮚ | We generally support proposals seeking to require director election by majority vote. |
We note that majority voting is not appropriate in all circumstances, for example, in the context of a contested election. We also recognize that some companies with a plurality voting standard have adopted a resignation policy for directors who do not receive support from at least a majority of votes cast.
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⮚ | Where we believe that the company already has a sufficiently robust majority voting process in place, we may not support a shareholder proposal seeking an alternative mechanism. |
6. | Cumulative voting for directors |
A cumulative voting structure is not consistent with a majority voting requirement, as it may further the candidacy of minority shareholders whose interests do not coincide with our fiduciary responsibility. Therefore:
⮚ | We generally support any proposal to eliminate cumulative voting. |
7. | Liability and/or indemnification of directors and officers |
⮚ | We evaluate proposals to limit directors’ liability and to broaden the indemnification of directors on a case-by-case basis. |
8. | Separation of Chairman and CEO positions |
⮚ | We generally oppose proposals requiring separate Chairman and CEO positions. |
9. | Proxy Access |
⮚ | We evaluate management and shareholder proposals to adopt proxy access and to amend proxy access bylaw provisions on a case-by-case basis. |
B. | Auditor Proposals |
1. | Ratification of auditors |
⮚ | We believe that the company is in the best position to choose its accounting firm, and we generally support management's recommendation absent evidence that auditors have not performed their duties adequately. |
2. | Approval of financial statements |
⮚ | In some markets, companies are required to submit their financial statements for shareholder approval. This is generally a routine item and, as such, we will generally vote for the approval of financial statements unless there are appropriate reasons to vote otherwise. |
3. | Auditor indemnification and limitation of liability |
⮚ | We generally oppose auditor indemnification and limitation of liability proposals. |
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C. | Capital Structure, Anti-Takeover, and Corporate Transaction Proposals |
1. | Increase authorized common stock |
We consider specific industry best practices in our analysis of these proposals, as well as a company’s history with respect to the use of its common stock. Generally, we will support a company’s proposed increase if:
(i) | a clear and legitimate business purpose is stated; and |
(ii) | the number of shares requested is reasonable in relation to the purpose for which authorization is requested. |
That said, we generally oppose a particular proposed increase where there is evidence that the shares are to be used to implement a “poison pill” or another form of anti-takeover device, or if the issuance of new shares would, in our judgment, excessively dilute the value of the outstanding shares upon issuance.
2. | Increase or issuance of preferred stock |
Preferred stock may be used to provide management with the flexibility to consummate beneficial acquisitions, combinations or financings on terms not necessarily available via other means of financing. We generally support these proposals in cases where the company specifies the voting, dividend, conversion and other rights or terms appear reasonable.
That said, we will also consider the impact of an issuance or increase of preferred stock on the current and future rights of shareholders and may oppose a particular proposed increase or issuance where the rights or terms appear unreasonable.
3. | Blank check preferred stock |
Blank check preferred stock proposals authorize the issuance of a class of preferred stock with unspecified voting, conversion, dividend distribution and other rights at some future point in time and may be used as a potential anti-takeover device. Accordingly, we generally oppose these types of proposals unless the company expressly states that the stock will not be used for anti-takeover purposes and will not be issued without shareholder approval.
4. | Stock splits and reverse stock splits |
⮚ | We generally support stock splits if a legitimate business purpose is set forth and the split is in shareholders' best interests. |
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⮚ | We generally support reverse splits if management proportionately reduces the number of authorized shares or if the effective increase in authorized shares (relative to outstanding shares) complies with the guidelines set forth herein for common stock increases. |
5. | Share repurchases |
⮚ | We generally support share repurchase proposals that are part of a well-articulated and well- conceived capital strategy. |
6. | Elimination of preemptive rights |
⮚ | Preemptive rights can be prohibitively expensive to widely-held companies. Therefore, we generally support proposals to eliminate preemptive rights. |
7. | Issuance of equity with and without preemptive rights |
⮚ | We generally support issuances of equity without preemptive rights unless there is concern that the issuance will be used in a manner that could hurt shareholder value. Conversely, we generally oppose issuances of equity which carry preemptive rights or super voting rights. |
8. | Reduce or eliminate number of authorized shares |
⮚ | We generally support proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock, provided such proposals have a legitimate business purpose. |
9. | Capitalization changes |
⮚ | We generally oppose proposals relating to changes in capitalization by 100% or more, where management does not offer an appropriate rationale or where it is contrary to the best interests of existing shareholders. |
10. | Poison pill plans |
Also known as shareholder rights plans, these plans are often adopted by the board without being subject to shareholder vote. We believe that poison pill plans not only infringe on the rights of shareholders but also may have a detrimental effect on the value of the company.
⮚ | We generally support proposals that require the company to submit a poison pill plan to a shareholder vote or to rescind a poison pill plan. |
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Where a poison pill is put to a shareholder vote, our policy is to examine these plans individually.
⮚ | We generally oppose proposals to adopt a poison pill plan which allows appropriate offers to shareholders to be blocked by the board or trigger provisions which prevent legitimate offers from proceeding. |
⮚ | We may support plans that include a reasonable ‘qualifying offer clause.’ Such clauses typically require shareholder ratification of the pill, and stipulate a sunset provision whereby the pill expires unless it is renewed. |
11. | Mergers, acquisitions and other special corporate transactions |
⮚ | Proposals requesting shareholder approval of mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) are determined on a case-by-case basis. |
D. | Compensation Proposals |
1. | Advisory resolutions on executive compensation (“Say on Pay”) |
It is challenging applying a rules-based framework when evaluating executive compensation plans because every pay program is a unique reflection of the company’s performance, industry, size, geographic mix and competitive landscape. For these reasons, we take a case-by-case approach to executive compensation (“Say on Pay”) proposals. Although we expect proxy disclosures to be the primary mechanism for companies to explain their executive compensation practices, we may engage with members of management and/or the compensation committee of the board, where concerns are identified or where we seek to understand a company’s approach to executive compensation better. We may also decline opportunities to engage with companies where we do not have any questions or concerns or believe that these guidelines already cover the issues at hand.
We assess each plan on a case-by-case basis while considering the following beliefs and expectations related to executive compensation plans:
⮚ | Companies should have compensation plans that are reasonable and that align shareholder and management interests over the longer term. |
⮚ | Disclosure of compensation programs should provide absolute transparency to shareholders regarding the sources and amounts of, and the factors influencing, executive compensation. |
⮚ | We expect companies to select peers that are broadly comparable to the company in question, based on objective criteria that are directly relevant to setting competitive compensation; we evaluate peer group selection based on factors including, but not limited to, business size, relevance, complexity, risk profile, and/or geography. |
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⮚ | We expect compensation committees to consider and respond to the shareholder voting results of relevant proposals at previous years’ annual meetings, and other feedback received from shareholders, as they evaluate compensation plans. At the same time, compensation committees should ultimately be focused on incentivizing long-term shareholder value creation and not necessarily on achieving a certain level of support on Say on Pay at any particular shareholder meeting. |
We may determine to vote against the election of compensation committee members and/or Say on Pay proposals in certain instances, including but not limited to when:
⮚ | We identify a misalignment over time between target pay and/or realizable compensation and company performance; |
⮚ | We determine that compensation is excessive relative to peers without appropriate rationale or explanation, including the appropriateness of the company’s selected peers; |
⮚ | We observe an overreliance on discretion or extraordinary pay decisions to reward executives, without clearly demonstrating how these decisions are aligned with shareholders’ interests; |
⮚ | We determine that company disclosure is insufficient to undertake our pay analysis; and/or |
⮚ | We observe a lack of board responsiveness to significant investor concern on executive compensation issues. |
2. | Elimination of single-trigger change in control agreements |
Companies sometimes include single trigger change in control provisions (e.g., a provision stipulating that an employee’s unvested equity awards or cash severance becomes fully vested upon a change in control of the company without any additional requirement) in employment agreements, severance agreements, and compensation plans.
⮚ | We may oppose directors who establish these provisions and we generally oppose compensation plans that include them. |
⮚ | We generally support shareholder proposals calling for future employment agreements, severance agreements, and compensation plans to include double trigger change in control provisions (e.g., a provision stipulating that an employee’s unvested equity awards or cash severance becomes fully vested only after a change in control of the company and termination of employment). |
3. | Elimination of excise tax gross-up agreements |
When severance payments exceed a certain amount based on the executive’s previous compensation, the payments may be subject to an excise tax. Some compensation plans provide for full excise tax gross-ups, which means that the company pays the executive sufficient additional amounts to cover the cost of the excise tax. We believe that the benefits of providing full excise tax gross-ups to executives are outweighed by the cost to the company of the gross-up payments. Accordingly:
⮚ | We may oppose directors who establish these provisions and we generally oppose compensation plans that include them. |
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⮚ | We generally support shareholder proposals calling to curtail excise tax gross-up payments. |
⮚ | We generally oppose compensation plans that provide for excise tax gross-up payments for perquisites. |
4. | Advisory votes on the frequency of Say on Pay resolutions |
⮚ | We generally opt for an annual vote on Say on Pay, which provides the most consistent and clear communication channel for shareholder concern about a company’s executive compensation plan. |
5. | Approve remuneration for Directors and Auditors |
⮚ | We generally support remuneration for directors or auditors, unless disclosure relating to the details of such remuneration is inadequate, or remuneration is excessive relative to local market practice. |
6. | Employee stock purchase plans |
An employee stock purchase plan (“ESPP”) gives the issuer’s employees the opportunity to purchase stock in the issuer, typically at a discount to market value. We believe these plans can provide performance incentives and help align employees’ interests with those of shareholders.
⮚ | We generally support the establishment of ESPPs and other employee ownership plans. |
⮚ | We generally support ESPPs that permit discounts up to 15%, but only for grants that are part of a broad-based employee plan, including all non-executive employees, and are fair, reasonable, and in the best interest of shareholders. |
7. | Equity compensation plans |
We support equity plans that are incentive based and align the economic interests of directors, managers and other employees with those of shareholders. The total number of shares reserved under a company's equity plan should be reasonable and not excessively dilutive. We believe that boards should establish policies prohibiting use of equity awards in a manner that could disrupt the intended alignment with shareholder interests. Our evaluation of equity compensation plans is based on a company’s executive pay and performance relative to peers and whether the plan plays a significant role in a pay-for-performance disconnect.
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⮚ | We generally oppose plans that contain “evergreen” provisions allowing for the unlimited increase of shares reserved without requiring further shareholder approval after a reasonable time period. |
⮚ | We generally oppose plans that allow for repricing without shareholder approval. |
⮚ | We generally oppose plans that provide for the acceleration of vesting of equity awards even in situations where an actual change in control may not occur. We encourage companies to structure their change in control provisions to require the termination of the covered employee before acceleration or special payments are triggered. |
⮚ | We support plans that allow a company to receive a business expense deduction due to favorable tax treatment attributable to Section 162(m) of the Internal Revenue Code. |
8. | Golden parachutes |
Golden Parachutes assure key officers of a company lucrative compensation packages if the company is acquired and/or if the new owners terminate such officers. We recognize that offering generous compensation packages that are triggered by a change in control may help attract qualified officers. However, such compensation packages cannot be so excessive that they are unfair to shareholders or make the company unattractive to potential bidders, thereby serving as a constructive anti-takeover mechanism.
⮚ | We generally support shareholder proposals requesting that implementation of such arrangements require shareholder approval. |
When determining whether to support or oppose an advisory vote on a golden parachute plan, we normally support the plan unless it appears to result in payments that are excessive or detrimental to shareholders. In evaluating golden parachute plans, we may consider several factors, including:
⮚ | Whether excessively large excise tax gross up payments are part of the payout; |
⮚ | Whether single trigger change in control provisions are part of the plan; and |
⮚ | Whether payments exceed three times the executive’s total compensation (salary plus bonus). |
9. | Pay-for-Superior Performance |
These are typically shareholder proposals requesting that compensation committees adopt policies under which a portion of equity compensation requires the achievement of performance goals as a prerequisite to vesting.
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⮚ | We generally oppose such proposals, as we believe these matters are best left to the compensation committee of the board and that shareholders should not set executive compensation or dictate the terms thereof. |
10. | Supplemental executive retirement plans |
⮚ | We evaluate shareholder proposals requesting to put extraordinary benefits contained in Supplemental Executive Retirement Plans (“SERP”) agreements to a shareholder vote on a case- by-case basis. |
⮚ | We evaluate shareholder proposals limiting benefits under SERP agreements on a case-by-case basis. |
E. | Corporate Governance Proposals |
1. | Amendments to charter/articles/by-laws |
When voting on a management or shareholder proposal to make changes to charter/articles/by-laws, we will consider in part the company’s and/or proponent’s publicly stated rationale for the changes, the company’s governance profile and history, relevant jurisdictional laws, and situational or contextual circumstances which may have motivated the proposed changes, among other factors.
⮚ | We will typically support changes to the charter/articles/by-laws where the benefits to shareholders, including the costs of failing to make those changes, demonstrably outweigh the costs or risks of making such changes. |
⮚ | We evaluate shareholder proposals requiring shareholder approval for bylaw or charter amendments on a case-by-case basis. |
2. | Shareholders’ right to call a special meeting |
⮚ | We believe that shareholders should have the right to call a special meeting in cases where a reasonably high percentage of shareholders are required to agree to such a meeting before it is called, in order to avoid the waste of corporate resources in addressing narrowly supported interests. We may oppose this right in cases where the proposal is structured for the benefit of a dominant shareholder to the exclusion of others. |
⮚ | We generally oppose proposals to eliminate/restrict the right of shareholders to call a special meeting. |
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3. | Shareholders’ right to act by written consent |
⮚ | We believe that shareholders should have the right to act by written consent, however, we may oppose shareholder proposals requesting this right in cases where the proposal is structured for the benefit of a dominant shareholder to the exclusion of others. |
⮚ | We may oppose shareholder proposals requesting the right to act by written consent if the company already provides a shareholder right to call a special meeting that we believe offers shareholders a reasonable opportunity to raise issues of substantial importance without having to wait for management to schedule a meeting. |
4. | Supermajority voting requirements |
We generally favor a simple majority voting requirement to pass proposals. Therefore:
⮚ | We will support the reduction or the elimination of supermajority voting requirements. |
⮚ | We generally oppose amendments to bylaws that would require anything other than a simple majority vote requirement to pass or repeal certain provisions. |
5. | Exclusive forum provisions |
⮚ | We will generally support proposals mandating an exclusive forum for shareholder lawsuits and will generally oppose proposals that ask the board to repeal the company’s exclusive forum bylaw. The courts within the state of incorporation are considered best suited to interpret that state’s laws. |
6. | Other business |
⮚ | We generally oppose “Other Business” proposals that allow shareholders to raise and discuss other issues at the meeting. As the content of these issues cannot be known prior to the meeting, we are unable to make an informed decision. |
7. | Conduct of the annual meeting |
⮚ | We generally support proposals relating to the conduct of the annual meeting (meeting time, place, etc.) as these are considered routine administrative proposals. |
8. | Adjourn meeting |
⮚ | We generally support such proposals unless the agenda contains items that we judge to be detrimental to shareholders’ best long-term economic interests. |
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F. | Environmental, Social and Disclosure Proposals |
It is our policy to analyze every shareholder proposal of an environmental and social nature on a case- by-case basis. Generally speaking, we support proposals targeting issues that are either a significant potential threat or realized harm to shareholders’ interests that have not yet been adequately addressed by management. In deciding our course of action, we will assess whether there is a clear and material economic disadvantage to the company if the issue is not addressed.
Baron believes that climate change represents a material risk for all businesses and that every company may be impacted by climate-related risks and opportunities. We believe it is imperative that both the public and private sector play a key role in aligning greenhouse gas (GHG) reduction efforts with science- based targets to 1) achieve a scenario in which the global temperature rise is limited to below 2ᵒC by 2100 and 2) is consistent with global goals, as conveyed by the 2016 Paris Agreement, to reach net zero GHG emissions by 2050. As such, we are broadly supportive of the work of the Task Force on Climate- related Financial Disclosure (TCFD) and the Sustainability Accounting Standards Board (SASB). Issuers can look to those frameworks as leading best practices for disclosure and reporting of material climate and other ESG-related issues. We expect executives and directors to be familiar with those recommendations and be able to discuss how they relate to the risk assessment for their business.
In analyzing requests for additional disclosure, we will assess whether the request: 1) is costly to provide; 2) would require duplicative efforts or expenditures that are of a non-business nature; or 3) would provide no pertinent information from the perspective of institutional shareholders.
1. | Climate Change |
⮚ | We generally support shareholder proposals asking companies to disclose the identification, assessment, management, and oversight of climate-related risks in accordance with the four key pillars of the TCFD. |
⮚ | We generally support shareholder proposals calling for the reduction of GHG emissions. |
⮚ | We generally support shareholder proposals requesting that companies establish and disclose goals and/or science-based targets for GHG emission reductions from company operations and/or products. |
⮚ | We generally support shareholder proposals that ask a company to incorporate life-cycle design in their business processes, addressing such issues as energy efficiency, renewable fuels, pollution prevention, waste minimization, and recycling and reuse. |
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2. | Lobbying and Political Spending |
⮚ | We generally support shareholder proposals requesting increased disclosure of political contributions and lobbying expenses, including those paid to trade organizations and political action committees, whether at the federal, state, or local level. |
⮚ | We generally support shareholder proposals asking companies to disclose the budgets dedicated to public policy lobbying activities. |
⮚ | We generally support shareholder proposals asking companies to support public policy activities, including lobbying or political spending that are consistent with shareholder or other stakeholder efforts to strengthen policies that protect workers, communities, the environment, and public safety. |
⮚ | We generally oppose restrictions related to social, political or special interest issues that impact the ability of the company to do business or be competitive and that have a significant financial or best-interest impact to the shareholders. |
3. | Work Place: Diversity |
⮚ | We generally support shareholder proposals calling for disclosure and/or implementation of diversity policies and practices, taking into account existing policies and practices of the company and whether the proposed information is of added benefit to shareholders. |
⮚ | We generally support shareholder proposals asking companies to report on efforts to comply with federal Equal Employment Opportunity (EEO) mandates. |
⮚ | We generally support shareholder proposals that request disclosure of a company’s workforce diversity data, pay ratios by demographic categories and those that request that companies expand their EEO statement to include sexual orientation, gender identity and/or expression. |
4. | Gender Equality |
⮚ | We generally support shareholder proposals that seek increased disclosure of policies and programs aimed at promoting gender equality and empowerment. |
⮚ | We generally support shareholder proposals that would require the board to consider women and minority candidates in director searches. |
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5. | Human Rights |
⮚ | We generally support shareholder proposals that request companies to operate in accordance with the principles and standards set out in the United Nations Global Compact. |
⮚ | We generally support shareholder proposals that request companies to increase reporting around any involvement with repressive regimes or conflict zones. |
⮚ | We generally support shareholder proposals that request companies to adopt policies to prohibit human trafficking or programs to educate employees and consumers about related risks. |
⮚ | We generally support shareholder proposals that request companies to develop policies governing the use of images of indigenous peoples, women or other identifiable group in their advertising, brand, or mascots. |
6. | Other |
⮚ | We generally support shareholder proposals that request companies to develop policies or programs to prevent or mitigate harm to indigenous peoples, or that request that companies report on their impacts to indigenous peoples. |
⮚ | We generally support shareholder proposals that request companies take steps to improve product-related safety performance or report on product safety and integrity uses. These issues may include privacy and data security, toxicity, animal welfare, nanomaterials, and product recalls. |
⮚ | We generally support shareholder proposals that request companies to adopt policies to address workplace health and safety and increase disclosure of workplace safety practices and performance. |
⮚ | We generally support shareholder proposals that request companies to adopt policies or report on practices that govern community engagement. |
⮚ | We may vote against a chair of a committee responsible for providing oversight of ESG matters and/or risk where we believe the company is lagging peers in terms of disclosure, business practices, or targets. |
⮚ | We may also vote against committee members, lead independent director(s) and/or board chair of companies that have lagged over several years. |
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Proxy Voting Policy and Guidelines
Barrow Hanley has accepted authority to vote proxies for our clients who have delegated this responsibility to us. It is the Firm’s policy to vote our clients’ proxies in the best economic interests of our clients, the beneficial owners of the shares. The Firm has adopted this Proxy Voting Policy for handling research, voting, reporting, and disclosing proxy votes, and this set of Proxy Voting Guidelines (“Guidelines”) that provide a framework for assessing proxy proposals.
Barrow Hanley votes all clients’ proxies the same based on the Firm’s policy and Guidelines. If or when additional costs for voting proxies are identified, the Firm will determine whether such costs exceed the expected economic benefit of voting the proxy and may abstain from voting proxies for ERISA Plan clients. However, if/when such voting costs are borne by Barrow Hanley and not by the client, all proxies will be voted for all clients.
Disclosure information about the Firm’s Proxy Voting Policy and Guidelines is provided in the Firm’s Form ADV Part 2.
To assist in the proxy voting process, at its own expense, Barrow Hanley retains Glass Lewis & Co. (“Glass Lewis”) as proxy service provider. Glass Lewis provides:
● | Research on corporate governance, financial statements, business, legal and accounting risks. |
● | Proxy voting recommendations, including environmental, social, and governance voting Guidelines. |
● | Portfolio accounting and reconciliation of shareholdings for voting purposes. |
● | Proxy voting execution, record keeping, and reporting services. |
Proxy Oversight Committee, Proxy Coordinators, and Proxy Voting Committee
● | Barrow Hanley’s Proxy Oversight Committee is responsible for implementing and monitoring this Proxy Voting Policy, procedures, disclosures, and recordkeeping. |
● | The Proxy Oversight Committee conducts periodic reviews of proxy votes to ensure that the policy is observed, implemented properly, and amended or updated, as appropriate. |
● | The Proxy Oversight Committee is comprised of the Responsible Investing Committee Lead (chair), the CCO, the Head of Investment Operations, an At-Large Portfolio Manager, and another rotating member of the investment team. |
● | Proxy Coordinators are responsible for organizing and reviewing the data and recommendations of Glass Lewis. |
● | Proxy Coordinators are responsible for ensuring that the proxy ballots are routed to the appropriate research Analyst based on industry sector coverage. |
● | Research Analysts are responsible to review and evaluate proposals and make recommendations to the Proxy Voting Committee to ensure that votes are consistent with the Firm’s analysis. |
BARROW HANLEY GLOBAL INVESTORS
2200 Ross Avenue, 31st Floor | Dallas, TX 75201 | (214) 665-1900
DALLAS | HONG KONG | LONDON | SINGAPORE | SYDNEY
Revised February 15, 2024
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● | Equity Portfolio Managers are members of the Proxy Voting Committee. |
● | Equity Portfolio Managers vote proposals based on our Guidelines, internal research recommendations, and the research from Glass Lewis. Proxy votes must be approved by the Proxy Voting Committee before submitting to Glass Lewis. |
● | Proxies for the Diversified Small Cap Value accounts are voted in accordance with the Glass Lewis’ recommendations for the following reasons: |
o | Investment selection is based on a quantitative model |
o | The holding period is too short to justify the time for analysis necessary to vote. |
Conflicts of Interest
Potential conflicts may arise when:
● | Clients elect to participate in securities lending arrangements; in such cases, the votes follow the shares. Barrow Hanley is not a party to the client’s lending arrangement and typically does not have information about shares on loan. Under these circumstances the proxies for those shares may not be voted. |
● | If/when a proxy voting issue is determined to be financially material, the Firm makes a best-efforts attempt to alert clients and their custodial bank to recall shares from loan to be voted. In this context, Barrow Hanley defines a financially material issue to be issues deemed by our investment team to have significant economic impact. The ultimate decision on whether to recall shares is the responsibility of the client. |
● | Barrow Hanley invests in equity securities of corporations who are also clients of the Firm. In such cases, the Firm seeks to mitigate potential conflicts by: |
o | Making voting decisions for the benefit of the shareholder(s), our clients, |
o | Uniformly voting every proxy based on Barrow Hanley’s internal research and consideration of Glass Lewis’ recommendations, and |
o | Documenting the votes of companies who are also clients of the Firm. |
● | If a material conflict of interest exists, members from the Proxy Voting and Proxy Oversight Committees will determine if the affected clients should have an opportunity to vote their proxies themselves, or whether Barrow Hanley will address the specific voting issue through other objective means, such as voting the proxies in a manner consistent with a predetermined Proxy Voting Policy or accepting the voting recommendation of Glass Lewis. |
Other Policies and Procedures
● | A proxy card or voting instruction form contains a list of voting options, including For, Against, Abstain, and/or Withhold. A vote to Abstain or Withhold is effectively a vote against the proposal. Barrow Hanley assesses each vote, the intended impact of our vote, and the rule(s) that apply to the vote and may select any of these options when casting the vote. Barrow Hanley sends a daily electronic transfer of equity positions to Glass Lewis. |
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● | Glass Lewis identifies accounts eligible to vote for each security and posts the proposals and research on its secure, proprietary online system. |
● | Barrow Hanley sends a proxy report to clients at least annually and/or as requested by client, listing the number of shares voted and disclosing how proxies were voted. |
● | Barrow Hanley retains voting records in accordance with the Firm’s Books and Records Policy. Glass Lewis retains the Firm’s voting records for seven years. |
● | Proxy Coordinators are responsible for retaining the following proxy records: |
o | These policies, procedures, and amendments. |
o | Proxy statements regarding our clients’ securities. |
o | A record of each proxy voted. |
o | Proxy voting reports that are sent to clients annually. |
o | Internal documents related to voting decisions; and |
o | Records of clients’ requests for proxy voting information and/or correspondence about votes. |
Voting Debt and/or Bank Loan Securities
Barrow Hanley’s proxy voting responsibilities may include voting on proposals, amendments, consents, or resolutions solicited by or in respect to securities related to bank loan investments.
Exceptions
Limited exceptions to this policy may be permitted based on a client’s circumstances, such as, foreign regulations that create a conflict with U.S. practices, expenses to facilitate voting when the costs outweigh the benefit of voting the proxies, or other circumstances.
Proxy Voting Guidelines
Barrow Hanley’s set of Guidelines is a framework for assessing proposals. Each proposal is evaluated based on its facts and circumstances. The Firm reviews and considers ESG issues along with other financially material factors to assess the financially material impact on the long-term value of the shares. Our Guidelines address the following issues:
● | Board of Directors |
● | Independent Auditors |
● | Compensation Issues |
● | Corporate Structure and Shareholder Rights |
● | Shareholder Proposals and ESG Issues |
● | Voting of Non-U.S./Foreign Shares |
Issues that do not conform to these Guidelines are evaluated by the Proxy Voting Committee and voted in the best interest of our clients.
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Board of Directors
Election of Directors
Barrow Hanley believes that good corporate governance begins with a board of majority-independent directors and committees, including independent directors who serve on Audit, Compensation, and Nominating committees.
Barrow Hanley will generally approve:
● | A slate of nominees comprised of a two-thirds majority of independent directors. |
● | Nominees for Audit, Compensation and/or Nominating committees who are independent of management. |
● | Nominees who we believe have the required skills and diverse backgrounds to make informed judgments about the subject matter for which the committee is responsible. |
● | We attempt to target board diversity of at least 30%. |
Barrow Hanley will generally not approve:
● | A slate of nominees that results in a majority non-independent directors. |
● | Nominees for Audit, Compensation and/or Nominating committees who are not independent of management. |
● | Incumbent board members who failed to attend at least 75% of board and applicable committee meetings. |
● | Nominees who have served on boards or as executives of companies with records of poor performance, inadequate risk oversight, excessive compensation, audit, or accounting-related problems and/or other indicators of mismanagement or actions against the interests of shareholders. |
● | Nominees whose actions on other committees demonstrate serious failures of governance, which may include acting to significantly reduce shareholder rights, or failure to respond to previous vote requests for directors and shareholder proposals. |
● | An independent director who has in the past three years, had a material financial, familial, or other relationship with the company or its executives. |
● | Members of a Nominating committee where the board has an average tenure of over ten years and has not appointed a new member to the board in at least five years |
● | Members of a Nominating committee where the board lacks diversity. |
Combined Chairman / CEO Role
When the roles of a board’s chair and CEO are combined a strong lead independent director is necessary. If a lead director is not appointed, Barrow Hanley supports proposals to separate the roles.
Contested Elections of Directors
Barrow Hanley evaluates a nominee’s qualifications, the incumbent board’s performance, and the rationale behind dissident campaigns, and votes based on maximizing shareholder value.
Classified Boards
Barrow Hanley supports proposals to declassify existing boards, whether proposed by management or shareholders. In most cases we vote against proposals for classified board structures where only part of the board is elected each year.
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If a board does not have a committee responsible for governance oversight and the board has not implement a proposal that received the requisite support, we vote against the entire board. If a proposal requests the board adopt a declassified structure, we vote against all directors and nominees up for election.
Board Diversity
Barrow Hanley supports boards with diverse backgrounds and nominees with relevant experience. Nominating and governance committees should consider diversity within the context of the company and industry. Shareholders are best served when boards make an effort to ensure a constituency that is not only reasonably diverse based on age, race, gender, and ethnicity, but also based on geographic knowledge, industry experience, board tenure and culture. Board diversity is one of many factors considered on a case-by-case basis when reviewing board elections.
Board Tenure
Barrow Hanley believes that independent directors are an important part of good governance. Long term service diminishes a member’s independence. Directors serving on a board for 10 years or more are not considered to be independent.
We recognize that in some cases, a director’s tenure and experience on the board is beneficial to shareholders. Nominees’ tenure on the board is evaluated to determine independence.
Overboarding
Barrow Hanley reviews a nominee’s board commitments on a case-by-case basis and generally votes against nominees who are executives of public company while serving on two or more public boards or a non-executive who sits on four or more public boards.
Proxy Access
Shareholders’ participation in electing directors enhances a board’s accountability and responsiveness. Long-term investors can benefit from shareholder rights to nominate directors. Such rights should require a minimum percentage ownership (at least 5%) of outstanding shares held for a minimum period (at least three years) to nominate a maximum percentage of (up to 20%) for the board.
Approval of Independent Auditors
Independent auditors are a critical element of good governance. A company’s relationship with its independent auditor should be limited to its audit. Barrow Hanley votes against auditor ratification proposals when the auditor has changed for 15 or more years. Auditor’s fees should be limited to the audit work. Other, closely related activities that do not appear to impair the auditor’s independence may be approved. Barrow Hanley evaluates the circumstances of auditors who have a substantial non-auditing relationship with the company on a case-by-case basis.
Compensation Issues
Compensation Plans should align the interests of long-term shareholders with the interests of management, employees, and directors.
Stock-Based Compensation Plans
Stock-based compensation plans should be administered by an independent committee of the board and approved by shareholders. Barrow Hanley opposes compensation plans that substantially dilute a shareholder’s ownership interest, provides participants with excessive awards, and/or have other objectionable features. Compensation proposals are evaluated on a case-by-case basis using the following factors:
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● | The company’s industry group, market capitalization, and competitors’ compensation plans. |
● | Requirements for senior executives to hold a minimum amount/percentage of company stock. |
● | Requirements for minimum holding periods for stock acquired through equity awards. |
● | Performance-vesting awards, indexed options, and/or other grants linked to the company’s performance. |
● | Requirements that limit the concentration of equity grants to senior executives and provide for a broad-based plan. |
● | Requirements for stock-based compensation plans as a substitute for cash compensation to deliver market-competitive total compensation. |
Bonus Plans
Bonus based compensation plans should include the following features:
● | Periodic shareholder approval to properly qualify for deductions under Internal Revenue Code Section 162(m). |
● | Performance measures relating to key value drivers of the company’s business. |
● | Maximum award amounts expressed in dollar amounts. |
Bonus plans should not include excessive awards in both absolute and relative terms.
Executive Compensation Plans (Say on Pay)
Say on Pay type of executive compensation programs can effectively link pay and performance and provide competitive compensation opportunities. Say on Pay type plans should state the amount of compensation at risk and the amount of equity-based compensation linked to the company’s performance and include adequate disclosure about the overall compensation structure. Say on Pay type plans should not include significant compensation guarantees and/or compensation that is not sufficiently linked to performance.
Recoupment Provisions (Clawbacks)
Executive compensation programs should be clearly tied to performance and include the following:
● | Detailed bonus recoupment policies to prevent executives from retaining performance-based awards that were not truly earned. |
● | Clawback triggers in the event of a restatement of financial results or similar revision of performance indicators upon which bonuses were based. |
● | Policies allowing board reviews of performance-related bonuses and awards paid to senior executives during the period covered by a restatement that allows the company to recoup such bonuses if performance goals were not actually achieved. |
● | Clawback policies that limit discretion and ensure the integrity of such policies. |
Executive Severance Agreement (Golden Parachutes)
Executive compensation should be designed as an incentive for continued employment and include reasonable severance benefits, and the executive’s termination should be limited to three times salary and bonus, referred to as double-trigger plans.
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Guaranteed severance benefits that exceed three times salary and bonus should be disclosed and should require shareholder approval.
Barrow Hanley does not support guaranteed severance benefits without a change in control or arrangements that does not require the executive’s termination, referred to as single-trigger plans.
Employee Stock Purchase Plans
Employee stock purchase plans are effective ways to increase employees’ ownership in the company’s stock. Such plans should not allow for purchases below 85% of current market value and should limit shares reserved under the plan to 5% or less of the outstanding shares of the company.
Corporate Structure and Shareholder Rights
Barrow Hanley supports market-based corporate control functions without undue interference from artificial barriers. Shareholders’ rights are a fundamental privilege of equity ownership and should be proportional to economic ownership. Appropriate limits include a shareholder’s ability to act by corporate charter, bylaw provisions, or adoption of certain takeover provisions.
Shareholder Right Plans (Poison Pills)
Poison pill plans can erode shareholder value by limiting a potential acquirer’s ability to purchase a controlling interest in the company without the approval of its board of directors, and/or can serve to entrench incumbent management and directors.
Shareholder rights plans should be designed to enables the board to take appropriate to defensive actions, and should require the following:
● | Shareholder approval within a year of its adoption. |
● | Timing limited to 3-5 years. |
● | Requirement for shareholder approval for renewal. |
● | Reviews by a committee of independent directors at least every three years, referred to as TIDE provisions. |
● | Permitted bid or qualified offer features requiring shareholder votes under specific conditions referred to as chewable pills. |
● | Reasonable ownership triggers of 15-20%. |
● | Highly independent, non-classified boards. |
Shareholder rights plans should avoid the following:
● | Long-term defensive features of 5 or more years. |
● | Automatic renewals without shareholder approval. |
● | Ownership triggers of less than 15%. |
● | Classified boards. |
● | Boards with limited independence. |
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Political Contributions and Lobbying
Barrow Hanley evaluates an issuer’s policy and procedures governing political spending and lobbying. Proposals demonstrating insufficient or absent policies and disclosure are opposed.
An Increase in Authorized Shares
Proposals for increases in authorized share amounts should not expose shareholders to excessive dilution and should be limited to increases of up to 20% of the current share authorization.
Cumulative Voting
Cumulative voting should be proportional to the shareholders’ economic investment in the company.
Supermajority Vote Requirements
Shareholders’ rights to approve or reject proposals should be based on a simple majority.
Confidential Voting
Shareholder voting should be conducted in a confidential manner.
Dual Classes of Stock
Barrow Hanley opposes dual-class capitalization structures that provide disparate voting rights to shareholders with similar economic interests. Proposals to create separate share classes with different voting rights are opposed. Proposals to dissolve separate share classes are approved.
Shareholder Proposals and ESG Issues
Proposals relating to ESG issues are usually initiated by shareholders seeking disclosure about certain business practices or amendments to certain policies. Barrow Hanley’s policy and Guidelines are designed to provide a framework for assessing the financial materiality of corporate governance, environmental, and social issues. Barrow Hanley supports proposals that improve transparency on issues that can be clearly tied to sustainable resource development, environmental compliance, and workplace safety.
Barrow Hanley subscribes to third party ESG research and scoring databases, including MSCI, Sustainalytics, and IFRS as a tool for rating the financial materiality of ESG factors to support our internal research. Some investments may have a low corporate ranking based on a third party’s profile. Investment in low ranked companies is based on our belief that shareholder engagement is the best way to engage with management and use our influence toward sustainable improvements. Our fundamental analysis identifies areas and issues for engagement with management to improve policies and disclosure.
Barrow Hanley evaluates climate risk and disclosure standards for the companies and industries most exposed to climate change and engages with management and boards to understand the company’s risks and opportunities and where necessary, seeks additional disclosure.
Barrow Hanley considers issues related to human capital to be a company’s most significant risks and opportunities. Boards should disclose and communicate plans to instill inclusive, attractive, and high-retention environments in the company. Barrow Hanley supports inclusive working environments and diversity among employees and supports shareholder proposals that contain comprehensive equal opportunity and anti-discrimination provisions, and reporting on gender-based discrepancies in compensation.
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Voting of Non-U.S./Foreign Shares
Although corporate governance standards, disclosure requirements, and voting mechanisms vary greatly among the markets outside the U.S., proposals are evaluated under these Guidelines and consideration of the local market’s standards and best practices.
Exceptions
Reasonable and limited exceptions to these Guidelines are permitted based on the facts, circumstances, and best economic interests of our clients. Exceptions are documented and retained in the Firm’s proxy voting records.
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CAUSEWAY CAPITAL MANAGEMENT LLC
PROXY VOTING POLICIES AND PROCEDURES
Overview
As an investment adviser with fiduciary responsibilities to its clients, Causeway Capital Management LLC (“Causeway”) votes the proxies of companies owned by investment vehicles managed and sponsored by Causeway, and institutional and private clients who have granted Causeway such voting authority. Causeway has adopted these Proxy Voting Policies and Procedures to govern how it performs and documents its fiduciary duty regarding the voting of proxies.
Proxies are voted solely in what Causeway believes is the best interests of the client, a fund’s shareholders or, where employee benefit assets are involved, plan participants and beneficiaries (collectively “clients”). Causeway’s intent is to vote proxies, wherever possible to do so, in a manner consistent with its fiduciary obligations. Practicalities involved in international investing may make it impossible at times, and at other times disadvantageous, to vote proxies in every instance.
The Chief Operating Officer of Causeway supervises the proxy voting process. Proxy voting staff monitor upcoming proxy votes, review proxy research, identify potential conflicts of interest and escalate such issues to the Chief Operating Officer, receive input from portfolio managers, and ultimately submit proxy votes in accordance with these Proxy Voting Policies and Procedures. The Chief Operating Officer and President have final decision-making authority over case-by-case votes. To assist in fulfilling its responsibility for voting proxies, Causeway currently uses Institutional Shareholder Services Inc. (“ISS”) for proxy research, which assists the decision-making process, and for proxy voting services, which include organizing and tracking pending proxies, communicating voting decisions to custodian banks, and maintaining records. Causeway will conduct periodic due diligence on ISS and its capacity and competency to provide proxy research and the proxy voting services provided to Causeway.
Proxy Voting Guidelines
Causeway generally votes on specific matters in accordance with the proxy voting guidelines set forth below. However, Causeway reserves the right to vote proxies on behalf of clients on a case-by-case basis if the facts and circumstances so warrant.
Causeway’s proxy voting guidelines are designed to cast votes consistent with certain basic principles: (i) increasing shareholder value; (ii) maintaining or increasing shareholder influence over the board of directors and management; (iii) establishing and enhancing strong and independent boards of directors; (iv) maintaining or increasing the rights of shareholders; and (v) aligning the interests of management and employees with those of shareholders with a view toward the reasonableness of executive compensation and shareholder dilution. Causeway’s guidelines also recognize that a company’s management is charged with day-to-day operations and, therefore, Causeway generally votes on routine business matters in favor of management’s proposals or positions.
-1- | June 30, 2021 |
Causeway generally votes for:
● | distributions of income |
● | appointment of auditors |
● | director compensation, unless deemed excessive |
● | boards of directors – Causeway generally votes for management’s slate of director nominees. However, it votes against incumbent nominees with poor attendance records, or who have otherwise acted in a manner Causeway believes is not in the best interests of shareholders. Causeway recognizes that, in certain jurisdictions, local law or regulation may influence Board composition. |
● | financial results/director and auditor reports |
● | share repurchase plans |
● | changing corporate names and other similar matters |
Causeway generally votes the following matters on a case-by-case basis:
● | amendments to articles of association or other governing documents |
● | changes in board or corporate governance structure |
● | changes in authorized capital including proposals to issue shares |
● | compensation – Causeway believes that it is important that a company’s equity-based compensation plans, including stock option or restricted stock plans, are aligned with the interests of shareholders, including Causeway’s clients, and focus on observable long-term returns. Causeway evaluates compensation plans on a case-by-case basis, with due consideration of potential consequences of a particular compensation plan. Causeway generally opposes packages that it believes provide excessive awards or create excessive shareholder dilution. Causeway generally opposes proposals to reprice options because the underlying stock has fallen in value. |
● | social and environmental issues – Causeway believes that it is generally management’s responsibility to address such issues within the context of increasing long-term shareholder value. To the extent that management’s position on a social or environmental issue is inconsistent with increasing long-term shareholder value, Causeway may vote against management or abstain. Causeway may also seek to engage in longer-term dialogue with management on these issues, either separately or in connection with proxy votes on the issue. |
-2- | June 30, 2021 |
● | debt issuance requests |
● | mergers, acquisitions and other corporate reorganizations or restructurings |
● | changes in state or country of incorporation |
● | related party transactions |
Causeway generally votes against:
● | anti-takeover mechanisms – Causeway generally opposes anti-takeover mechanisms including poison pills, unequal voting rights plans, staggered boards, provisions requiring supermajority approval of a merger and other matters that are designed to limit the ability of shareholders to approve merger transactions. |
Conflicts of Interest
Causeway’s interests may, in certain proxy voting situations, be in conflict with the interests of clients. Causeway may have a conflict if a company that is soliciting a proxy is a client of Causeway or is a major business partner or vendor for Causeway. Causeway may also have a conflict if Causeway personnel have significant business or personal relationships with participants in proxy contests, corporate directors or director candidates.
The Chief Operating Officer determines the issuers with which Causeway may have a significant business relationship. For this purpose, a “significant business relationship” is one that: (1) represents 1.5% or more of Causeway’s prior calendar year gross revenues; (2) represents $2,000,000 or more in payments from a sponsored vehicle during the prior calendar year; or (3) may not directly involve revenue to Causeway or payments from its sponsored vehicles, but is otherwise determined by the Chief Operating Officer to be significant to Causeway or its affiliates or sponsored vehicles, such as a primary service provider of a fund or vehicle managed and sponsored by Causeway, or a significant relationship with the company that might create an incentive for Causeway to vote in favor of management.
The Chief Operating Officer will identify issuers with which Causeway’s employees who are involved in the proxy voting process may have a significant personal or family relationship. For this purpose, a “significant personal or family relationship” is one that would be reasonably likely to influence how Causeway votes proxies.
-3- | June 30, 2021 |
Proxy voting staff will seek to identify potential conflicts of interest in the first instance and escalate relevant information to the Chief Operating Officer. The Chief Operating Officer will reasonably investigate information relating to conflicts of interest. For purposes of identifying conflicts under this policy, the Chief Operating Officer will rely on publicly available information about Causeway and its affiliates, information about Causeway and its affiliates that is generally known by Causeway’s employees, and other information actually known by the Chief Operating Officer. Absent actual knowledge, the Chief Operating Officer is not required to investigate possible conflicts involving Causeway where the information is (i) non-public, (ii) subject to information blocking procedures, or (iii) otherwise not readily available to the Chief Operating Officer.
Proxy voting staff will maintain a list of issuers with which there may be a conflict and will monitor for potential conflicts of interest on an ongoing basis.
Proxy proposals that are “routine,” such as uncontested elections of directors or those not subject to a vote withholding campaign, meeting formalities, and approvals of annual reports/financial statements are presumed not to involve material conflicts of interest. For non-routine proposals, the Chief Operating Officer in consultation with Causeway’s General Counsel/Chief Compliance Officer decides if they involve a material conflict of interest.
If a proposal is determined to involve a material conflict of interest, Causeway may, but is not required to, obtain instructions from the client on how to vote the proxy or obtain the client’s consent for Causeway’s vote. If Causeway does not seek the client’s instructions or consent, Causeway will vote as follows:
● | If a “for” or “against” or “with management” guideline applies to the proposal, Causeway will vote in accordance with that guideline. |
● | If a “for” or “against” or “with management” guideline does not apply to the proposal, Causeway will follow the recommendation of an independent third party such as ISS. If Causeway seeks to follow the recommendation of a third party, the Chief Operating Officer will assess the third party’s capacity and competency to analyze the issue, as well as the third party’s ability to identify and address conflicts of interest it may have with respect to the recommendation. |
To monitor potential conflicts of interest regarding the research and recommendations of independent third parties, such as ISS, proxy voting staff will review the third party’s disclosures of significant relationships. The Chief Operating Officer will review proxy votes involving issuers where a significant relationship has been identified by the proxy research provider.
-4- | June 30, 2021 |
Practical Limitations Relating to Proxy Voting
While the proxy voting process is well established in the United States and other developed markets with numerous tools and services available to assist an investment manager, voting proxies of non-US companies located in certain jurisdictions may involve a number of problems that may restrict or prevent Causeway’s ability to vote such proxies. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings relative to deadlines required to submit votes; (iii) restrictions on the ability of holders outside the issuer’s jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person; (v) restrictions on the sale of the securities for a period of time prior to the shareholder meeting; and (vi) requirements to provide local agents with powers of attorney (which Causeway will typically rely on clients to maintain) to facilitate Causeway’s voting instructions. As a result, Causeway will only use its best efforts to vote clients’ non-US proxies and Causeway may decide not to vote a proxy if it determines that it would be impractical or disadvantageous to do so.
In addition, regarding US and non-US companies, Causeway will not vote proxies if it does not receive adequate information from the client’s custodian in sufficient time to cast the vote.
For clients with securities lending programs, Causeway may not be able to vote proxies for securities that a client has loaned to a third party. Causeway recognizes that clients manage their own securities lending programs. Causeway may, but is not obligated to, notify a client that Causeway is being prevented from voting a proxy due to the securities being on loan. There can be no assurance that such notice will be received in time for the client, if it so chooses, to recall the security.
-5- | June 30, 2021 |
POLICY
PROXY POLICY |
POLICY SECTION NUMBER
6.12 | |
Implementation Date
January 1, 2009 |
Revision Date
January 1, 2024 |
Page 1 of 3 |
6.12 PROXY
Under SEC Rule 206(4)-6, investment advisors have fiduciary obligations to their clients if the advisors have authority to vote their clients’ proxies. Under our standard contractual agreements, Ceredex Value Advisors LLC (“Ceredex” or the “Firm”) is authorized to vote proxies on behalf of client accounts.
The rule requires an investment advisor that exercises voting authority over client proxies to adopt policies and procedures reasonably designed to ensure that the advisor: 1) votes proxies in the best interests of clients, 2) discloses information about those policies and procedures, 3) discloses how clients may obtain information regarding individual security proxy votes cast on their behalf, and 4) maintains appropriate records relating to actual proxy voting.
The Firm has a Proxy Committee (“Committee”) that is responsible for establishing policies and procedures reasonably designed to enable the Firm to ethically and effectively discharge its fiduciary obligation to vote all applicable proxies on behalf of all client accounts and funds where the Firm has proxy voting authority and ensure compliance with all the requirements. Annually (or more often as needed), the Committee will review, reaffirm and/or amend guidelines, strategies and proxy policies for all client accounts, funds and product lines.
The firm votes all shares per the firm Proxy Guidelines unless the client chooses custom guidelines. In the case that a ballot item is not covered under the policy or is coded as case-by-case in Ceredex’s proxy guidelines, a research analyst or portfolio manager will review the available information and will utilize such information, along with knowledge of the company, to make a vote recommendation to the Proxy Committee. The Proxy Committee members consider the information and recommendation and will then vote on that ballot item.
The Firm utilizes a third-party proxy service provider for support services related to the Firm’s proxy voting processes/procedures, which include, but are not limited to:
1. | The collection of proxy material from our clients’ custodians. |
2. | The review of proxy proposals and appropriate voting recommendations on behalf of the Firm. |
3. | The facilitation of proxy voting, reconciliation, and disclosure, in accordance with the Firm’s proxy policies and the Committee’s direction. |
4. | Recordkeeping and voting record retention. |
The Firm will continue to utilize all available resources to make well-informed and qualified proxy vote decisions.
POLICY
PROXY POLICY |
POLICY SECTION NUMBER
6.12 | |
Implementation Date
January 1, 2009 |
Revision Date
January 1, 2024 |
Page 2 of 3 |
As reflected in the Firm’s proxy guidelines, the Committee will vote proxies in a manner deemed to be in the best economic interest of its clients, as a whole, as shareholders and beneficiaries of those actions.
The Committee recognizes that each proxy vote must be evaluated on its own merits. Factors such as a company’s organizational structure, executive and operational management, Board of Directors structure, corporate culture and governance process, and the impact of economic, environmental and social implications remain considerations in our voting decisions.
The Committee will consider client-specific preferences and/or develop and apply criteria unique to its client base and product lines, where appropriate. As needed, the Firm will communicate this information to its service provider so those clients’ proxies will be voted accordingly. The Committee will review the service provider’s capabilities as agent for the contracted services noted above.
An Independent, Objective Approach to Proxy Issues
The Firm maintains its own proxy guidelines for U.S. domestic proxy voting issues. ERISA accounts will be voted in accordance with the Firm’s U.S. Domestic Proxy Guidelines; as such guidelines include ERISA-specific guidelines and requirements.
The Firm currently provides and maintains the following standard proxy voting guidelines:
U.S. Domestic Proxy Guidelines (applied to both ERISA- and Non-ERISA-related accounts and funds)
Exceptions to Policy
The Firm may choose not to vote proxies in certain situations, or for certain accounts, such as but not limited to when the cost of voting would exceed any anticipated benefit to the respective client(s); when a proxy is received for a client account that has been terminated; when a proxy is received for a security no longer managed; and/or when the exercise of voting rights could restrict the ability of an account’s portfolio manager to freely trade the security in question (for example, in certain foreign jurisdictions known as “blocking markets”).
Conflicts of Interest
Due to the Firm’s diversified client base and product lines, the Committee may determine a potential conflict exists in connection with a proxy vote. The Committee will determine how to address the conflict that may include voting strictly in accordance with policy, voting with management, and/or allowing the third-party service provider to vote in accordance with its guidelines.
POLICY
PROXY POLICY |
POLICY SECTION NUMBER
6.12 | |
Implementation Date
January 1, 2009 |
Revision Date
January 1, 2024 |
Page 3 of 3 |
Additional conflicts of interest will be evaluated by the Committee on an individual basis.
Although the Firm does its best to alleviate or diffuse known conflicts, there is no guarantee that all situations have been or will be mitigated through proxy policy incorporation.
Securities Lending Program
The Firm manages assets for several clients (including the Virtus Funds in the Virtus Asset Trust (“Virtus Funds”)) that engage in “securities lending” programs. In a typical securities lending program, clients or funds lend securities from their accounts/portfolios to approved broker-dealers against cash collateral. On behalf of clients and the Virtus Funds, the Firm seeks to balance the economic benefits of continuing to participate in an open securities lending transaction against the inability to vote proxies. On behalf of clients and the Virtus Funds, the Firm will call loaned securities back to vote proxies, or to otherwise obtain rights to vote or consent with respect to a material event affecting securities on loan when the advisor believes it is necessary to vote.
Additional Information
Records Related to Proxy Voting:
All proxy voting records, including policy and procedures, proxy statements, votes cast and any correspondence relative thereto will be maintained in accordance with the applicable provisions of the Investment Advisers Act of 1940 (as amended) and pursuant to the Firm’s Data Retention Policy.
Firm clients:
Individual client Proxy Voting records are available to clients upon request. Proxy Voting Policies and Procedures are available on the firm’s website. For any information related to proxy voting, or to obtain information about specific voting issues, please e-mail at: [email protected].
Virtus Funds shareholders:
Shareholders of the Virtus Funds may request fund-related proxy voting information by calling 1-800-243-1574.
APPENDIX B — CORPORATE GOVERNANCE GUIDELINES
Contents
1 Overview of key principles and approach | B-1 |
2 Role, structure and operation of boards | B-2 |
3 Board committees | B-5 |
4 Compensation | B-6 |
5 Audit, risk and control | B-7 |
6 Shareholder rights | B-8 |
7 Reporting | B-9 |
8 Social and environmental factors | B-11 |
9 Voting matters | B-13 |
The following guidelines apply to Columbia Threadneedle Investments’ client accounts to the extent agreed upon and/or permissible including voting on behalf of reo® (Responsible Engagement Overlay) service clients, which gives investors access to our overall engagement and proxy voting service offerings.i
As an asset management business, we seek to act in the best economic interests of clients when carrying out our investment activities. Our investment clients are retail and institutional investors, including corporate pension funds.
Our voting guidelines are applied to all listed equity client portfolios. However, our institutional clients always have the right to determine how we vote their securities. We will always comply with those requests.
In addition to these guidelines, general and country-specific voting guidelines are maintained and applied within the voting process. Voting guidelines provide greater detail on resolutions that will (and will not) be supported and are drawn directly from the Corporate Governance Guidelines.
In executing votes, where companies put forward a strong case for not complying with our voting guidelines, we will take this into account and adjust our vote if we believe the company is acting in the best economic interests of shareholders (and, thus, our clients). We apply our guidelines to client portfolios in a manner that considers our clients’ respective investment objectives and best economic interests. This could result in our voting on a matter the same way (or differently) for different clients. If you wish to clarify anything in these guidelines, please email your relationship manager or the Responsible Investment team at [email protected]. The Responsible Investment team is responsible for and reviews this document annually.
1 Overview of key principles and approach
Well governed companies are better positioned to manage risks, identify opportunities, and deliver sustainable growth and returns for our clients. These guidelines establish a consistent philosophy and approach to corporate governance and the exercise of voting rights. The approach is based on the overarching principles of:
■ | An empowered and effective board and management; |
■ | Appropriate checks and balances in company management structures; |
■ | Effective systems of internal control and risk management covering all material risks, including environmental, social and corporate governance (ESG) issues; |
■ | A commitment to promoting throughout the company a culture of transparency and accountability that is grounded in sound business ethics; |
■ | Compensation policies that reward the creation of long-term shareholder value through the achievement of corporate objectives; and |
■ | A commitment to protecting the rights and interests of all. |
We recognize that such principles may be expressed differently in different markets. Therefore, our voting policies take account of local practices and are applied in a pragmatic fashion that reflects an integrated understanding of local and international good practice. In all cases, we aim to achieve the same result: the preservation and enhancement of long-term shareholder value through management accountability and transparency in reporting.
Statement of Additional Information – March 1, 2024 | B-1 |
We also recognize that companies are not homogeneous and some variation in governance structures and practice is to be expected. Achieving best practice in corporate governance is a dynamic process between the board, management, and shareholders.
We encourage companies to engage in the process of shaping and meeting evolving standards of best practice. Although our voting is strongly rooted in a clear set of corporate governance principles, we approach each company’s case on its merits using our expertise, discretion, and dialogue with companies to do so. For this reason, we encourage companies to contact us with information about any governance practices and challenges unique to the company. When we do not vote with management’s or the board’s recommendations, we may choose to inform the company of our voting decision and provide comments to explain the specific concerns with the resolutions we did not support.
2 Role, structure and operation of boards
We use the term “board” to describe the board of directors and similar supervisory decision-making bodies. The board is ultimately responsible for the management of the company.
This is mainly achieved through the delegation of powers to executive management. The board should receive the report of executive management on the conduct of the business and regularly question management on these matters. However, certain matters should be reserved for the board.
The board is responsible for setting and testing strategy proposed by executive management, determining the risk appetite for the business, ensuring the independence and effectiveness of external audit, and for succession planning of both executive management and the board.
The structure, composition and operation of boards will vary from country to country and company to company. Certain elements of effective boards are universal, and these are detailed below under the following sub-headings:
■ | Roles and independence; |
■ | Competence, objectivity and refreshment; |
■ | Effective functioning of boards; and |
■ | Communication and accountability to shareholders. |
Roles and independence
The composition of the board is of the utmost importance. Boards should have meaningful representation of both executive and non-executive directors. Non-executives should be wholly independent of the company, although we recognize that, in certain cases, connected non-executives have a valuable role to play.
The role of the chair and separation of principal roles
The roles of the chair and chief executive officer (CEO) are substantively different and should be separated. We regard separation of the roles as important for securing a proper balance of authority and responsibility between executive management and the board, as well as preserving accountability within the board. If for any reason the roles are combined (e.g., over an unexpected transitional period) this should be explained and justified in the report and accounts. In all such cases, a strong senior independent non-executive director should be nominated (i.e., a lead independent director).
Executive directors
Including executives in board meetings is essential to enhance discussion and allow independent directors to gain the fullest understanding of company operations. In markets where customary, we encourage the appointment of key executives to the board alongside the CEO and the chief financial officer (CFO). The presence of other executives provides additional company knowledge for the board and ensures the board is not solely dependent on the CEO for input relating to the company’s operations and strategies. However, the number of executive directors should not outweigh the number of independent non-executives.
Non-executive directors
We assess the number of directorships an individual director holds to ensure they have sufficient time and energy to perform their role as a non-executive director properly as this is a demanding role. Factors that determine the appropriate number of directorships are the size of the company, its complexity, its circumstances, other commitments that a director has and the results of board evaluation, among others. We consider that holding multiple directorships in large companies can be excessive even for a full-time non-executive director, especially when considering board committee participation. Multiple directorships should be avoided for a full-time executive. For complex companies, particularly in developed markets, we may vote against non-executive directors who hold more than five directorships.
Statement of Additional Information – March 1, 2024 | B-2 |
Proportion of non-executive directors on the board
Difficult decisions that center on the best interest of shareholders arise from open and direct interplay between boards and company executives. It is important to have enough independent non-executive directors for an adequate diversity of views and to fulfil committee membership quotas. We expect all widely-held companies to have a majority of independent directors.
For companies with controlling shareholders, we expect there to be a minimum of one-third of fully independent directors on the board.
Independence of non-executive directors
Independence of individual directors is valued, but a well- balanced board is valued above all. We will support non- independent directors when they bring skills, sector knowledge and other experience that justify their presence on the board, particularly where the appropriate balance of independence is maintained.
The criteria for the independence of directors draw on a variety of standards, including the Organization for Economic Co-operation and Development (OECD) Principles of Corporate Governance, national corporate governance codes, listing rules, and guidance provided by the International Corporate Governance Network, among others. We favor a principles-based approach, which seeks to ensure that directors can act in the interests of the company and its shareholders. Companies should consider using the corporate governance report or annual shareholder meeting materials to explain the board evaluation process, and to justify the value that non-independent directors bring to the board.
■ | Not have close family ties with the company’s advisers, directors or senior employees; |
■ | Not serve as a board committee chair if they have served on the board for a period of time that may hinder their independence of thought; |
■ | Not hold cross-directorships or have significant links with other directors (see “Interlocking boards” below); |
■ | Not be major shareholders or representatives of any special interest group, including government representatives in cases of state ownership or representatives of affiliated companies; |
■ | Have no significant commercial involvement with the company as professional advisers, major suppliers or customers; |
■ | Not be entitled to performance-related pay, stock options, pensions, or benefit from large donations to charitable causes of their choice; |
■ | Not normally hold other directorships in companies in a closely-related industry so as to avoid potential conflicts of interest. |
Interlocking boards
We seek to ensure that directors are not only independent from the company, but also of one another. We expect companies to disclose interlocking board relationships and to explain how the independence of individual directors is preserved when directors jointly serve on two or more of the same boards.ii
Extensive board service and independence
Prolonged membership on a board jeopardizes independence as directors may become close with management and overly invested in prior strategic decisions. Independence is critical to ensuring shareholders have adequate voice inside the boardroom. After a certain length of board service, directors may not be considered fully independent and it may be inappropriate for such directors to serve on committees, such as the audit committee, where absolute independence is a key requirement.
We recognize that there is no fixed time period where a director categorically loses independence. Nonetheless, we will leverage a respective country’s own regulatory requirement regarding independence where specified. In North America, we will assess whether the average board tenure of the company is significantly beyond the respective market’s average when considering the board’s overall balance.
Where the appropriate balance of independence is not met, we will analyze whether to support the re-election of long-standing directors.
Independence of employee representatives
While a number of countries have legislation mandating a certain percentage of employee representatives on the board, we do not consider these individuals to be fully independent. Hence, we expect companies domiciled in countries with mandatory co-determination (the process by which employees elect their representatives to the board) or employee representation to ensure that the board and its committees have adequate representation of truly independent directors.
Competence, objectivity and renewal
Diversity, competencies and perspectives
A relevant and suitably diverse mix of skills and perspectives is critical to the quality of the board and the strategic direction of the company. Companies should therefore strive to widen the pool of potential candidates for board and management roles to ensure they draw on the richest possible combination of competencies and experiences.
Statement of Additional Information – March 1, 2024 | B-3 |
In all cases, candidates must be selected for their ability to oversee and enhance long-term company performance. Boards should recruit members with the appropriate combination of skills and experience, and should affirm the value of individual diversity, including gender, racial, ethnic, national origin, professional background and other relevant factors that may enhance the board’s overall performance. As boards cannot be transformed overnight, we look for a statement that sets out the board’s approach to promoting diversity at the board, executive management, and companywide workforce level. We welcome disclosure of specific diversity targets set by the board and subsequent reporting on performance against these targets. Where disclosure is absent and appropriate diversity levels across gender, racial and ethnic representation have not been met, we will normally not support the re-election of nomination committee chairs or other relevant directors.
Re-election of directors
To ensure that it retains an open and critical perspective, the board should be continually refreshed. For this reason, all directors should be required to submit themselves for re-election at regular intervals. We prefer to have all directors standing for annual election to strengthen the accountability of the board to shareholders. Failing that, we encourage the chair of the board, as well as the chairs of the audit, compensation and nomination committees to stand for annual re-election to strengthen accountability for the core functions of the board. We also believe that a minimum of one-third of board members should stand for election annually.
Nomination of directors
We strongly believe that a board nominating committee composed of a majority of independent non-executive directors is best placed to identify and put forward suitable candidates for the board. Shareholders should only put forward candidates where there is clear evidence of ineffective board oversight and unwillingness to correct the problem—or where a cumulative voting system or similar arrangement encourages direct shareholder participation in board nominations. We expect companies to put forward only one candidate for each available position as an indication that the company is clear about the value each director brings to the board. We encourage companies to specify each candidate’s qualifications, experiences and skills that are of relevance and importance to the board’s oversight of company strategy.
Balanced composition
We will consider voting against the chair or members of nominating committees who have not constructed appropriately balanced, independent boards. Indicators include: an overreliance on long-standing members; an over-reliance on affiliated directors; and a lack of appropriate diversity characteristics, including gender, race, nationality, ethnicity, etc., that reflect the nature, scope and aspirations of the business.
Effective functioning of boards
Board size
In the case of a two-tier board structure, neither board should be large: between five and 10 members typically is appropriate. A unitary board normally should have between five and 15 members. In the case of overly large boards and in the absence of a commitment to reduce board size, we may withhold support from the nominating or corporate governance committee chair unless clear justification has been provided explaining the need for such a large board.
Two-tier boards
We are agnostic as to the merits of a two-tier board as opposed to a unitary board, and we recognize that a two-tier board structure is the norm in many markets. At the same time, we are aware that there can be challenges in communication between a supervisory board and a management board. Where there is more than one body forming the board, companies should maintain an effective mechanism for the various elements of the board to work together and should explain how this happens. This system should ensure the most effective use is made of all individuals involved so that the company can optimize the unique skills and experiences of their directors.
Board evaluation
Board evaluations are an important tool for improving board performance. All boards should implement an evaluation process that considers the effectiveness of the entire board, its committees, the contributions made by each member, including its systems for interaction between the board and company management, areas for improvement, and behaviors and overall board culture. The nominating or governance committee may oversee the evaluation process and should report general findings and areas for improvement publicly to shareholders. Large or systemically important companies should leverage professional, independent assistance to facilitate evaluations on a periodic basis (typically every three years).
Board meetings & attendance
The board should meet at regular intervals to ensure effective oversight of the company. We regard six meetings per year as a minimum guidance, and often more frequent meetings are necessary.
Statement of Additional Information – March 1, 2024 | B-4 |
We also expect directors to attend the annual general meeting (AGM), and to facilitate communication with the shareholders whom they represent. The company should disclose the attendance record of individual directors in the AGM report, as well as mechanisms for shareholders to communicate directly with the board. We may withhold support from directors with poor attendance records or boards who fail to accommodate shareholder dialogue.
Non-executive director (NED) only meetings
NEDs should meet without executive board members present on a regular basis and when circumstances demand. They should also have at least one meeting per year to hold an unconstrained discussion away from day-to-day business matters. Ideally, this should be chaired by a senior or lead independent director, although the chair may be present (provided they are a non- executive). Conversely, in the case of two-tiered boards, supervisory boards should meet with executives on a regular basis to minimize the risk that NEDs could become marginalized from the business.
Training and mentorship
All directors should receive appropriate training when being onboarded. Ideally, the onboarding process should include assignment of a board mentor. Mentors are normally long- or medium-standing directors willing to take on the responsibility of providing ad hoc support and context for new directors.
All directors should regularly be provided opportunities to attend conferences, classes, or webinars to upskill and remain relevant. Such offerings may be an outcome of the board evaluation process or a request from directors or management directly. We encourage companies to develop regular director training plans that include educating directors on relevant environmental, social and governance matters.
Communication and accountability
The board should proactively and regularly make itself available for consultation with shareholders. To this end, boards should appoint a senior or lead independent director to fulfil a formal liaison role with key stakeholders. This is most important in cases where the CEO also holds the chair position, has executive responsibilities or was not independent on appointment.
Where appropriate, NEDs should be prepared to discuss matters of strategy, performance, risk, capital structure, standards of operational practice, and oversight of company-specific environmental and social matters.
3 Board committees
We encourage companies to move towards fully independent audit and compensation committees, as well as a nomination committee composed of a majority of independent directors. All board committees should report on their activities annually to shareholders (see section on “Reporting” below).
Audit
The audit committee provides an important safeguard for shareholders and for other stakeholders that rely upon the integrity of the report and accounts as a basis for their investing in the company.
The audit committee should consist exclusively of NEDs, all of whom should be independent, and consist of at least three individuals. At least one should have recent and relevant financial, accounting or audit experience, and all audit committee members should be financially literate. The committee should be responsible for assessing the effectiveness, independence, qualifications, expertise and resources of the external auditors (including the quality of audit) and oversee the process of review and issue of the accounts.
The audit committee should also be responsible for monitoring and approving related-party transactions and should ensure that any material related-party transactions do not disadvantage minority shareholders.
The audit committee is also responsible for publishing the annual audit report, which is essential for investors to evaluate the overall health of the business (see “Reporting” below). The audit committee report should provide meaningful disclosure on the committee’s work and the issues it has addressed. In the event of a significant restatement of accounts or material weakness in internal controls, we may not support the election of members of the audit committee who we consider have not fulfilled their duty to shareholders. We may also not support the election of these director to the boards of other unrelated companies.
Compensation
The compensation (or remuneration) committee is responsible for setting the compensation of executive directors and senior executives and should coordinate with the company’s human resources function to develop a coherent and effective compensation strategy throughout the company. As a best practice we believe that compensation committees should consist exclusively of independent non-executive directors. We encourage compensation committees to engage in direct dialogue with shareholders when developing compensation policies. (See “4. Compensation” below).
Statement of Additional Information – March 1, 2024 | B-5 |
The compensation committee must consult with other board functions to ensure that pay mechanisms are well aligned with strategic goals and the company’s appetite for risk. In particular, the compensation committee should work with the board and its committees to determine the appropriate balance in the allocation of profits to employees as incentive payment, to shareholders as dividends, and for retention or reinvestment in the business itself.
The committee’s fiduciary duty is also to ensure that the amount of payment to management is fair and appropriate. Finally, the committee should be attentive to compensation across the company to ensure management is delivering on strategic priorities, especially those that enhance shareholder returns, and managing risk effectively.
We may withhold our support from the chair and/or members of the compensation committee where there are significant concerns with the committee’s decision-making, or where issues we have identified with pay policies and practices remain unaddressed.
Nomination
A nomination committee should oversee all board and senior executive appointments. Normally it should be a committee of independent non-executive directors and the board chair. In certain instances, it may be appropriate for the committee to leverage management’s advice. Although we prefer a fully independent committee, we recognize that a non-independent director or representative of a large shareholder may be appropriate in some circumstances.
Corporate governance
We recognize that companies may choose to have the nominating committee or a specific corporate governance committee responsible for corporate governance practices and procedures. Regardless of the structure, the committee should monitor emerging regulatory and industry standards, strive to achieve global best practice, and should consult with shareholders to understand investor expectations.
Corporate responsibility and sustainability
We believe that committees with responsibilities related to oversight of corporate social responsibility, ethics or sustainability are prudent for purposes of risk management. For large companies exposed to significant ESG risks, such committees are essential to protecting shareholder value and managing reputational risk.
Business ethics
Whether it is through a committee such as the audit committee or a general board review, it is important that the board affirm its responsibility for reviewing internal business ethics systems, practices, and processes.
4 Compensation
Levels of compensation and other incentives should be designed to promote sustainable, long-term shareholder value creation and reflect the executives’ work and contribution to the company. No director should be involved in setting their own compensation. Given the consistent upward trend in total compensation, we expect careful usage and robust justification of benchmarks. We also wish to see comprehensive disclosure of performance targets as well as actual performance against pre-set targets. We expect justification of base pay levels awarded, and that a significant proportion of total compensation be variable and subject to appropriately challenging performance conditions. We do not set guidelines for levels of compensation beyond the principles mentioned below.
Level of pay
We expect boards to demonstrate an understanding of (and sensitivity to) the views and expectations of shareholders and other key stakeholders, such as employees, when setting executive pay.
Relationship to strategy and risk
We expect companies to demonstrate the alignment of their compensation policy with their overall business strategy and planning. Performance metrics should relate to the company’s articulated strategy and risk tolerance. Targets should be constructed to align executive incentives to the interests of long-term shareholders and should not create incentives for executives to undertake short-term risks that might imperil sustainable long-term performance. We advocate for risk-related preconditions to bonus awards to ensure inappropriate incentive payments are not awarded in the event the company’s financial strength or credit quality deteriorates.
We seek appropriately detailed disclosure of board and disclosure management compensation packages (See “Compensation report” below). The purpose of the compensation report should not simply be related to compliance, rather it should be to enhance investors’ understanding of the committee’s practices, processes, and goals.
Following the award of the bonus, companies should provide a meaningful analysis in the compensation report of the extent to which relevant targets were met. The compensation report should be written in plain language and include the tax implications for the company.
Statement of Additional Information – March 1, 2024 | B-6 |
At a minimum, the compensation of all directors, including all nonexecutive and executive directors, should be disclosed individually. We look for banded disclosure of those individuals at sub-board level who make a significant contribution to the company.
Executive contracts and pensions
Prior to employment contract agreements, companies should actively consider the potential rewards concerning severance in the event of inadequate performance and clarify the performance conditions under which such severance benefits are to be payable. We encourage companies to seek mitigation in case a director has taken up employment elsewhere and to adjust the length and size of any payments accordingly. We recommend that companies make larger severance packages the subject of a shareholder vote.
Share schemes/share compensation arrangements
We believe that strict guidelines should be observed regarding the issue, or potential issue, of shares for incentive schemes (also known as equity-based compensation plans) both as to the proportion of shares issued and to the rate at which these are issued each year. For us to accept large share schemes, the commercial drivers must outweigh the dilutive impacts. If the company is insufficiently transparent regarding the details of such schemes, we may abstain or vote against them.
Equity incentive plans
We support the principle of motivating and rewarding executives through the granting of equity incentives.
Performance targets for equity incentive plans should be clearly disclosed and challenging. We believe that the compensation committee is in the best position to determine the most appropriate performance metrics for driving the long-term business strategy. However, overall compensation packages should reflect a range of performance.
Generally, we believe executive pay plans should reflect a balance of financial, operational, and relative performance targets. We strongly believe that exceptional performance over a significant period merits an exceptional level of compensation. We oppose retesting of performance conditions and may withhold support of compensation plans where the compensation committee has used its discretion to relax any performance targets previously approved by shareholders.
We will consider one-off equity awards on a case-by-case basis in light of justification provided by the company. However, frequent use of exceptional awards raises questions over the adequacy of the overall compensation strategy and effectiveness of succession planning. We will take particular care when reviewing equity awards granted for the purposes of recruitment or retention when such awards are not linked to meaningful performance targets.
We encourage the inclusion of environmental and social factors in performance bonus payments where they could have a material impact on shareholder returns. We also expect a discussion of the process undertaken by the company to identify such factors and an explanation as to why it considers these factors to be relevant.
Holding periods, vesting and malus/clawback policies
Bonus payments and long-term incentive schemes should be structured to reward long-term growth in shareholder value and be subject to performance-vesting conditions. We encourage companies to include deferred shares as a portion of short-term bonuses. Longer-term incentive plans should be fully sharebased, and vesting periods should extend from at least three to five years or longer. We also encourage companies to require longer-term holding periods post vesting. The compensation committee should maintain a malus authority to withhold all or part of performance-based pay from executives before it has vested in cases where it deems it appropriate. The compensation committee should also have clawback authority to recover sums already paid out to executives. This might occur following a significant restatement of accounts, where previously granted awards were paid on the basis of inaccurate figures, or where the long-term outcomes of a specific strategy result in significant value destruction for shareholders.
Employee ownership
Widespread employee ownership can contribute positively to shareholder value, as it further aligns employees’ interests with those of shareholders. Such devices should not, however, be instituted as anti-takeover devices, and should be included within company-wide dilution limits.
5 Audit, risk and control
We recommend that the independent members of the audit committee meet on a regular basis with the company’s auditors and without company management. This may enable a better flow of information between auditors and the board.
Appointment of auditors
The auditors’ performance and appointment should be reviewed periodically. Where the same firm remains as auditor for a period of time, there should be a policy of regular rotation of the lead audit partner. We believe that systematic rotation of audit firms is both desirable and in the best interests of shareholders.
Statement of Additional Information – March 1, 2024 | B-7 |
We expect audit quality to be the main consideration in the selection of the auditor and expect that shareholders should be given the opportunity to vote on the appointment and payment of auditors.
Auditor liability
We recognize the disproportionate risk that joint & several liability may place upon audit firms. However, we will only consider supporting arrangements to cap auditor liability in exceptional circumstances (e.g., where the risk of a catastrophic and disproportionate claim can be demonstrated).
Fees paid to a company’s auditors in addition to audit fees
Companies should disclose when auditors carry out consultancy work in addition to auditing the company and the audit committee should consider whether there is a risk that an auditor’s impartiality may be jeopardized. The range, nature and tendering process for any such non-audit work should be supervised by the audit committee, whose responsibilities in this area should be fully disclosed. Where substantial non-audit fees are paid for more than one year, we may not support the reappointment of the auditor or the payment of auditor fees in its voting at AGMs.
Related-party transactions
Many companies are involved in material related-party transactions, which represent a significant risk to shareholders. This risk is mitigated in companies with fully independent audit committees whose responsibility it is to ensure that such transactions are conducted on the basis of arm’s-length valuations. We strongly encourage companies to use such committees for scrutiny, and to secure prior shareholder approval for material related-party transactions.
In the circumstance of continued concerns, we recommend that each company disclose any shareholdings that its controlling shareholders may have in other companies or investment vehicles that have a material interest in the company.
Risk management
The board as a whole is responsible for defining a company’s risk tolerance relative to its strategy and operations—it is also responsible for monitoring the company’s performance relative to defined risks. Financial, operational, and reputational risks that are relevant to the company’s business and performance should be included in this oversight, including material ESG and ethical risks.
Depending on the size and complexity of the company, a standalone risk management committee may be warranted.
6 Shareholder rights
While the precise nature and scope of shareholder rights vary across jurisdictions and many related aspects of our expectations are touched upon in other parts of these guidelines, a number merit direct mention:
Liaison with shareholders
Board and management teams should be ready, where practicable, to engage in dialogue with shareholders based on an understanding of shared objectives. They should also be proactive in making sure important news is imparted, subject to appropriate inside information procedures, and should react helpfully to investor inquiries.
In investment meetings with shareholders, companies should be prepared to address relevant corporate ESG issues.
Issuance of Shares
We respect a company’s right to issue shares to raise capital. However, share issuance should be strictly limited to that which is necessary to maintain business operations and drive company strategy. We will not support requests to increase authorized share capital that exceed 50% of existing capital, unless specific justification has been provided (e.g., to complete a strategically important acquisition or undertake a necessary stock split).
Pre-emption Rights
We believe that pre-emptive rights for existing shareholders are essential. Shares may be issued for cash without pre-emptive rights or for compensation purposes, subject to shareholder approval. Companies should adhere to strict limits for issuing new shares as a proportion of the issued share capital. Furthermore, they should also be subject to flow rates, where appropriate.
Share repurchases
We expect companies to repurchase shares in the market when it is advantageous for the company and its shareholders.
Authority to repurchase shares should be subject to shareholder approval.
Controlled companies and share classes with differential voting rights
We favor a share structure that gives all shares equal voting rights. We do not support the issue of shares with impaired or enhanced voting rights.
Where differential voting structures exist, this structure should be transparently disclosed to the market. In the case of controlled companies, we will review any request to issue shares with enhanced voting rights to determine why these are necessary and how they will reflect the interests of minority shareholders. We support the principle of one share, one vote, and encourage companies to take steps to eliminate differential voting structures over time or prevent their introduction. Where there are unequal voting rights, we encourage clear and comprehensive disclosure of a timeline regarding the retirement of unequal voting structures (otherwise known as sunset provisions).
Statement of Additional Information – March 1, 2024 | B-8 |
Voting caps
We oppose voting caps in principle and believe that all shares should be entitled to full voting rights irrespective of the holding period. However, we recognize the widespread use of voting caps in certain markets, and the benefits accruing to shareholders not subject to a cap. Therefore, at a minimum, we expect companies to clearly disclose any caps and encourage them not to introduce new caps while phasing out existing caps over time.
Mergers and acquisitions, spin-offs and other corporate restructuring
We expect boards to conduct thorough due diligence prior to pursuing any merger or acquisition and to maximize shareholder value in any deal. Where major transactions are not subject to shareholder approval, companies should consider the views of their major shareholders, subject to regulatory constraints and shareholders’ policies concerning insiders.
We consider the ESG risk implications of any corporate activity as part of the assessment of such activity, particularly in high-impact industries. We also expect the board to evaluate any potential ESG or ethical risks or liabilities of any business combination, including supply chains.
Poison pills
We regard artificial devices to deter bids, known as poison pills, as inappropriate and inefficient unless they are strictly controlled and very limited in duration. We believe that any control-enhancing mechanism or poison pill that entrenches management and protects the company from market pressures is not in the interests of shareholders.
Pension and other similar significant corporate liabilities
Companies should be aware of, and report to shareholders on, significant liabilities such as those arising from unfunded or under-funded pension commitments. The extent of the liability should be reported, and the plans put in place to cover the deficit should also be reported within a reasonable timeframe for action. The principal assumptions used in calculating amounts should form part of this disclosure. Other significant liabilities could include specific operational or ESG risks that the company faces. The company should provide some indication of how these risks can result in “contingent liabilities.”
Shareholder resolutions
We consider all shareholder resolutions that appear on the ballot and vote in accordance with our view of the long-term economic benefit to shareholders. On this basis we will typically support requests to improve board accountability, executive pay practices, ESG disclosure and climate change scenario analyses where we agree with both the broader issue highlighted as well as the implementation proposed. We also typically support shareholder proposals asking companies to report on implementation of environmental and social policies and assessments where there is reason for concern that links to financially material risks that could impact the performance of the company. We will review company and outside data and information, assess peers for benchmarking and consider the proponents’ and company’s arguments in full.
7 Reporting
Companies should have meaningful and transparent disclosure so that investors can obtain a clear understanding of all important and relevant issues. The annual report should provide a full review of the business model and strategy; key performance indicators used to gauge how the company is progressing against its objectives; principal (material) risks and any significant factors affecting the company’s future performance, including significant ESG or ethical issues; key achievements; and standards followed during the accounting period.
In all markets, we favor reports that are:
■ | Comprehensive, covering the strategic direction of the business and all material issues, including any significant changes in the regulatory context and key ESG issues; |
■ | Balanced, with even-handed treatment of both good and bad aspects of a company; |
■ | Transparent, with narrative text that leverages plain language, and accounting notes that provide investors with a full understanding of the circumstances underlying the reported figures; |
■ | Underpinned by Key Performance Indicators (KPIs) that drive business performance, are comparable over time, and are supported by detailed information on how they are calculated; |
■ | Consistent and joined-up with other company reporting, including the compensation policy and corporate social responsibility or sustainability reporting. |
Statement of Additional Information – March 1, 2024 | B-9 |
Directors
Adequate biographical information on the directors should be provided for shareholders in advance of the AGM. This should include information about directors’ qualifications and experience, term of office, date of first appointment, level of independence, board committee memberships and other personal and professional commitments that may influence the quality of their contribution and independence (e.g., other directorships, family and social ties, and affiliations with related companies or organizations). For all newly appointed directors, we encourage disclosure of qualifications, experiences and skills that are considered by the board to be of relevance and importance to its oversight of company strategy. To this end, we encourage disclosure of a clear and concise board skills matrix in the proxy voting materials and annual report.
Nomination committee report
The committee should report annually on its activity and the report should provide a detailed discussion of its process for identifying and appointing executive and non-executive directors, including the processes it employs to ensure board membership reflects an appropriate diversity of perspectives, experiences, gender and racial or ethnic representation as well as cultural backgrounds. Where necessary, the report should include a thorough discussion of the board’s view of the independence of certain members. The report should also include a robust description of the board evaluation process, cadence, and outcomes (including strengths and opportunities identified).
Audit committee report
The audit committee should report on its conduct during the year and, in particular, any specific matters of judgement relating to the application of accounting principles or the scope of the audit. It should also comment on the process for ensuring the independence of the auditors and for evaluating the impact of non-audit work. The audit committee report should include a narrative description of any related-party transactions, with reference to how these might impact the interests of minority shareholders. Any qualification of the audit statement and all matters raised in the auditor’s report must be fully explained.
System of internal controls and risk management
If the audit committee’s remit includes risk management, the audit committee report should also address the board’s oversight of enterprise-wide risks. Either as part of the audit committee report or a standalone report, the company should explain the results of the board’s review of internal controls, including any identified (or potential) weaknesses in internal controls and how the board plans to respond to these.
Compensation report
We expect all companies to publish an annual compensation report in line with international good governance standards. Good compensation reporting outlines a company’s overall philosophy and its policies and formulas for determining annual, short- and long-term pay. We look for compensation reports to break down fixed versus variable pay and to clearly align total pay packages with long-term shareholder value. The compensation report should clearly disclose specific long-term performance targets and total potential pay-outs.
If short-term performance targets cannot be disclosed due to commercial sensitivity, we expect retrospective disclosure of short- term targets and of actual performance against these targets.
We recommend that all companies put the compensation report to a shareholder vote and encourage compensation committee members to actively consult their shareholders prior to the AGM.
Sustainability reporting
We encourage companies to report on any significant ESG or ethical risks and opportunities in their annual reports including the systems in place to manage these risks. This may be supported by more detailed disclosure in a separate corporate social responsibility or sustainability report.
Code of corporate governance
Companies should provide a full and clear statement of all matters relating to the application of the provisions of the relevant national code of corporate governance. The way the provisions are put into effect should be clearly discussed. Any deviations should be supported by meaningful explanations.
Code of conduct
Companies should maintain a code of conduct reflecting corporate values and promotion of ethical business practices. Such codes should address business-critical compliance issues including anti-corruption practices.
Reincorporation in a tax or governance haven
Irrespective of the potential benefits a smaller tax burden may bring, we will typically vote against resolutions for a company to reincorporate in a new legal jurisdiction that offers lower legal and governance protections to shareholders. Aggressive tax strategies, even if structured legally, can pose potentially significant reputational and commercial risks for companies.
Statement of Additional Information – March 1, 2024 | B-10 |
We expect boards to ensure the company’s approach to tax policy is both prudent and sustainable. To that end, we therefore expect companies to disclose how the board is providing such oversight. Companies should provide a suitable amount of information for investors to understand their tax practices and associated risks
Listings
Companies that are listed on an exchange should comply with the rules and listing requirements of that exchange.
Shareholder resolutions
and access to the proxy statement
Shareholder resolutions represent the exercise of a key shareholder right and may encompass a wide range of issues. We encourage companies to engage in constructive dialogue with shareholders and other key stakeholders. Where engagement is unsuccessful, we support shareholders’ right to submit a shareholder proposal for consideration by all investors. In these instances, companies should behave respectfully by communicating promptly and fully with shareholders while refraining from obstructing the process. The board should provide a full and reasoned response to any shareholder proposal on the ballot. We consider all shareholder resolutions put forward and vote in accordance with our understanding of the long-term economic benefit to shareholders. We may support shareholder resolutions relating to the right to nominate or remove directors, including those related to an advisory shareholder vote on pay. We will incorporate into our decision whether a shareholder resolution is binding in nature or advisory (non-binding) in applying the above considerations.
8 Social and environmental factors
Environmental and social factors can present serious risks to corporations and their ability to generate shareholder returns. A well-run company should, therefore, have formal systems to identify, assess and manage significant risks associated with financially material environmental and social factors. Companies should publicly disclose such factors on a regular basis and detail any management-related strategies and targets.
Disclosure should cover both direct operations and, where relevant, the policies applied to their supply chains. Companies should make appropriate and integrated disclosures reflecting touch points to their strategy, research and development, capital expenditures, operational performance, and commercial aspirations.
In general, we evaluate environmental and social proposals based on the relevance of the issue to the company and the desirability of the specific action requested in the proposals to advance long-term shareholder value. We recognize that some proposals may identify important company risks even if the proposal is poorly constructed. In such cases, we encourage companies to identify, mitigate and report on their respective risk management approach effectively.
Environmental and social management
Companies should determine how financially material environmental and social risks and opportunities are addressed via their core business strategy. As part of this process, companies should proactively identify, assess and manage those risks and opportunities, as well as implement robust sustainability governance frameworks to promote accountability and ensure effective oversight. We expect companies to align their disclosure of environmental and social policies, management systems and performance according to internationally accepted standards. We also expect companies to quantify impacts from environmental and social factors and set targets to mitigate and manage material sustainability risks and impacts.
We have set out our detailed thoughts for environmental and social practices in stand-alone documents available on our website.
We may withhold support from management resolutions should we deem companies’ responses to involvement in significant environmental or social controversies as insufficient, or where we have concerns about recurrent weak practices by companies in high-impact industries.
We may vote in favor of shareholder resolutions seeking improvements in reporting and/or management of environmental or social practices where we have concerns, acting in the best economic interest of our clients, or improvements are proportionate to the risks faced.
Climate change
We recognize that climate change and the global transition to a lower-carbon economy present both risks and opportunities to businesses. We are supporters of both CDP (formerly, the Carbon Disclosure Project) and the recommendations of the Taskforce on Climate Related Financial Disclosuresiii and expect to see companies report climate risks and strategy against the proper standards and frameworks. We also support company efforts to implement net zero targets; however, the company should disclose specifics as to how they will accomplish this.
Some companies may be exposed to business risks stemming from the effects of climate change either directly via their business operations, regulations, changing consumer demand or through supply chains. Where these are financially material risks, companies should describe how their business strategy incorporates climate risk and ensure adequate disclosure.
Statement of Additional Information – March 1, 2024 | B-11 |
Where companies in high-impact sectors—e.g., those requested to disclose to CDP Climate Change—fail to provide investment-relevant climate disclosure or do not have a robust climate change risk management strategy, we may not support management resolutions, including the report and accounts or the election of directors if we think this is in the best economic interests of our clients.
Where there are matters of concern, we may support shareholder resolutions calling on companies to improve their business planning and public disclosure in relation to climate change risks and opportunities.
We will make use of investor tools such as the Climate Action 100+ Net Zero Company Benchmark, the Transition Pathway Initiative, our own proprietary net zero tool as well as engagements we’ve conducted to identify companies that fail to follow best practice.
Biodiversity
Loss of biodiversity degrades ecosystems which underpin the Earth’s ability to provide regulating, provisioning, cultural and supporting ecosystem benefits. For companies in sectors with high biodiversity impact that fail to provide appropriate disclosure (e.g., CDP Water Security and/or Forests disclosures), we may not support management resolutions if we think this is in the best economic interests of our clients.
Sustainability and integrated reporting
A company’s recognition and management of financially material environmental and social exposures and related disclosures provides shareholders with an additional lens through which to assess the quality, leadership, strategic focus, risk management and operational standards of practice of the business.
Disclosure of significant environmental and social risk factors should be included in the annual report. Certain high risk or high impact operations that are of substantial interest to investors and the public may require modular reporting alongside reporting that aggregates all company activity. We recommend disclosure in line with internationally accepted standards of best practice which enhances our understanding of a company’s ability to create and sustain value in the short, medium and long term.
Audit of social and environmental management systems
We appreciate that auditing and assurance practices for environmental and social systems require further development; nevertheless, we consider third-party auditing of sustainability reports to be best practice. We encourage companies to move towards third-party verification.
Labour practices and standards
Companies may incur significant risks because of the employment practices of their own operations and those of their suppliers and sub-contractors. Codes of conduct that address such risks and include detailed and effective procedures for their supply chain are usually in companies’ best interests.
Where there is cause for concern, we favor codes based on internationally recognized standards (e.g., core conventions of the International Labour Organization), independent monitoring or auditing of implementation, and reporting of aggregate audit results. We look for regular, public reporting on code implementation.
Human rights
Companies may incur extraordinary risks to their operations, staff, or reputation as a result of operating in conflict zones or in locations at risk of human rights abuses. Risks may also be encountered via supply chains when primary product inputs are sourced from at-risk areas. Where there is cause for concern, we support resolutions asking companies to develop and implement policies and management systems addressing human rights and security management. These policies should reflect internationally recognized standards (e.g., United Nations Universal Declaration of Human Rights) and should apply to suppliers and sub-contractors.
Severe human and labor rights issues often affect the most vulnerable communities and can represent a threat to reputational and operational corporate performance. They are referenced in various international standards and conventions and are linked to existingiv or evolvingv regulations that issuers may be subject to.
We believe that effective mitigation of these issues can contribute to sustainable long-term value creation by the companies in which we choose to invest. At companies identified as being most at risk with insufficient mitigation strategies, we may not support management resolutions, including the report and accounts or election of directors if we think this is in the best economic interests of our clients.
Diversity and equal employment opportunity
Recruiting and hiring from the widest possible talent pool is in the best interests of companies, as is maintaining a diverse workforce. We support efforts to strengthen non-discrimination policies, achieve diversity objectives and address glass ceilings at all levels within organizations. We welcome disclosure of specific diversity targets and reporting on performance against these targets, as well as reporting on gender and ethnicity pay gaps within companies and plans to address these. We will look for disclosure of how measures to increase diversity have been applied and the management and oversight of these measures. In an environment where many industries and companies are facing shortages of skilled workers, thus increasing competition for talent, it is advisable and appropriate for company policies and practices to exceed legal requirements in order to attract and retain employees.
Statement of Additional Information – March 1, 2024 | B-12 |
Political and charitable donations
Charitable and political donations should be consistent with the company’s stated sustainability strategy. (See “Reporting” above). We recommend that the board provide ultimate oversight for political donations and related activity. Furthermore, we believe that companies that undertake charitable giving should have transparent policies and undertake charitable giving programs with due regard for the interests of shareholders and key stakeholders.
Environmental stewardship
Companies should determine how key environmental risks and opportunities fit into their core business strategy. As part of this process, companies should identify, assess, and manage their environmental impacts. This may include minimizing key environmental impacts, reporting on environmental management systems and performance, and discussing related financial impacts. Areas of increasing business interest include energy use, emissions, water, waste, and the utilization of natural resources.
9 Voting matters
Annual general meetings
Although we supported company efforts to hold virtual-only AGMs during the initial stages of the COVID-19 pandemic, we encourage a return to physical annual meetings of the shareholders that are supplemented with a robust and accessible virtual (or hybrid) option. If the company decides to provide a hybrid meeting, shareholders joining virtually should be provided the same treatment and transparency as those attending in-person.
Vote disclosure
We expect companies to disclose the voting results of their general meetings, both at the meeting and on their websites. This should include a detailed breakdown of votes for and against, as well as abstentions.
In the spirit of transparency, we also make available to both our institutional and retail fund customers, as well as to the public, a comprehensive record of our voting by publishing all our votes and comments on our website.vi A summary of our voting statistics can be found in our annual Stewardship report.
Shareblocking
We believe that shareblocking—the practice of preventing shares from being transferred for a fixed period prior to the vote at a company meeting—discourages shareholder participation and should be replaced with a record date. Where shareblocking exists, we will follow client policy and may be prevented from voting because of concerns about failed trade settlements and extraordinary cost to clients.
Electronic voting and of use proxy advisory services
We typically exercise voting rights electronically. We currently vote using ProxyExchange, the electronic voting platform provided by Institutional Shareholder Services (ISS). We do not follow ISS vote recommendations, except as provided for in our Conflict of Interest Policy or if instructed by clients. Instead, ISS assists us though pre-populating our vote instructions in accordance with our vote policies. Our Responsible Investment team reviews a proportion of meetings based on an internal prioritization model.
Position on abstentions
Our standard voting approach is to either vote for or against resolutions where these options are available to shareholders. However, there are cases where we consider abstaining to be appropriate—for example, where company practices have improved significantly but do not fully meet our expectations.
With respect to shareholder resolutions, we may abstain in cases where we agree with the broader issue highlighted but do not agree with the way in which the resolution prescribes change.
Additional soliciting materials
If we become aware that an issuer has filed additional soliciting materials prior to a proxy vote submission deadline, then we endeavor to review and reflect those in the application of our voting policy where: (a) the submission is published at least five days prior to our earliest client vote cut-off; and (b) the enclosed information is considered to be material towards impacting our voting position.
Statement of Additional Information – March 1, 2024 | B-13 |
Stocklending
We observe that stock lending is a widespread market practice involving the sale and contractually pre-agreed repurchase of a stock. We believe that stock lending is an important factor in preserving the liquidity of markets and in facilitating hedging strategies; it can also provide investors with a significant additional return on their investments as the sale repurchase transaction may include a profit margin. Importantly, however, if the term of the instrument coincides with an annual or extraordinary general meeting, the transfer of the voting right impairs the ability of the underlying shareowner to exercise their voting rights. In rare instances, this has led to abuse, where borrowers have deliberately entered into transactions to sway the outcome of a shareholder vote without any intention of owning the stock long-term. We consider the balance struck between stock lending and voting to be a matter for individual decision-making by clients.
Record dates
We recommend that a record date be set a maximum of five working days prior to AGMs for custodians and registrars to clearly establish those shareholders eligible to vote. This will give time for all relevant formalities to be completed and serves the same purpose as shareblocking without the disruptions noted above.
Voting systems
All companies should conduct voting by poll, rather than relying on a show of hands.
We believe that shareholders have the right to appoint any reasonable person as proxy to vote their shares, either in person or electronically.
We encourage the introduction of electronic voting systems that are accurate and provide an effective audit trail of votes cast.
Bundled resolutions
Resolutions put to company meetings should cover single issues, or issues that are clearly interdependent. Any other practice potentially reduces the value of votes and can lead to opposition to otherwise acceptable proposals. We will normally oppose resolutions that contain such inappropriately bundled provisions.
Any other business
We expect to vote on resolutions where the content has been made clear to shareholders and is in the interests of the company and its shareholders. Where a resolution invites shareholders to vote on “any other business,” we will systematically vote against.
Political and charitable donations
We welcome the opportunity to vote on company donations if material. With respect to donations to political parties or to organizations closely associated with political parties, we believe the board is best positioned to oversee the appropriateness of such spending and should review as often as is necessary to ensure congruency with both corporate strategy and values.
Amendments to
Articles
We are generally unsupportive of amendments to the articles of incorporation which limits the liability of company officers.
Endnotes:
i | The following guidelines do not apply to Pyrford International Ltd. |
ii | Such interlocking relationships can raise concerns when there is an imbalance of power between the two directors. |
iii | https://www.fsb-tcfd.org/publications/final-recommendations-report/. |
iv | UK Modern Slavery Act, OECD Guidelines for Multinational Enterprises. |
v | EU corporate mandatory human rights due diligence, Swiss mandatory human rights DD (focus weapons), German Supply Chain Code |
vi | See vote disclosure webpage here. |
Statement of Additional Information – March 1, 2024 | B-14 |
PROXY VOTING
(As of 11/28/2023)
A. | General Proxy Voting Policies |
1. | CrossingBridge understands and appreciates the importance of proxy voting. CrossingBridge will endeavor to actively vote proxies. |
2. | To the extent that CrossingBridge has discretion to vote the proxies of its Advisory Clients, CrossingBridge will vote any such proxies in what it believes is the best interests of Advisory Clients and Investors (as applicable) and in accordance with the procedures outlined below (as applicable). |
B. | Proxy Voting Procedures |
(1) | All proxies sent to Advisory Clients that are actually received by CrossingBridge (to vote on behalf of the Advisory Clients) will be provided to the Chief Compliance Officer and/or Portfolio Manager. |
(2) | The Chief Compliance Officer and/or Portfolio Manager will generally adhere to the following procedures (subject to limited exception): |
a. | A written or electronic record of each voted proxy by CrossingBridge (on behalf of its Advisory Clients) will be kept in CrossingBridge’s files; |
b. | The Chief Compliance Officer and/or Portfolio Manager will determine which of CrossingBridge’s Advisory Clients hold the security to which the proxy relates and whether the Advisory Client has its own specific voting guidelines; |
c. | The Portfolio Manager will review the proxy and determine how to vote the proxy in question in accordance with the Advisory Client’s guidelines or the guidelines set forth in Section D below. |
d. | Prior to voting any proxies, the Portfolio Manager and/or Chief Compliance Officer will determine if there are any conflicts of interest related to the proxy in question in accordance with the general guidelines in Section C below. If a conflict is identified, the Chief Compliance Officer will make a determination (which may be in consultation with outside legal counsel) as to whether the conflict is material or not. |
i. | If no material conflict is identified pursuant to these procedures, the Portfolio Manager will make a decision on how to vote the proxy in question in accordance with the guidelines set forth in Section D below. |
e. | Although not presently intended to be used on a regular basis, CrossingBridge is empowered to retain an independent third party to vote proxies in certain situations (including situations where a material conflict of interest is identified) |
f. | The Portfolio Manager and/or Chief Compliance Officer shall coordinate with Mutual Fund Advisory Clients and such Advisory Client’s Fund Administrator to assist in the preparation of the Mutual Funds proxy voting annual report on Form N-PX. |
C. | Handling of Conflicts of Interest |
(1) | As stated above, in evaluating how to vote a proxy, the Portfolio Manager and/or the Chief Compliance Officer will first determine whether there is a conflict of interest related to the proxy in question between CrossingBridge and its Advisory Clients. This examination will include (but will not be limited to) an evaluation of whether CrossingBridge (or any affiliate of CrossingBridge) has any relationship with the company (or an affiliate of the company) to which the proxy relates outside an investment in such company by an Advisory Client of CrossingBridge. |
(2) | If a conflict is identified and deemed “material” by the Portfolio Manager and/or the Chief Compliance Officer, CrossingBridge will determine whether voting in accordance with the proxy voting guidelines outlined in Section D below is in the best interests of affected Advisory Clients (which may include utilizing an independent third party to vote such proxies). |
(3) | With respect to material conflicts, CrossingBridge will determine whether it is appropriate to disclose the conflict to affected Advisory Clients and give them the opportunity to vote the proxies in question themselves except that if the Advisory Client is subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the investment management agreement between CrossingBridge and the ERISA Advisory Client reserves the right to vote proxies when CrossingBridge has determined that a material conflict exists that does affect its best judgment as a fiduciary to the ERISA Advisory Client, CrossingBridge will: |
a. | Give the ERISA Advisory Client the opportunity to vote the proxies in question themselves; or |
b. | Follow designated special proxy voting procedures related to voting proxies pursuant to the terms of the investment management agreement with such ERISA Advisory Clients (if any).1 |
1 At this time, CrossingBridge does not have any ERISA Advisory Clients.
D. | Voting Guidelines |
In the absence of specific voting guidelines mandated by a particular Advisory Client, CrossingBridge will endeavor to vote proxies in what it deems to be the best interests of each Advisory Client.
In some foreign markets where proxy voting demands fee payment for agent services, CrossingBridge will balance the cost and benefit of proxy voting and may give up the proxy voting if the cost associated is greater than the benefits from voting.
(1) | Although voting certain proxies may be subject to the discretion of CrossingBridge, CrossingBridge is of the view that voting proxies in accordance with the following general guidelines is in the best interests of its Advisory Clients: |
a. | CrossingBridge will generally vote in favor of routine corporate housekeeping proposals including, but not limited to, the following: |
i. | election of directors (where there are no related corporate governance issues); |
ii. | selection or reappointment of auditors; or |
iii. | increasing or reclassification of common stock. |
E. | Disclosure of Procedures |
To the extent applicable to CrossingBridge and if CrossingBridge were to engage Advisory Clients other than Mutual Funds, a brief summary of these proxy voting procedures will be included in CrossingBridge’s Form ADV Part 2 and will be updated whenever these policies and procedures are updated. Through the Brochure, Advisory Clients will also be provided with contact information as to how such Advisory Clients can obtain information about: (a) the details of CrossingBridge’s proxy voting procedures (i.e., a copy of these procedures); and (b) how CrossingBridge has voted proxies that are relevant to the affected Advisory Client.
F. | Record-keeping Requirements |
The Chief Compliance Officer will be responsible for maintaining files relating to CrossingBridge’s proxy voting procedures. Records will be maintained and preserved for five years from the end of the fiscal year during which the last entry was made on a record, with records for the first two years kept in the offices of CrossingBridge. Records of the following will be included in the files:
(1) | Copies of these proxy voting policies and procedures, and any amendments thereto; |
(2) | A copy of each proxy statement that CrossingBridge actually receives; provided, however, that CrossingBridge may rely on obtaining on an as needed basis a copy of proxy statements from the SEC’s EDGAR system or other generally accepted sources for those proxy statements that are so available. As a general rule CrossingBridge relies on the SEC’s EDGAR system, or systems provided by Custodians, or other generally accepted sources. |
(3) | A record of each vote that CrossingBridge casts; |
(4) | A copy of any document that CrossingBridge created that was material to making a decision how to vote the proxies, or memorializes that decision (if any); and |
A copy of each written request for information on how CrossingBridge voted such Advisory Client’s proxies and a copy of any written response to any request for information on how CrossingBridge voted proxies on behalf of Advisory Clients.
DoubleLine Capital LP
DoubleLine Alternatives LP
DoubleLine ETF Adviser LP
DoubleLine Funds Trust
DoubleLine ETF Trust
DoubleLine Closed-End Funds
Proxy Voting, Corporate Actions and Class Actions Policy
I. | Background |
Rule 206(4)-6 of the Investment Advisers Act of 1940, as amended (the “Advisers Act”), requires investment advisers that exercise voting authority with respect to client securities to: (i) adopt and implement written policies and procedures reasonably designed to ensure that client securities are voted in the best interest of clients, which must include how an adviser addresses material conflicts that may arise between an adviser's interests and those of its clients; (ii) provide a concise summary of its proxy voting policies and procedures and, upon request, furnish a copy of the full policies and procedures to its clients; and (iii) disclose how clients may obtain information with respect to how the adviser voted their securities.
This Proxy Voting, Corporate Actions and Class Actions Policy (the “Proxy Policy”) is adopted by DoubleLine Capital LP, DoubleLine Alternatives LP and DoubleLine ETF Adviser LP (the “Advisers,” or each applicable “Adviser”) to govern the Advisers’ proxy voting, corporate actions and class actions activities involving client investments, and along with the DoubleLine Funds Trust (“DFT”), the DoubleLine ETF Trust (“DET”), the DoubleLine Opportunistic Credit Fund (“DBL”), the DoubleLine Income Solutions Fund (“DSL”), and the DoubleLine Yield Opportunities Fund (“DLY”) (DBL, DSL, and DLY are collectively, the “DoubleLine Closed-End Funds” and together with DFT and DET, each a “Fund,” collectively the “Funds,” and together with the Advisers, “DoubleLine”), to help ensure compliance with applicable disclosure and reporting requirements.
II. | Policy |
Employees must handle all proxy voting, corporate actions and class actions (“Proxy Matters”) with reasonable care and diligence, and solely in the best interest of DoubleLine clients. Accordingly, all Proxy Matter proposals must immediately be forwarded to the Trade Management team to ensure that each proposal is processed timely and in accordance with the Proxy Policy.
The Adviser generally will exercise proxy voting, corporate actions and class actions authority on behalf of clients only where the client has expressly delegated such authority in writing. If directed to do so by the client, the Adviser will process each proposal in a manner that seeks to enhance the economic value of client investments.
Proxy Voting Guidelines and Corporate Actions
Designated employees from the Portfolio Management team will review the specific facts and circumstances surrounding each proxy and corporate action proposal to determine a course of action that promotes the best interest of clients (including, if so directed, to maximize the value of client investments). The Advisers adopt the Proxy Voting Guidelines (the “Guidelines,” see Attachment A) as a framework for analyzing proxy and corporate action proposals on a consistent basis.
The Portfolio Management team may, in their discretion, vote proxies and corporate actions in a manner that is inconsistent with the Guidelines (or instruct applicable parties to do so) when they determine, after conducting reasonable due diligence, that doing so is in the best interest of the client. They may consult with the Proxy Voting Committee (the “Proxy Committee”), DoubleLine senior management or a third-party expert such as a proxy voting service provider to make such determinations.
Class Actions
In the event that a client investment becomes the subject of a class action lawsuit, the Adviser will assess, among other factors, the potential financial impact of participating in such legal action. If the Adviser determines that participating in the class action is in the best interest of the client, the Adviser will recommend that the client or its custodian submit appropriate documentation on the client’s behalf, subject to contractual or other authority. The Adviser may consider other factors in determining whether participation in a class action lawsuit is in the best interest of the client, including (i) the costs that likely would be incurred by the client, (ii) the resources that likely would be expended in participating in the class action, and (iii) other available options for pursuing legal recourse against the issuer. If appropriate, the Adviser may also notify the client about the class action without making a recommendation as to participation, which would allow clients to decide on how to proceed. The Advisers provide no assurance to former clients that applicable class action information will be delivered to them.
Conflicts of Interest
Employees must be diligent with respect to actual and potential conflicts of interest when handling client investments. This covers conflicts between the interests of DoubleLine, employees and clients, including conflicts between two or more clients. As a general matter, conflicts should be avoided where practicable. In cases where it cannot be avoided, the conflict must be mitigated as much as possible and then fully and fairly disclosed to the client, such that the client can make an informed decision and, where applicable, provide an informed consent. As required under the Code of Ethics and the Outside Business Activities and Affiliations Policy, employees must report, and in some cases request pre-approval for, certain transactions, activities and affiliations that may present a conflict of interest. Moreover, employees from the Portfolio Management and Trade Management teams who are directly involved in the implementation of the Proxy Policy and members of the Proxy Committee should seek to identify, and report to the Proxy Committee, any conflict of interest related to any proposal or the Proxy Policy in general.
If a material conflict involving a client is deemed to exist with respect to a proposal, the Proxy Committee will generally seek to resolve such conflicts in the best interest of the applicable client by pursuing any one of the following courses of action: (i) voting (or not voting) in accordance with the Guidelines; (ii) convening a Proxy Committee meeting to assess and implement available measures; (iii) voting in accordance with the recommendation of an independent third-party service provider chosen by the Proxy Committee; (iv) voting (or not voting) in accordance with the instructions of such client; or (v) not voting with respect to the proposal if consistent with the Adviser’s fiduciary obligations.
In the event that an Adviser invests in a Fund with other public shareholders, the Adviser will vote the shares of such Fund in the same proportion as the votes of the other shareholders. Under this “echo voting” approach, the Adviser’s potential conflict is mitigated by replicating the voting preferences expressed by the other shareholders.
Client Inquiries
Employees must immediately forward any inquiry about DoubleLine’s proxy voting policy and practices, including historical voting records, to the Trade Management team. The Trade Management team will record the identity of the client, the date of the request, and the disposition of each request and coordinate the appropriate response with the Investor Services team or other applicable party.
The Adviser shall furnish the information requested, free of charge, to the client within ten (10) business days. A copy of the written response should be attached and maintained with the client’s written request, if applicable, and stored in an appropriate file. Clients can require the delivery of the proxy voting record relevant to their accounts for the five-year period prior to their request.
The Funds are required to furnish a description of the Proxy Policy within three (3) business days of receipt of a shareholder request, by first-class mail or other means designed to ensure equally prompt delivery. The Funds rely upon the fund administrator to process such requests.
The Trade Management team shall forward to the Proxy Committee all Proxy Matter inquiries, including proxy solicitations or an Adviser’s voting intention on a pending proposal, from third parties that are not duly authorized by a client.
III. | Third-Party Proxy Agent |
To assist in carrying out its proxy voting obligations, DoubleLine has retained a third-party proxy voting service provider, currently Glass, Lewis & Co. (“Glass Lewis”), as its proxy voting agent. Pursuant to an agreement with DoubleLine, Glass Lewis obtains proxy ballots related to client investments, evaluates the facts and circumstances relating to each proposal and communicates to the Adviser the recommendation from the issuer’s management (where available) and Glass Lewis’ broad recommendation. The Adviser shall vote on proposals in its discretion and in a manner consistent with the Proxy Policy or instructs Glass Lewis to do so on its behalf.
In the event that DoubleLine determines that a recommendation from Glass Lewis (or from any other third-party proxy voting service provider retained by DoubleLine) was based on a material factual error, DoubleLine will investigate the error, taking into account, among other things, the nature of the error and the recommendation, and seek to determine whether the vote or other actions related to the proposal would change in light of the error and whether the service provider is taking reasonable steps to reduce similar errors in the future. DoubleLine will also inform the Proxy Committee of the error to determine if it is a material compliance matter under Rule 206(4)-7 of the Advisers Act or Rule 38a-1 of the Investment Company Act of 1940, as amended (the “1940 Act”), or if further remedial action is necessary.
IV. | Environmental, Social and Governance Matters |
The Advisers integrate environmental, social and governance (“ESG”) factors into its research and decision-making process to gain a more holistic view of the relevant investment risks, better understand the potential drivers of performance, and strive for better risk-adjusted returns. In particular, the Advisers seek to identify and understand material ESG factors that have a potential financial impact on an issuer and the valuation of client investments. As stewards of client investments, the Advisers view proxy voting as an opportunity to influence the financial impact of such material ESG factors (if applicable) and, through the Guidelines, ensure that proposals are consistently reviewed and voted in a manner that seeks to enhance the economic value of client investments. The Advisers also may consider material ESG factors in determining how to address corporate actions and class actions.
V. | Limitations |
Securities on Loan
The Adviser may not be able to take action with respect to a proposal when the client’s relevant securities are on loan in accordance with a securities lending program or are controlled by a securities lending agent or custodian acting independently of DoubleLine. In addition, the Adviser will not recall securities if the potential economic impact of the proposal is insignificant or less than the economic benefit gained if the securities remained on loan (such as the interest income from the loan arrangement) or if recalling the securities is otherwise not in the best interest of the client. In the event that the Adviser determines that a proposal could reasonably enhance the economic value of the client’s investment, the Adviser will make reasonable efforts to inform the client and recall the securities. Employees cannot make any representation that any securities on loan will be recalled successfully or in time for submitting a vote on a pending proposal.
Foreign Markets
In certain markets, shares of securities may be blocked or frozen at the custodian or other designated depositary for certain periods typically around the shareholder meeting date. In such cases, the Adviser cannot guarantee that the blocked securities can be processed in time for submitting a vote on a pending proposal. In addition, where the Adviser determines that there are unusual costs to the client or administrative difficulties associated with voting on a proposal, which more typically might be the case with respect to proposals involving non-U.S. issuers and foreign markets, the Adviser reserves the right to not vote on the proposal unless the Adviser determines that the potential benefits exceed the anticipated cost to the client.
Proofs-of-Claim
The Advisers do not complete proofs-of-claim on behalf of clients for current or historical holdings other than for the Funds and private funds offered by DoubleLine; however, an Adviser may provide reasonable assistance to other existing clients by sharing related information that is in the Adviser’s possession. The Advisers do not undertake to complete, or provide any assistance for, proofs-of-claim involving securities that had been held by any former client. The Advisers will complete proofs-of-claim for the Funds and private funds offered by DoubleLine or provide reasonable access to the applicable administrator to file such proofs-of-claim when appropriate.
Contractual Obligations
In certain limited circumstances, particularly in the area of structured finance, the Adviser may, on behalf of clients, enter into voting agreements or other contractual obligations that govern proxy and corporate action proposals. In the event of a conflict between any such contractual requirements and the Guidelines, the Adviser will vote in accordance with its contractual obligations.
VI. | Other Regulatory Matters and Responsibilities |
Form N-PX Filings
A. | Rule 30b1-4 under the 1940 Act requires open-end and closed-end management investment companies to file an annual record of proxies voted on Form N-PX. The Funds shall file Form N-PX in compliance with Rule 30b1-4, including certain new requirements which include, but are not limited to, the following: |
● | Identification of Proxy Voting Matters – funds must use the same language as the issuer’s proxy card (where a proxy card is required under Rule 14a-4 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”); and if the matter relates to an election of directors, identify each director separately in the same order as on the proxy card, even if the election of directors is presented as a single matter. |
● | Categorization of Voting Matters – funds are required to categorize the votes reported on Form N-PX consistent with a list of categories outlined in the amended form. The categories will be non-exclusive, and funds must select all categories applicable to each proxy matter. |
● | Quantitative Disclosures and Securities Lending – funds must disclose the number of shares voted or instructed to be cast (if the fund had not received confirmation of the actual number of votes cast) and how those shares were voted (e.g., for, against or abstain). If the votes were cast in multiple manners (e.g., both for and against), funds will be required to disclose the number of shares voted or instructed to be voted in each manner. Additionally, funds must disclose the number of shares loaned but not recalled and, therefore, not voted by the fund. |
● | Structured Data Language – funds must file their reports using a custom XML format. |
● | Joint Reporting – funds are permitted to report on its Form N-PX on behalf of a series or a manager so long as the fund presents the complete voting record of each included series separately and provide the required quantitative information for each included manager separately. Funds must also provide certain information (generally, their name and other identifying information such as their legal entity identifier) in the summary page about the included series or managers. |
● | Standardized Order – funds must submit information based on the specific Form N-PX format and standardized order of disclosure requirements. |
● | Fund Notice Reports – funds are now permitted to indicate on the cover page of Form N-PX if no securities were subject to a vote and, therefore, do not have any proxy votes to report. |
● | Website Posting – funds that have a website must make the most recently filed Form N-PX report publicly available as soon as reasonably practicable. Funds may satisfy the requirement by providing a direct link to the relevant HTML-rendered Form N-PX report on EDGAR. |
B. | Rule 14Ad-1 under the Exchange Act requires institutional investment managers subject to section 13(f) of the Exchange Act, which may include certain Advisers, to report annually on Form N-PX how the managers voted proxies relating to executive compensation matters (commonly referred to as “say-on-pay” votes). When reporting say-on-pay votes, managers are required to comply with the other requirements of Form N-PX for their say-on-pay votes (including the new requirements as described above, except that a manager is not required to disclose or provide access to its proxy voting records on its website). |
The Legal team shall be primarily responsible for DoubleLine’s Form N-PX filings. DoubleLine may rely on the applicable fund administrator or other service provider to prepare and submit required Form N-PX filings. The Trade Management team shall assist the Legal team and, as necessary, the relevant service provider by furnishing complete and accurate information required under Form N-PX (including by causing such information to be provided by any third-party proxy voting service provider). Form N-PX must be filed each year no later than August 31 and must contain applicable proxy voting records for the most recent twelve-month period ending June 30.
Proxy Voting Disclosures
The Legal team will ensure that (i) a concise summary of the Proxy Policy which includes how conflicts of interest are addressed, and (ii) instructions for obtaining a copy of the Proxy Policy and accessing relevant proxy voting records free of charge (e.g., via a toll-free telephone number, the Funds’ website, etc.) are provided within each Adviser’s Form ADV Part 2A and the Funds’ Statement of Additional Information, registration statement and Form N-CSR, in accordance with applicable legal requirements.
VII. | Policy Governance |
DoubleLine established the Proxy Voting Committee to help ensure compliance with the Proxy Policy. The Proxy Committee, whose members include the Chief Risk Officer and the Chief Compliance Officer (or their respective designees), meets on an as-needed basis. The Proxy Committee will (i) monitor compliance with the Proxy Policy, including by periodically sampling Proxy Matters for review, (ii) review, no less frequently than annually, the adequacy of the Proxy Policy to ensure it has been effectively implemented and that it continues to be designed to ensure that Proxy Matters are addressed in a manner that promotes the best interest of clients, (iii) periodically review, as needed, the adequacy and effectiveness of Glass Lewis or other third-party proxy voting service provider retained by DoubleLine, and (iv) review conflicts of interest that may arise under the Proxy Policy, including changes to the businesses of DoubleLine or the service provider retained by DoubleLine to determine whether those changes present new or additional conflicts of interest that should be addressed pursuant to the Proxy Policy.
The Proxy Committee shall have primary responsibility for managing DoubleLine’s relationship with Glass Lewis and any other third-party proxy voting service provider, including overseeing their compliance with the Proxy Policy, as well as reviewing periodically instances in which Glass Lewis does not provide a recommendation with respect to a proposal, or when Glass Lewis commits material errors.
VIII. | Books and Records |
The Trade Management team shall maintain all proxy voting records whether internally or through a third party in compliance with Rule 204-2 of the Advisers Act. The Trade Management team will maintain records which include, but are not limited to: (i) copies of each proxy statement that each Adviser receives regarding securities held by clients; (ii) a record of each vote that each Adviser cast on behalf of each client; (iii) any documentation that is material to each Adviser’s decision on voting a proxy or that describes the basis for that decision; (iv) a written description of each Adviser’s analysis when deciding to vote a proxy in a manner inconsistent with the Guidelines or when an Adviser has identified a material conflict of interest, (v) each written request from a client for information about how the Adviser voted proxies; and (vi) the Adviser’s written response to each client oral or written request for such information. The Trade Management team shall also ensure that comparable documentation related to corporate actions and class actions involving client investments is maintained.
The Legal team shall maintain investment management agreements which may include the Adviser’s written authorization to process Proxy Matters or client-specified proxy voting guidelines.
DoubleLine must maintain all books and records described in the Proxy Policy for a period of not less than five (5) years from the end of the fiscal year during which the last entry was made on such record, the first two (2) years of which shall be onsite at its place of business.
History of Amendments:
Effective as of August 2023
Approved by the Boards of DFT, DET and DoubleLine Closed-End Funds: August 17, 2023
Effective as of August 2022
Approved by the Boards of DFT, DET and Closed-End Funds: August 18, 2022
Updated and effective as of May 2022
Approved by the Boards of DFT, DET and Closed-End Funds: May 19, 2022
Updated and effective as of February 15, 2022
Approved by the Boards of DFT, DET, DSL, DBL and DLY: February 15, 2022
Updated and effective as of January 2022
Effective as of January 2021
Approved by the boards of DFT, DSL, DBL and DLY: December 15, 2020
Last reviewed December 2020
Updated and effective as of February 2020
Approved by the boards of DFT, DSL, DBL and DLY: November 21, 2019
Last reviewed November 2019
Reviewed and approved by the Boards of the DoubleLine Funds Trust, DoubleLine Equity Funds, DoubleLine Opportunistic Credit Fund and DoubleLine Income Solutions Fund: August 20, 2015
Adopted by the DoubleLine Equity Funds Board of Trustees: March 19, 2013
Renewed, reviewed and approved by the DoubleLine Equity Funds Board: May 22, 2013
Renewed, reviewed and approved by the DoubleLine Equity Funds Board: November 20, 2013
Renewed, reviewed and approved by the DoubleLine Equity Funds Board: August 21, 2014
Adopted by the DoubleLine Income Solutions Board of Trustees: March 19, 2013
Renewed, reviewed and approved by the DoubleLine Income Solutions Board of Trustees: May 22, 2013
Renewed, reviewed and approved by the DoubleLine Income Solutions Board of Trustees: November 20, 2013
Renewed, reviewed and approved by the DoubleLine Income Solutions Board of Trustees: August 21, 2014
Adopted by the DoubleLine Opportunistic Credit Fund Board of Trustees: August 24, 2011
Renewed and approved by the DoubleLine Opportunistic Credit Fund Board of Trustees: March 19, 2013
Renewed, reviewed and approved by the DoubleLine Opportunistic Credit Fund Board of Trustees: May 22, 2013
Renewed, reviewed and approved by the DoubleLine Opportunistic Credit Fund Board of Trustees: November 20, 2013
Renewed, reviewed and approved by the DoubleLine Opportunistic Credit Fund Board of Trustees: August 21, 2014
Adopted by the DoubleLine Funds Trust Board: March 25, 2010
Renewed, reviewed and approved by the DoubleLine Funds Trust Board: March 1, 2011
Renewed, reviewed and approved by the DoubleLine Funds Trust Board: August 25, 2011
Renewed and approved by the DoubleLine Funds Trust Board of Trustees: March 19, 2013
Renewed, reviewed and approved by the DoubleLine Funds Trust Board: May 22, 2013
Renewed, reviewed and approved by the DoubleLine Funds Trust Board: November 20, 2013
Renewed, reviewed and approved by the DoubleLine Funds Trust Board: August 21, 2014
Attachment A to the Proxy Voting, Corporate Actions and Class Actions Policy
Effective July 1, 2023
Guidelines
The Advisers have a fiduciary duty to clients, and shall exercise diligence and care, with respect to its proxy voting authority. Accordingly, the Advisers will review each proposal to determine the relevant facts and circumstances and adopt the following guidelines as a framework for analysis in seeking to maximize the value of client investments. The guidelines do not address all potential voting matters and actual votes by the Advisers may vary based on specific facts and circumstances.
A. | Director Elections |
Directors play a critical role in ensuring that the company and its management serve the interests of its shareholders by providing leadership and appropriate oversight. We believe that the board of directors should have the requisite industry knowledge, business acumen and understanding of company stakeholders in order to discharge its duties effectively.
Proposal | Shareholder
Proposal |
Anticipated Vote |
Frequency
of Elections Electing all directors annually. |
For | |
Uncontested
Elections Voting management nominees, unless the nominee lacks independence or focus, has had chronic absences or presents other material concerns to the detriment of the effectiveness of the board. |
For | |
Majority
Voting Allowing majority voting unless incumbent directors must resign if they do not receive a majority vote in an uncontested election. |
For | |
Cumulative
Voting Allowing cumulative voting unless the company previously adopted a majority voting policy. |
For | |
Changes
in Board Structure Changing the board structure, such as the process for vacancies or director nominations, or the board size, unless there is an indication that the change is an anti-takeover device, or it diminishes shareholder rights. |
For | |
Stock
Ownership Requiring directors to own company shares. |
X | Against |
Contested
Elections The qualifications of nominees on both slates, management track record and strategic plan for enhancing shareholder value, and company financial performance generally will be considered when voting nominees in a contested election. |
X | Case-by-Case |
B. | Section 14A Say-On-Pay Votes |
Current law requires companies to allow shareholders to cast non-binding advisory votes on the compensation for named executive officers, including the frequency of such votes. The Advisers generally support proposals for annual votes, as well as the ratification of executive compensation unless the compensation structure or any prior actions taken by the board or compensation committee warrant a case-by-case analysis.
Proposal | Shareholder Proposal |
Anticipated Vote |
Frequency
of Say-On-Pay Votes Annual shareholder advisory votes regarding executive compensation. |
X | For |
Compensation
Disclosures Seeking additional disclosures related to executive and director pay unless similar information is already provided in existing disclosures or reporting. |
X | For |
Executive
Compensation Advisory Executive compensation proposals generally will be assessed based on its structure, prevailing industry practice and benchmarks, and any problematic prior pay practices or related issues involving the board/compensation committee. |
X | Case-by-Case |
Golden
Parachute Advisory Golden parachute proposals, in general, will be assessed based on the existing change-in-control arrangements, the nature and terms of the triggering event(s) and the amount to be paid. |
X | Case-by-Case |
C. | Audit-Related |
The Advisers generally support proposals for the selection or ratification of independent auditors, subject to a consideration of any conflicts of interest, poor accounting practices or inaccurate prior opinions and related fees.
Proposal | Shareholder
Proposal |
Anticipated Vote |
Appointment
of Auditors Selecting or ratifying independent auditors, unless there is a material conflict of interest, a history of poor accounting practice or inaccurate opinions, or excessive fees. |
For | |
Non-Audit/Consulting
Services Other alternative service providers, conflicts of interest, and company disclosures are areas of consideration when voting proposals to limit other engagements with auditors. |
X | Case-by-Case |
Indemnification
of Auditors Indemnification of auditors generally will be assessed based on the nature of the engagement, the auditor's work history and field of expertise, and the terms of the agreement such as its impact on the ability of shareholders to pursue legal recourse against the auditor for certain acts or omissions. |
X | Case-by-Case |
Rotation
of Auditors Shareholder proposals requiring auditor rotation generally will be assessed based on any audit issues involving the company, the auditor's tenure with the company, and policies and practices surrounding auditor evaluations. |
X | Case-by-Case |
D. | Investment Company Matters |
When the Advisers invest in a DoubleLine Fund with other public shareholders, the Advisers will vote the shares of such fund in the same proportion as the votes of the other shareholders. Under this “echo voting” approach, the Advisers’ potential conflict is mitigated by replicating the voting preferences expressed by the other shareholders. With respect to specific proposals involving the DoubleLine Funds, the Advisers generally support recommendations by the fund’s board unless applicable laws and regulations prohibit the Advisers from doing so.
Proposal | Shareholder Proposal |
Anticipated Vote |
Share
Classes Issuance of new classes or series of shares. |
For | |
Investment
Objectives Changing a fundamental investment objective to nonfundamental. |
Against | |
Investment
Restrictions Changing fundamental restrictions to nonfundamental generally will be assessed in consideration of the target investments, reason(s) for the change and its impact on the portfolio. |
Case-by-Case | |
Distribution
Agreements Distribution agreements generally will be assessed based on the distributor's services and reputation, applicable fees, and other terms of the agreement. |
Case-by-Case | |
Investment
Advisory Agreements Investment advisory agreements generally will be assessed based on the applicable fees, fund category and investment objective, and performance. |
Case-by-Case |
E. | Shareholder Rights and Defenses |
The Advisers believe that companies have a fundamental obligation to protect the rights of shareholders. Therefore, the Advisers generally support proposals that hold the board and management accountable in serving the best interest of shareholders and that uphold their rights. However, the Advisers generally will not support proposals from certain shareholders that are hostile, disruptive, or are otherwise counter to the best interest of the Advisers’ clients.
Proposal | Shareholder
Proposal |
Anticipated Vote |
Appraisal
Rights Providing shareholders with rights of appraisal. |
X | For |
Fair
Price Provision Fair price provisions that ensures each shareholder's securities will be purchased at the same price if the company is acquired in disagreement with the board. However, fair price provisions may not be supported if it is used as an anti-takeover device by the board. |
X | For |
Special
Meetings Providing or restoring rights to call a special meeting so long as the threshold to call a meeting is no less than 10 percent of outstanding shares. |
X | For |
Confidential
Voting Allowing shareholders to vote confidentially. |
X | For |
Written
Consents Allowing shareholders to act by written consent. |
X | For |
Greenmail Adopting anti-greenmail charter or bylaw amendments or otherwise restricting the company's ability to make greenmail payments for repurchasing shares at a premium to prevent a hostile takeover. |
X | For |
Supermajority
Vote Requiring a supermajority vote, unless there are disproportionate substantial shareholders that weaken minority votes. |
Against | |
Bundled
Proposals Bundled or conditional proposals generally will be reviewed to determine the benefit or cost of the matters included or if there is a controversy or any matter that is adverse to shareholder interests. |
Case-by-Case | |
Preemptive
Rights Preemptive rights, in general, will be assessed based on the size of the company and its shareholder base, for which larger publicly held companies with a broad shareholder base may be less ideal. |
Case-by-Case | |
Shareholder
Rights Plans (Poison Pills) Poison pills generally will be assessed based on the company's governance practices, existing takeover defenses, and the terms of the plan, including the triggering mechanism, duration, and redemption/rescission features. Requests to have shareholders ratify plans generally will be supported. |
X | Case-by-Case |
F. | Extraordinary Transactions |
Proposals for transactions that may affect the ownership interests or voting rights of shareholders, such as mergers, asset sales and corporate or debt restructuring, will be assessed on a case-by-case basis generally in consideration of the economic outcome for shareholders, the potential dilution of shareholder rights and its impact on corporate governance, among other relevant factors.
Proposal | Shareholder Proposal |
Anticipated Vote |
Reincorporation Reincorporating in another state or country in support of the rights and economic interests of shareholders. |
For | |
Merger,
Corporate Restructuring and Spin Offs Merger, corporate restructuring and spin off proposals generally will be assessed with the view of maximizing the economic value of shareholder interests. The purchase or sale price and other deal terms will be reviewed, among other factors, to ensure that that the transaction is aligned with the long-term interests of shareholders. |
Case-by-Case |
Debt
Restructuring The terms of the transaction, current capital markets environment, and conflicts of interest are factors that generally will be considered for ensuring that the proposal enhances the economic value of shareholder interests. |
Case-by-Case | |
Liquidations
and Asset Sales As with other transaction proposals, the long-term economic impact of the transaction will be the focus of review of such proposals and, in general, factors such as the sale price, costs and conflicts of interest will be considered. |
Case-by-Case |
G. | Capital Structure |
The Advisers believe that the prudent management of debt and equity to finance company operations and growth, and which is supportive of shareholders’ rights and economic interests, is critical to financial viability.
Proposal | Shareholder
Proposal |
Anticipated Vote |
Common
Stock Issuing common stock for recapitalizations, stock splits, dividends or otherwise reasonably amending outstanding shares for a specific purpose. |
For | |
Multi-Class Shares Adopting multi-class share structures so long as they have equal voting rights. |
For | |
Repurchase
Programs Adopting plans to repurchase shares in the open market unless shareholders cannot participate on equal terms. |
For | |
Blank
Check Preferred Stock Allowing the board to issue preferred shares without prior shareholder approval and setting the terms and voting rights of preferred shares at the board's discretion. |
Against | |
Recapitalization
Plans The rationale and objectives; current capital markets environment; impact on shareholder interests including conversion terms, dividends and voting rights; and any material conflicts of interest are factors that generally will be considered when reviewing proposals to reclassify debt or equity capital. |
Case-by-Case |
H. | Compensation |
The Advisers believe that compensation arrangements should align the economic interests of directors, management, and employees with those of shareholders and consider factors such as (1) local norms, (2) industry-specific practices and performance benchmarks, and (3) the structure of base and incentive compensation. The Advisers generally support transparency (e.g., disclosures related to the performance metrics and how they promote better corporate performance, etc.) and periodic reporting with respect to compensation.
Proposal | Shareholder Proposal |
Anticipated Vote |
Employee
401 (k) Plan Adopting a 401 (k) plan for employees. |
For | |
Employee
Stock Option Plan (ESOP) Requiring shareholder approval to adopt a broad-based ESOP or to increase outstanding shares for an existing plan unless the allocation of outstanding shares to the ESOP exceeds five percent or 10 percent among all stock-based plans. |
For | |
Recoupment
Provisions (Clawbacks) Adopting clawback provisions in cases of revised financial results or performance indicators on which prior compensation payments were based, as well as for willful misconduct or violations of law or regulation that result in financial or reputational harm to the company. |
X | For |
Limits
on Executive or Director Compensation Setting limits on executive or director compensation unless there is a substantial deviation from industry practice or any problematic issue involving the board/compensation committee or prior pay practices. |
X | Against |
Equity-Based
and Other Incentive Plans Incentive plans, in general, will be assessed based on the prevailing local and industry-specific practices and performance benchmarks, the terms of the plan and whether they are aligned with company goals and shareholder interests, the cost of the plan, and the overall compensation structure. |
Case-by-Case | |
Severance
Agreements for Executives (Golden Parachutes) Golden parachutes generally will be assessed based on the existing change-in-control arrangements, the nature and terms of the triggering event(s) and the amount to be paid. |
Case-by-Case |
I. | Corporate Governance |
The Advisers believe that authority and accountability for establishing business strategies, corporate policies and compensation generally should rest with the board and management. The independence, qualifications, and integrity of the board as well as the effectiveness of management and their oversight, which must be aligned with shareholder interests, are essential to good governance. The following general guidelines reflect these principles although material environmental, social and governance (ESG) factors, which have a potential financial impact on the company and the valuation of client investments, if any, are also considered.
Proposal | Shareholder Proposal |
Anticipated Vote |
Quorum
Requirements Establishing a majority requirement, unless shareholder turnout has been an issue, or a reduced quorum is reasonable based on applicable laws or regulations and the market capitalization or ownership structure of the company. |
For | |
Annual
Meetings Changing the date, time, or location of annual meetings, unless the proposed schedule or location is unreasonable. |
For |
Board
Size Setting the board size, so long as the proposal is consistent with the prevailing industry practice and applicable laws or regulations. |
For | |
Proxy
Access Allowing shareholders to nominate director candidates in proxy ballots with reasonable limitations (e.g., minimum percentage and duration of ownership and a cap on board representation) for preventing potential abuse by certain shareholders. |
X | For |
Independent
Directors Requiring the board chair and a majority of directors to be independent directors. Proposals for a lead independent director may be supported in cases where the board chair is not independent. |
X | For |
Independent
Committees Requiring independent directors exclusively for the audit, compensation, nominating and governance committees. |
X | For |
Removal
of Directors Removing a director without cause. |
X | For |
Indemnification
of Directors and Officers Indemnifying directors and officers for acts and omissions made in good faith and were believed to be in the best interest of the company. Limitations on liability involving willful misconduct or violations of law or regulation, or a breach of fiduciary duty, generally will be voted against. |
For | |
Term
Limits for Directors Imposing term limits on directors unless the director evaluation process is ineffective and related issues persist. |
X | Against |
Classified
Boards Establishing a classified board. |
Against | |
Adjournment
of Meetings Providing management the authority to adjourn annual or special meetings without reasonable grounds. |
Against | |
Amendments
to Bylaws Giving the board the authority to amend bylaws without shareholder approval. |
Against |
J. | Environment or Climate |
The Advisers would generally consider the recommendations of management for shareholder proposals involving environmental issues as it believes that, in most cases, elected directors and management are in the best position to address such matters. In addition, reporting that provides meaningful information for evaluating the financial impact of environmental policies and practices is generally supported unless it is unduly costly or burdensome or it places the company at a competitive disadvantage. Material ESG factors, which have a potential financial impact on the company and the valuation of client investments, if any, are also considered.
Proposal | Shareholder
Proposal |
Anticipated Vote |
Environmental
and Climate Disclosures Providing environmental/climate-related disclosures and reporting unless it is duplicative or unsuitable. |
For | |
Environmental
and Climate Policies Environmental and climate policies generally will be assessed based on the company's related governance practices, local and industry-specific practices, the nature and extent of environmental and climate risks applicable to the company, and the economic benefit to shareholders. |
Case-by-Case |
K. | Human Rights or Human Capital/Workforce |
The Advisers would generally consider the recommendations of management for shareholder proposals involving social issues as it believes that, in most cases, elected directors and management are in the best position to address such matters. In addition, reporting that provides meaningful information for evaluating the financial impact of social policies and practices is generally supported unless it is unduly costly or burdensome or it places the company at a competitive disadvantage. Material ESG factors, which have a potential financial impact on the company and the valuation of client investments, if any, are also considered.
Proposal | Shareholder
Proposal |
Anticipated Vote |
Human
Rights and Labor Disclosures Providing human rights and labor-related disclosures and reporting unless it is duplicative or unsuitable. |
For | |
Human
Rights and Labor Policies Human rights and labor policies generally will be assessed based on the company's related governance practices, applicable law or regulations, local and industry-specific practices, the nature and extent of supply chain or reputational risks applicable to the company, and their economic benefit to shareholders. |
Case-by-Case |
L. | Diversity, Equity, and Inclusion |
The Advisers generally support reporting that provides meaningful information for evaluating the financial impact of diversity, equity, and inclusion (DEI) policies and practices unless it is unduly costly or burdensome. For policy proposals, the Advisers will consider existing policies, regulations and applicable local standards and best practices, to determine if they provide an added benefit to shareholders. Material ESG factors, which have a potential financial impact on the company and the valuation of client investments, if any, are also considered.
Proposal | Shareholder
Proposal |
Anticipated Vote |
DEI
Disclosures Providing Equal Employment Opportunity (EEO-1) Reports, and other additional disclosures or reporting unless it is duplicative or unsuitable. |
For | |
Anti-Discrimination
Policy Adopting an anti-discrimination and harassment policy. |
For | |
Other
DEI Policies Other DEI policies generally will be assessed based on the company's related governance practices, applicable law or regulations, and local and industry-specific practices. |
Case-by-Case |
M. | Other Social Issues |
Proposal | Shareholder
Proposal |
Anticipated Vote |
Political
Contribution and Activities Political contributions and lobbying activities generally will be reviewed in consideration of legal restrictions and requirements, applicable policies and historical practice, and its cost-benefit to the company. Related disclosures to shareholders generally are supported. |
Case-by-Case | |
Charitable
Contributions Charitable contributions, in general, will be reviewed in consideration of applicable policies and historical practice, conflicts of interests, as well as the cost-benefit of charitable spending. Related disclosures to shareholders generally are supported. |
Case-by-Case |
DRIEHAUS CAPITAL MANAGEMENT LLC
SUMMARY OF PROXY VOTING POLICY
MAY 1, 2024
For those clients for whom Driehaus Capital Management LLC (“DCM,”) has undertaken to vote proxies, we retain the final authority and responsibility for such voting. On behalf of our valued clients, we (i) provide our clients with this written summary of our proxy voting policy and our complete proxy voting policy upon request; (ii) disclose to our clients how to obtain voting information; (iii) apply the proxy voting policy consistently; (iv) document the rationale for our votes; (v) maintain records of our voting activities for clients and regulating authorities; (vi) generally aim to vote securities based on a pre-determined voting policy, following the recommendations of an independent third-party proxy advisory firm to avoid conflicts of interest; and (vii) follow a formal process in the event of a deviation from such third-party’s proxy advisory firm’s voting recommendations.
In order to facilitate this proxy voting process, we retain Institutional Shareholder Services Inc. (“ISS”) as a third-party proxy advisory firm to provide in-depth proxy research, vote recommendations and execution, as well as the record keeping necessary for the appropriate management of our client accounts as well as client transparency into the voting activities performed by us on their behalf. ISS is an investment adviser that specializes in providing a variety of fiduciary-level services related to proxy voting. We have ascertained that ISS has the capacity and competency to analyze proxy issues, make vote recommendations in an impartial manner and in the best interests of our clients. ISS offers a selection of voting guidelines including “benchmark” guidelines as well as a number of specialty guidelines. DCM utilizes the benchmark guidelines for vote recommendations and research unless we determine that a specialty policy is more aligned with a specific strategy or if directed otherwise by a client.
DCM’s full proxy voting policy sets forth the general voting guidelines that ISS follows on various issues when there are no company-specific reasons for voting to the contrary. In making the proxy voting decision, there are two overriding considerations: first, the economic impact of the proposal; and second, the best interest impact of a proposal if it were to pass or not pass, as the case may be. ISS performs company-by-company analysis, which means that all votes are reviewed on a case-by-case basis and no issues are considered routine. Each issue is considered in the context of the company under review. DCM generally follows ISS’s recommendations and typically does not use its discretion in making the proxy voting decision. For this reason, client proxies are voted in the clients’ best interests, in accordance with a predetermined policy based upon recommendations of an independent third party, and are not affected by any potential or actual conflict of interest of DCM. If a situation arises in which a DCM portfolio manager wishes to deviate from an ISS recommendation on a proxy voting decision, that portfolio manager must consult with DCM’s general counsel or chief compliance officer in writing and provide: (i) the name of the issuer; (ii) a description of the proposal; (iii) ISS’s voting recommendation; (iv) the reason the portfolio manager believes they are acting in the best interest of clients by voting against the ISS recommendation; and (v) identification of any actual or potential conflicts of interest which do or could exist with respect to the proposal.
DCM seeks to vote proxies for all securities held in accounts for which we retain proxy voting authority. However, in certain markets administrative issues beyond our control may sometimes prevent us from voting such proxies. For example, some markets outside the US require periodic renewals of powers of attorney that local agents must have from our clients prior to implementing voting instructions. In certain instances, we may decline to vote proxies due to certain market considerations, including “share blocking.” DCM generally prefers not to restrict the sale of any shares held within client accounts for proxy voting purposes and it is therefore standard practice for us not to execute proxies for holdings located in countries that engage in share blocking.
In addition, DCM annually, and more frequently if necessary, reviews ISS’s policies and procedures regarding any potential conflicts of interest when making vote recommendations to determine if ISS is acting impartially.
Clients who are interested in obtaining information from DCM on how their securities were voted may contact the Relationship Management Department at 1-800-688-8819. In addition, the Relationship Management Department mails to each client an annual record of all proxies voted on behalf of that client. Clients may also contact the Relationship Management Department if they wish to receive a copy of DCM’s complete proxy voting policy.
Federated Equity management company of pennsylvania
Proxy Voting Policies
As an investment adviser with a fiduciary duty to the Fund and its shareholders, the general policy of Federated Equity Management Company of Pennsylvania (the “Sub-Adviser”) is to cast proxy votes in favor of management proposals and shareholder proposals that the Sub-Adviser anticipates will enhance the long-term value of the securities being voted in a manner that is consistent with the investment objectives of the Fund. Generally, this will mean voting for proposals that the Sub-Adviser believes will improve the management of a company, increase the rights or preferences of the voted securities, or increase the chance that a premium offer would be made for the company or for the voted securities. This approach to voting proxy proposals will be referred to hereafter as the “General Policy.”
The Sub-Adviser generally votes consistently on the same matter when securities of an issuer are held by multiple client portfolios. However, the Sub-Adviser may vote differently if a client’s investment objectives differ from those of other clients or if a client explicitly instructs the Sub-Adviser to vote differently.
The following examples illustrate how the General Policy may apply to the most common management proposals and shareholder proposals. However, whether the Sub-Adviser supports or opposes a proposal will always depend on a thorough understanding of the Fund’s investment objectives and the specific circumstances described in the proxy statement and other available information.
On matters related to the board of directors, generally the Sub-Adviser will vote to elect nominees to the board in uncontested elections except in certain circumstances, such as where the director: (1) had not attended at least 75% of the board meetings during the previous year; (2) serves as the company’s chief financial officer, unless the company is headquartered in the UK where this is market practice; (3) has become overboarded (more than five boards for retired executives and more than two boards for CEOs); (4) is the chair of the nominating or governance committee when the roles of chairman of the board and CEO are combined and there is no lead independent director; (5) served on the compensation committee during a period in which compensation appears excessive relative to performance and peers; or (6) served on a board that did not implement a shareholder proposal that the Sub-Adviser supported and received more than 50% shareholder support the previous year. In addition, the Sub-Adviser will generally vote in favor of; (7) a full slate of directors, where the directors are elected as a group and not individually, unless more than half of the nominees are not independent; (8) shareholder proposals to declassify the board of directors; (9) shareholder proposals to require a majority voting standard in the election of directors; (10) shareholder proposals to separate the roles of chairman of the board and CEO; (11) a proposal to require a company’s audit committee to be comprised entirely of independent directors; and (12) shareholder proposals to eliminate supermajority voting requirements in company bylaws.
On other matters of corporate governance, generally the Sub-Adviser will vote: (1) in favor of proposals to grant shareholders the right to call a special meeting if owners of at least 10% of the outstanding stock agree; (2) against proposals to allow shareholders to act by written consent; (3) on a case-by-case basis for proposals to adopt or amend shareholder rights plans (also known as “poison pills”); (4) in favor of shareholder proposals to eliminate supermajority requirements in company bylaws; and (5) in favor of shareholder proposals calling for “Proxy Access,” that is, a bylaw change allowing shareholders owning at least 3% of the outstanding common stock for at least three years to nominate candidates for election to the board of directors.
Generally, the Sub-Adviser will vote every shareholder proposal of an environmental or social nature on a case-by-case basis. The quality of these shareholder proposals varies widely across markets. Similarly, company disclosures of their business practices related to environmental and social risks are not always adequate for investors to make risk assessments. Thus, the Sub-Adviser places great importance on company-specific analyses to determine how to vote. Above all, the Sub-Adviser will vote in a manner that would enhance the long-term value of the investment within the framework of the client’s investment objectives.
The Sub-Adviser’s general approach to analyzing these proposals calls for considering the literal meaning of the written proposal, the financial materiality of the proposal’s objective, and the practices followed by industry peers. This analysis utilizes research reports from the Sub-Adviser’s proxy advisors, company filings, as well as reports published by the company and other outside organizations.
On matters of capital structure, generally, the Sub-Adviser will vote proxies for U.S. issuers on a case-by-case basis for proposals to authorize the issuance of new shares if not connected to an M&A transaction and the potential dilution is more than 10%, against proposals to create multiple-class voting structures where one class has superior voting rights to the other classes, in favor of proposals to authorize reverse stock splits unless the amount of authorized shares is not also reduced proportionately.
Generally, the Sub-Adviser will vote proxies for non-U.S. issuers in favor of proposals to authorize issuance of shares with and without pre-emptive rights unless the size of the authorities would threaten to unreasonably dilute existing shareholders.
Votes on executive compensation come in many forms, including advisory votes on U.S. executive compensation plans (“Say On Pay”), advisory and binding votes on the design or implementation of non-U.S. executive remuneration plans, and votes to approve new equity plans or amendments to existing plans. Generally, the Sub-Adviser will support compensation arrangements that are aligned with the client’s long-term investment objectives. With respect to Say On Pay proposals, the Sub-Adviser will generally vote in favor unless the compensation plan has failed to align executive compensation with corporate performance, or the design of the plan is likely to lead to misalignment in the future. The Sub-Adviser supports the principle of an annual shareholder vote on executive pay and will generally vote accordingly on proposals which set the frequency of the Say On Pay vote.
In some markets, especially Europe, shareholders are provided a vote on the remuneration policy, which sets out the structural elements of a company’s executive remuneration plan on a forward-looking basis. The Sub-Adviser will generally support these proposals unless the design of the remuneration policy fails to appropriately link executive compensation with corporate performance, total compensation appears excessive relative to the company’s industry peer group, with local market dynamics also taken into account; or there is insufficient disclosure to enable an informed judgment, particularly as it relates to the disclosure of the maximum amounts of compensation that may be awarded.
The Sub-Adviser will generally vote in favor of equity plan proposals unless they result in unreasonable dilution to existing shareholders, permit replacement of “underwater” options with new options on more favorable terms for the recipient, or omit the criteria for determining the granting or vesting of awards.
On matters relating to corporate transactions, the Sub-Adviser will generally vote in favor of mergers, acquisitions and sales of assets if the Sub-Adviser’s analysis of the proposed business strategy and the transaction price would have a positive impact on the total return for shareholders.
If a shareholders meeting is contested, that is, shareholders are presented with a set of director candidates nominated by company management and a set of director candidates nominated by a dissident shareholder, the Sub-Adviser will study the proposed business strategies of both groups and vote in a way that maximizes expected total return for the Fund.
In addition, the Sub-Adviser will not vote any proxy if it determines that the consequences or costs of voting outweigh the potential benefit of voting. For example, if a foreign market requires shareholders voting proxies to retain the voted shares until the meeting date (thereby rendering the shares “illiquid” for some period of time), the Sub-Adviser will not vote proxies for such shares. In addition, the Sub-Adviser is not obligated to incur any expense to send a representative to a shareholder meeting or to translate proxy materials into English.
The Sub-Adviser will take into account feedback from issuers on the voting recommendations of the Sub-Adviser’s proxy advisory firm if the feedback is provided at least five days before the voting cut-off date. In certain circumstances, primarily those where the Sub-Adviser’s voting policy is absolute and without exception, issuer feedback will not be part of the voting decision. For example, it is the Sub-Adviser’s policy to always support a shareholder proposal to separate the roles of chairman of the board and CEO. Thus, any comments from the issuer opposing this proposal would not be considered.
If proxies are not delivered in a timely or otherwise appropriate basis, the Sub-Adviser may not be able to vote a particular proxy.
Proxy Voting Procedures
The Sub-Adviser has established a Proxy Voting Committee (“Proxy Committee”), to exercise all voting discretion granted to the Sub-Adviser by the Board in accordance with the proxy voting policies. To assist it in carrying out the day-to-day operations related to proxy voting, the Proxy Committee has created the Proxy Voting Management Group (PVMG). The day-to-day operations related to proxy voting are carried out by the Proxy Voting Operations Team (PVOT) and overseen by the PVMG. Besides voting the proxies, this work includes engaging with investee companies on corporate governance matters, managing the proxy advisory firm, soliciting voting recommendations from the Sub-Adviser’s investment professionals, bringing voting recommendations to the Proxy Committee for approval, filing with regulatory agencies any required proxy voting reports, providing proxy voting reports to clients and investment companies as they are requested from time to time, and keeping the Proxy Committee informed of any issues related to corporate governance and proxy voting.
The Sub-Adviser has compiled a list of specific voting instructions based on the General Policy (the “Standard Voting Instructions”). The Standard Voting Instructions and any modifications to them are approved by the Proxy Committee. The Standard Voting Instructions sometimes call for an investment professional to review the ballot question and provide a voting recommendation to the Proxy Committee (a “case-by-case vote”). The foregoing notwithstanding, the Proxy Committee always has the authority to determine a final voting decision.
The Sub-Adviser has hired a proxy advisory firm to perform various proxy voting related administrative services such as ballot reconciliation, vote processing and recordkeeping functions. The Proxy Committee has supplied the proxy advisory firm with the Standard Voting Instructions. The Proxy Committee retains the right to modify the Standard Voting Instructions at any time or to vote contrary to them at any time in order to cast proxy votes in a manner that the Proxy Committee believes is in accordance with the General Policy. The proxy advisory firm may vote any proxy as directed in the Standard Voting Instructions without further direction from the Proxy Committee. However, if the Standard Voting Instructions require case-by-case handling for a proposal, the PVOT will work with the investment professionals and the proxy advisory firm to develop a voting recommendation for the Proxy Committee and to communicate the Proxy Committee’s final voting decision to the proxy advisory firm. Further, if the Standard Voting Instructions require the PVOT to analyze a ballot question and make the final voting decision, the PVOT will report such votes to the Proxy Committee on a quarterly basis for review.
Conflicts of Interest
The Sub-Adviser has adopted procedures to address situations where a matter on which a proxy is sought may present a potential conflict between the interests of the Fund (and its shareholders) and those of the Sub-Adviser or Distributor. This may occur where a significant business relationship exists between the Sub-Adviser (or its affiliates) and a company involved with a proxy vote.
A company that is a proponent, opponent, or the subject of a proxy vote, and which to the knowledge of the Proxy Committee has this type of significant business relationship, is referred to below as an “Interested Company.”
The Sub-Adviser has implemented the following procedures in order to avoid concerns that the conflicting interests of the Sub-Adviser or its affiliates have influenced proxy votes. Any employee of the Sub-Adviser or its affiliates who is contacted by an Interested Company regarding proxies to be voted by the Sub-Adviser must refer the Interested Company to a member of the Proxy Committee, and must inform the Interested Company that the Proxy Committee has exclusive authority to determine how the proxy will be voted. Any Proxy Committee member contacted by an Interested Company must report it to the full Proxy Committee and provide a written summary of the communication. This requirement includes engagement meetings with investee companies and does not include communications with proxy solicitation firms. Under no circumstances will the Proxy Committee or any member of the Proxy Committee make a commitment to an Interested Company regarding the voting of proxies or disclose to an Interested Company how the Proxy Committee has directed such proxies to be voted. If the Standard Voting Instructions already provide specific direction on the proposal in question, the Proxy Committee shall not alter or amend such directions. If the Standard Voting Instructions require the Proxy Committee to provide further direction, the Proxy Committee shall do so in accordance with the proxy voting policies, without regard for the interests of the Sub-Adviser with respect to the Interested Company. If the Proxy Committee provides any direction as to the voting of proxies relating to a proposal affecting an Interested Company, it must disclose annually to the Fund’s Board information regarding: the significant business relationship; any material communication with the Interested Company; the matter(s) voted on; and how, and why, the Sub-Adviser voted as it did. In certain circumstances it may be appropriate for the Sub-Adviser to vote in the same proportion as all other shareholders, so as to not affect the outcome beyond helping to establish a quorum at the shareholders’ meeting. This is referred to as “proportional voting.” If the Fund owns shares of another Federated Hermes mutual fund, generally the Sub-Adviser will proportionally vote the client’s proxies for that fund or seek direction from the Board or the client on how the proposal should be voted. If the Fund owns shares of an unaffiliated mutual fund, the Sub-Adviser may proportionally vote the Fund’s proxies for that fund depending on the size of the position. If the Fund owns shares of an unaffiliated exchange-traded fund, the Sub-Adviser will proportionally vote the Fund’s proxies for that fund.
Downstream Affiliates
If the Proxy Committee gives further direction, or seeks to vote contrary to the Standard Voting Instructions, for a proxy relating to a portfolio company in which the Fund owns more than 10% of the portfolio company’s outstanding voting securities at the time of the vote (“Downstream Affiliate”), the Proxy Committee must first receive guidance from counsel to the Proxy Committee as to whether any relationship between the Sub-Adviser and the portfolio company, other than such ownership of the portfolio company’s securities, gives rise to an actual conflict of interest. If counsel determines that an actual conflict exists, the Proxy Committee must address any such conflict with the executive committee of the board of directors or trustees of any investment company client prior to taking any action on the proxy at issue.
Proxy Sub-Advisers’ Conflicts of Interest
Proxy advisory firms may have significant business relationships with the subjects of their research and voting recommendations. For example, a proxy advisory firm board member also sits on the board of a public company for which the proxy advisory firm will write a research report. This and similar situations give rise to an actual or apparent conflict of interest.
In order to avoid concerns that the conflicting interests of the engaged proxy advisory firm have influenced proxy voting recommendations, the Sub-Adviser will take the following steps:
■ | A due diligence team made up of employees of the Sub-Adviser and/or its affiliates will meet with the proxy advisory firm on an annual basis and determine through a review of their policies and procedures and through inquiry that the proxy advisory firm has established a system of internal controls that provide reasonable assurance that their voting recommendations are not influenced by the business relationships they have with the subjects of their research. |
■ | Whenever the standard voting guidelines call for voting a proposal in accordance with the proxy advisory firm recommendation and the proxy advisory firm has disclosed that they have a conflict of interest with respect to that issuer, the PVOT will take the following steps: (a) the PVOT will obtain a copy of the research report and recommendations published by another proxy advisory firm for that issuer; (b) the Director of Proxy Voting, or his designee, will review both the engaged proxy advisory firm research report and the research report of the other proxy advisory firm and determine what vote will be cast. The PVOT will report all proxies voted in this manner to the Proxy Committee on a quarterly basis. Alternatively, the PVOT may seek direction from the Committee on how the proposal shall be voted. |
Proxy Voting Report
A report on “Form N-PX” of how the Fund voted any proxies during the most recent 12-month period ended June 30 is available via the SEC’s website at www.sec.gov.
Gateway Investment Advisers, LLC
Section II: Proxy Voting, Policy 4
PROXY VOTING POLICY
4.1 Overview
This proxy voting policy and related procedures apply to clients who desire Gateway Investment Advisers, LLC (Gateway) to vote proxies on their behalf, including registered investment companies advised (or sub-advised) by Gateway. Questions regarding this policy should be directed to Gateway’s CCO.
4.2 Introduction
Gateway recognizes that voting rights are financial assets of its clients and that they must be managed accordingly; with voting decisions being made in the best interests of its clients who wish Gateway to exercise such authority and of shareholders of the registered investment companies for which it acts as adviser or sub-adviser (hereinafter referred collectively as “Clients”). Gateway, in turn, has retained Institutional Shareholder Services (ISS) as its proxy agent to recommend how to vote each proxy as well as administer the voting of proxies on behalf of Gateway.
4.3 Role of Proxy Voting Agent
Gateway has engaged ISS, an independent proxy voting service, to assist in the voting of proxies. ISS is responsible for coordinating with each Client’s custodian to ensure that all proxy ballots relating to a Client’s portfolio are processed in a timely manner. To accommodate this process, Gateway has instructed ISS to follow the ISS United States Proxy Voting Guidelines and to automatically vote in accordance with ISS’ vote recommendations no later than five (5) calendar days prior to the vote submission deadline without Gateway’s prior approval.
ISS, with its vast research capabilities, has developed its U.S. and global proxy voting guidelines, which provide vote recommendations for proxy voting, that are designed to serve the best interests of investors. These guidelines outline the rationale for determining how particular issues should be voted. Gateway’s CIO, on an annual basis, will determine whether ISS’ applicable proxy guidelines continue to be in the best interests of Gateway’s Clients. Gateway will instruct ISS to vote in accordance with these guidelines unless at least one of the following conditions apply:
A. | Gateway’s portfolio management team has decided to override the ISS vote recommendation for a Client(s) based on its own determination that the Client(s) would best be served with a vote contrary to the ISS recommendation based on Gateway’s higher degree of analysis of ISS’ vote recommendation. Such decision(s) will be documented by Gateway (and communicated to ISS if a decision(s) led to a vote override). Gateway’s CIO will determine, on an annual basis, as to which classification level an ISS vote recommendation should be analyzed further by Gateway (which may include highly contested matters regarding mergers and acquisitions, dissolutions, conversions, consolidations, or contested elections of directors); or |
B. | Gateway’s portfolio management team has decided to override ISS’ vote recommendation for a Client(s) based on its own determination that the Client(s) would best be served with a vote contrary to ISS’ recommendation based on Gateway’s consideration of certain additional information. Specifically, in the event Gateway becomes aware that an issuer has filed additional soliciting material with the SEC regarding ISS’ vote recommendation and if such additional information would reasonably be expected to affect Gateway’s voting determination, Gateway will consider this supplemental information if such additional material was submitted to Gateway via ISS no later than five (5) calendar days prior to the vote submission deadline. Only additional information from issuers that apply to the classification levels determined by the CIO would be considered information reasonably expected to affect Gateway’s voting determination. Information received within the five (5) calendar days before the cutoff time frame, but before the vote submission deadline, may be considered, but only on a best-efforts basis. Decision(s) as to whether this additional information affects whether or not Gateway follows ISS’ vote recommendation will be documented by Gateway (and communicated to ISS if the analysis led to a vote override); or |
1
Gateway Investment Advisers, LLC
Section II: Proxy Voting, Policy 4
C. | ISS does not give a vote recommendation, in which case Gateway will independently determine how a particular issue should be voted. In these instances, Gateway, through its portfolio management team, will document the reason(s) used in determining a vote and communicate Gateway’s voting instruction to ISS. Gateway will generally seek to vote in accordance with ISS’ guidelines; or |
D. | If voting on any particular security compromises Gateway’s ability to later transact in such security (e.g. shareblocking practices) or if, in Gateway’s judgment, the expected cost associated with the vote exceeds the expected benefits of the vote (e.g. non-U.S. security restrictions), then Gateway will abstain from voting on a particular security; or |
E. | If voting would impose costs on the Client, such as opportunity costs for the Client resulting from restricting the use of securities for lending in order to preserve the right to vote, then Gateway will not make efforts to vote these securities on behalf of the Client. |
4.4 Conflicts of Interest
From time to time, Gateway or an employee or another affiliate of Gateway may have a conflict of interest with respect to a proxy vote. A conflict of interest may exist, for example, if Gateway has a business relationship (or potential business relationship) with either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. Any individual with knowledge of any actual or potential conflict of interest, such as a personal conflict of interest (e.g., familial relationship with company management) or of a business relationship (e.g., Gateway is the investment manager to a soliciting company), shall disclose that conflict to the Legal and Compliance Department. In the event of a reported conflict, the Legal and Compliance Department will determine and record how the proxies in question shall be voted; although it is expected that ISS vote recommendations will be followed unless a determination to vote contrary to ISS is documented.
From time to time, ISS experiences conflicts of interest with respect to proxy votes. A conflict of interest can exist, for example, if a subsidiary of ISS has a business consultant relationship with an issuer and ISS is determining a vote recommendation on the same issuer. Gateway has formalized due diligence processes in place to determine, on an annual basis, if ISS’ efforts to mitigate such conflicts are reasonable.
2
Gateway Investment Advisers, LLC
Section II: Proxy Voting, Policy 4
4.5 Due Diligence of Proxy Adviser
Gateway will follow formalized procedures to undertake continuing due diligence of ISS, both in the areas of research and the administrative tasks of proxy voting.
4.6 Record Retention Requirements
A. | In accordance with Rule 204-2(c)(2) under the Investment Advisers Act of 1940, as amended, Gateway will maintain the following records for a period of not less than five years: |
1. | This Gateway proxy voting policy; |
2. | Records of Clients’ written requests for this policy and/or their voting record; |
3. | Gateway’s written response to such written or oral requests; and in instances that arise due to circumstances describe in Section 4.3 A, B and C, a memo as to how Gateway arrived at its decision to vote the proxies at issue. |
B. | ISS will make and retain, on Gateway’s behalf (as evidenced by an undertaking from ISS to provide a copy promptly upon request), the following documents: |
1. | A copy of a proxy statement*; |
2. | A record of each vote cast by Gateway on behalf of a Client; and |
3. | A copy of any document that was material to making a decision how to vote proxies on behalf of a Client or that memorialized the basis of that decision. |
*Gateway may also rely on obtaining a copy from the EDGAR system.
4.7 How to Obtain Voting Information
At any time, a Client may obtain this Proxy Voting Policy along with ISS’ Proxy Voting Guidelines Summary and his or her voting record upon the Client’s written or oral request to Gateway.
Effective Date: February 15, 2008, revised December 11, 2008, revised February 18, 2015, revised February 28, 2021, revised June 23, 2022.
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Proxy Voting Policy and Procedures
The following proxy voting policy sets forth our general principles and our process for voting on securities held in client accounts where Leeward Investments, LLC (“Leeward”) has discretion to vote proxies. Our authority to vote proxies on behalf of our clients is established by our advisory contract or comparable documents. In addition to SEC requirements governing advisers, our proxy voting policies reflect the long-standing fiduciary standards and responsibilities for ERISA accounts as well.
General Principles
In order to set a framework within which proxy questions should be considered and voted, the following general principles should be applied:
● | As a fiduciary under ERISA or otherwise, the discretion to vote proxies for a client’s account should be exercised keeping in mind a fiduciary’s duty to use its best efforts to preserve or enhance the value of the client’s account. Leeward votes proxy ballots with the goal of fostering the interests of the client or the participants in the case of an ERISA account. |
● | Proxy questions are considered within the individual circumstances of the issuer. It is possible that individual circumstances might mean that a given proxy ballot could be voted differently than what is generally done in other cases. |
● | It is Leeward’s general policy that, when given authority to vote proxies for a client’s account, we must be authorized to vote all proxies for the account in our discretion. We do not generally accept partial voting authority or instructions from clients on how to vote on specific issues. Certain clients may direct us to vote proxies in accordance with a specific set of guidelines or recommendations appropriate to their circumstances in which case we will not have voting discretion but will facilitate voting in accordance with a client’s direction. Our clients may wish to retain proxy voting authority and vote their own proxies in order to satisfy their individual corporate governance goals. |
Leeward maintains a set of proxy voting guidelines that describe in greater detail how we will generally vote specific issues for our clients. While it is not an exhaustive list, it is intended to serve as the foundation on which we make most of our proxy voting decisions. These guidelines are available upon request. Leeward will from time to time review our proxy voting policy and guidelines and may adopt changes. Clients may contact their Client Service Officer or the Compliance Office by calling (617) 468-6700 or via e-mail at [email protected] for a copy of our current guidelines or to obtain a record of how proxies were voted for their account.
Process
Leeward is responsible for fair and accurate proxy voting and for ensuring that proxy ballots are voted in a timely manner. Leeward has hired Institutional Shareholder Services, Inc. (“ISS”), a third party proxy voting vendor, to facilitate voting of proxy ballots based on guidelines established by Leeward. Our Chief Operating Officer works with ISS and oversees the proxy voting process and ensures that proxy voting is taking place, records are being maintained and that reporting and required filings are being made as necessary.
Limitations
Leeward may abstain from voting a client proxy if, in its opinion, the value obtained by voting the proxy is outweighed by the unique cost or the operational or trading constraints to a client account or situation. In accordance with fiduciary duties, Leeward weighs the costs and benefits of voting certain proxy proposals and makes an informed decision with respect to whether voting a given proxy proposal is prudent.
Some of Leeward’s clients engage in securities lending programs under which shares of an issuer may be on loan while that issuer is conducting a proxy solicitation. Shares that are on loan are not eligible to be voted. Generally, Leeward does not recall shares out on loan and therefore, shares that are on loan over record date are not voted. Additionally, Leeward may purchase a company’s “non-voting” shares. In this case, the shares are not eligible to be voted.
Conflicts of Interest
Leeward recognizes that the potential for conflicts of interest could arise in situations where we have discretion to vote client proxies and where Leeward has material business relationships or material personal or family relationships. A conflict of interest may exist when client portfolios hold shares of a publicly traded company that is also a Leeward client. To address potential conflicts, we have established a Proxy Voting Committee (“Committee”). The Committee consists of representatives from the Compliance and Operations departments including our Chief Operating Officer, Chief Compliance Officer, and relevant Portfolio Manager (or their designee). The Committee will use reasonable efforts to determine whether a potential conflict exists, including maintaining a list of clients or securities that may pose a potential conflict.
Securities identified as potential conflicts will be provided to ISS and flagged on the proxy voting system. Members of the Committee will receive an email weekly from ISS notifying them of a proxy vote taking place on a security from the list. Generally, votes cast for a security that represents a potential conflict of interest will default to Leeward’s standard voting policies. If a portfolio manager wishes to change the vote, the rationale for the change must be provided in writing to the Committee and the Committee will review the request for conflicts. If no conflicts exist, the Committee will authorize instruct ISS to process the vote change. All meeting minutes and Committee decisions will be kept by the designated Committee member.
Recordkeeping
Leeward shall maintain proxy voting records pursuant to Section 206-2 of the Advisers Act. Such records will include a copy of policies and procedures, proxy statements, a record of each vote that is cast, any document created that was material to the decision on how to vote, as well as a copy of client requests for proxy voting information and responses to such requests. Leeward also relies on ISS to provide certain proxy voting details promptly upon request in order to respond to certain requests for information or records.
Last Updated: November 2021
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Proxy Voting Guidelines Summary
The proxy voting guidelines contained herein are a sampling of select, key guidelines and are not all inclusive. LMCG will review our proxy voting policies and guidelines from time to time and may adopt changes. Proxy questions are considered within the individual circumstances of the issuer and therefore it is possible that individual circumstances might mean that a given proxy ballot could be voted differently than what is generally done in other cases. Clients may contact their Client Service Officer or the Compliance Office by calling (617) 380-5600 or via e-mail at [email protected] or [email protected] for a copy of our most current guidelines or to obtain a record of how proxies were voted for their account.
1. Board of Directors:
Voting on Director Nominees in Uncontested Elections
Generally vote For director nominees except under the following circumstances, which may result in a vote Against or Withhold:
● | Independent directors make up less than a majority of directors |
● | Company lacks an audit, compensation or nominating committee |
● | Nominee attended less than 75% of board and committee meetings |
● | Nominee sits on more than 5 public company boards |
● | Actions of Nominee or committees on which Nominee serves are inconsistent with principles of good governance such as failing to act on a shareholder proposal receiving majority vote or not acting on takeover offers where majority of shares are tendered |
Voting for Director Nominees in Contested Elections
Vote Case-By-Case on the election of directors in contested elections, considering the following:
● | Management’s track record; |
● | Background to the contested election; |
● | Qualifications of Director nominee(s); |
● | Strategic plan of dissident slate and quality of critique against management; |
● | Likelihood that the proposed goals and objectives can be achieved; and |
● | Stock ownership positions |
Classified Boards
Generally vote For proposals to declassify boards and vote Against or Withhold for directors who adopt classified board structures.
Proxy Access
Generally vote For management or shareholder approval for proxy access incorporating the following guidelines:
● | Nominating group should hold no less than 3% of company’s outstanding shares for a minimum of 3 years |
● | Proposed nominees represent no more than 25% of the board |
LMCG Update: June 2019
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Independent Chair (Separate CEO/Chair)
Generally vote For shareholder proposals requiring that the chairman position be filled by an independent director unless there are substantial reasons to recommend against the proposal, such as counterbalancing governance structure.
Majority Vote Shareholder Proposals
Generally vote For binding resolutions requesting that the board change the company’s bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast.
2. Audit-related Items:
Audit Committee related items
Generally vote For members of the Audit Committee unless:
● | Non-audit fees paid to auditor are excessive |
● | Company receives an adverse opinion on financial statements |
● | Evidence of inappropriate indemnification language that limits ability of the company or shareholders to pursue legal recourse against audit firm |
Vote Case-By-Case on members of the Audit Committee and potentially the full board if:
● | Poor accounting practices result in fraud, misapplication of GAAP, and/or other material weaknesses |
Auditor Ratification
Generally vote For proposals to ratify auditors unless:
● | Auditor lacks independence; |
● | There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position; |
● | Poor accounting practices are identified such as fraud, misapplication of GAAP and material weaknesses are identified; or |
● | Fees for non-audit services exceed audit and audit-related fees |
Vote Case-By-Case on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.
3. Shareholder Rights and Defenses:
Advanced Notice Requirements for Shareholder Proposals/Nominations
Vote Case-By-Case on advance notice proposals, giving support to proposals that allow shareholders to submit proposals/nominations reasonably close to the meeting date within the broadest window possible.
Poison Pills
Generally vote For shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it unless the company has (1) a shareholder approved poison pill in place or (2) the company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a poison pill if shareholders have approved the adoption of the plan or the board determines that it is in the best interest of shareholders to adopt a pill without delay.
LMCG Update: June 2019
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Vote Case-By-Case on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan.
Supermajority Vote Requirements
Generally vote For proposals to reduce supermajority vote requirements and conversely vote against proposals to impose a supermajority vote.
Shareholder Ability to Call Special Meetings
Generally vote for proposals that provide shareholders with the ability to call special meetings and against proposals to restrict this ability.
4. Capital and Corporate Structure:
Common Stock Authorization
Vote Case-By-Case on proposals to increase the number of shares of common stock authorized for issuance.
Dual Class Structure
Generally vote Against proposals to create a new class of common stock with superior voting rights
Share Repurchase Programs
Vote For management proposals to institute open market repurchase plans in which all shareholders may participate on equal terms.
Mergers and Acquisitions
Vote Case-By-Case for mergers and acquisitions, review and evaluate the merits and drawbacks of the proposed transaction balancing various and sometimes countervailing factors including:
● | Valuation; |
● | Market reaction; |
● | Strategic rationale; |
● | Negotiations and process; |
● | Conflicts of interest; and |
● | Governance |
5. Compensation:
Compensation Committee related items
In the absence of an Advisory vote on executive compensation, vote Against or Withhold on members of the Compensation Committee or potentially the full board if:
● | There is significant misalignment between CEO pay and company performance |
● | Company maintains problematic pay practices related to non-performance based compensation elements, incentives that motivate excessive risk taking and options backdating |
● | Board exhibits significant level of poor communication and responsiveness to shareholders |
● | Company fails to submit one-time transfer of stock options to shareholder vote |
● | Company fails to fulfill terms of burn rate commitment made to shareholders |
LMCG Update: June 2019
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Vote Case-By-Case on members of the Compensation Committee and the MSOP proposal if the Company’s previous say-on-pay proposal received support of less than 70% of votes cast, taking into account:
● | Discloser of engagement efforts with major institutional shareholders regarding issues that led to low level of support |
● | Specific actions to address issues that contributed to low level of support |
● | Other recent compensation practices |
● | Whether the issues raised are recurring or isolated |
● | Company’s ownership structure |
● | Whether support level was less than 50%, |
Advisory Vote on Executive Compensation (Say-on-Pay) Management Proposals
Vote Case-By-Case on ballot items related to executive pay and practices
Vote Against Advisory Votes on Executive Compensation (MSOP) if:
● | There is significant misalignment between CEO pay and company performance |
● | Company maintains problematic pay practices |
● | Board exhibits significant level of poor communication and responsiveness to shareholders |
Vote Against or Withhold from members of the Compensation Committee if:
● | There is no MSOP on the ballot |
● | Board fails to adequately respond to a previous MSOP proposal that received less than 70% support |
● | The company has poor compensation practices |
Vote For annual advisory votes on compensation.
Executive Severance Plans/Golden Parachutes
Vote For proposals requiring golden parachutes be submitted for shareholder ratification.
Vote Case-By-Case on proposals to ratify golden parachutes. Generally, the severance plan should pay out no more than three times base compensation, have a trigger mechanism beyond management control, and change in control payouts should require both a change in control and termination.
Employee Stock Purchase Plans
Vote For employee stock purchase plans where the stock purchase price is at least 85% of fair market value, the offering period is 27 months or less, and the number of shares allocated to the plan is 10 percent or less of the company’s outstanding shares.
Option Exchange Programs/Re-pricing Options
Vote Case-By-Case on management proposals seeking approval to exchange/re-price options. Vote For shareholder proposals to put options repricing to a shareholder vote.
LMCG Update: June 2019
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6. Corporate Social Responsibility(CSR) Issues:
General approach on CSR issues is to vote Case-By-Case taking into account factors such as impact on shareholder value, significance of company’s business affected by the proposal, impact on company reputation, response by other companies to similar issue and degree to which proprietary or confidential information would be disclosed.
Some issues that fall under this topic include proposals on:
● | Company’s political spending, lobbying efforts and charitable contributions |
● | Animal welfare practices |
● | Energy and environmental issues |
● | Equal employment opportunity and discrimination |
● | Diversity |
● | Product safety and hazardous materials |
7. Voting in markets outside of the United States
LMCG buys securities, on behalf of its clients’, issued by companies incorporated in foreign countries. We will evaluate, where applicable, issues presented to shareholders of foreign companies within the context of these guidelines. LMCG may look to industry-guidance to vote on items that are on a ballot solely due to the requirements of a particular foreign market.
Proxy voting in some foreign countries requires “share blocking”, which prevents selling of the shares for a period of time around the date of the annual meeting. LMCG believes that the risks associated with loss of liquidity outweigh the benefits of voting a proxy ballot. Therefore, in general, LMCG will not vote proxy ballots in countries that require share blocking.
8. Conflicts of Interest:
Conflicts of interest could exist when the Firm holds a security issued by a client in client portfolios, and the Firm is required to vote that security. When there is a potential conflict with a client, the Firm will look to these guidelines and the ISS recommendation for voting guidance.
LMCG Update: June 2019
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Proxy Voting Policy and Procedures
The following proxy voting policy sets forth our general principles and our process for voting on securities held in client accounts where LMCG Investments, LLC (‘LMCG”) has discretion to vote proxies. Our authority to vote proxies on behalf of our clients is established by our advisory contract or comparable documents. In addition to SEC requirements governing advisers, our proxy voting policies reflect the long-standing fiduciary standards and responsibilities for ERISA accounts as well.
General Principles
In order to set a framework within which proxy questions should be considered and voted, the following general principles should be applied:
● | As a fiduciary under ERISA or otherwise, the discretion to vote proxies for a client’s account should be exercised keeping in mind a fiduciary’s duty to use its best efforts to preserve or enhance the value of the client’s account. LMCG votes proxy ballots with the goal of fostering the interests of the client or the participants in the case of an ERISA account. |
● | Proxy questions are considered within the individual circumstances of the issuer. It is possible that individual circumstances might mean that a given proxy ballot could be voted differently than what is generally done in other cases. |
● | It is LMCG’s general policy that, when given authority to vote proxies for a client’s account, we must be authorized to vote all proxies for the account in our discretion. We do not generally accept partial voting authority or instructions from clients on how to vote on specific issues. Certain clients may direct us to vote proxies in accordance with a specific set of guidelines or recommendations appropriate to their circumstances in which case we will not have voting discretion but will facilitate voting in accordance with a client’s direction. Our clients may wish to retain proxy voting authority and vote their own proxies in order to satisfy their individual corporate governance goals. |
LMCG maintains a set of proxy voting guidelines that describe in greater detail how we will generally vote specific issues for our clients. While it is not an exhaustive list, it is intended to serve as the foundation on which we make most of our proxy voting decisions. These guidelines are available upon request. LMCG will from time to time review our proxy voting policy and guidelines and may adopt changes. Clients may contact their Client Service Officer or the Compliance Office by calling (617) 380-5600 or via e-mail at [email protected] for a copy of our current guidelines or to obtain a record of how proxies were voted for their account.
Process
LMCG is responsible for fair and accurate proxy voting and for ensuring that proxy ballots are voted in a timely manner. LMCG has hired Institutional Shareholder Services, Inc. (“ISS”), a third party proxy voting vendor, to facilitate voting of proxy ballots based on guidelines established by LMCG. LMCG’s Proxy Voting Administrator works with ISS and oversees the proxy voting process. The Proxy Voting Administrator ensures that proxy voting is taking place, records are being maintained and that reporting and required filings are being made as necessary.
For proxy voting on behalf of private client accounts, LMCG may follow an accepted industry practice of voting shares on a rolled-up basis when the same security is held across multiple client accounts. In general this process is utilized when numerous accounts are held at the same custodian bank. For accounts in which proxy ballots are voted in this manner, proxy votes are reported in the aggregate.
Last amended: October 2023
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Limitations
LMCG may abstain from voting a client proxy if, in its opinion, the value obtained by voting the proxy is outweighed by the unique cost or the operational or trading constraints to a client account or situation. In accordance with fiduciary duties, LMCG weighs the costs and benefits of voting certain proxy proposals and makes an informed decision with respect to whether voting a given proxy proposal is prudent.
Some of LMCG’s clients engage in securities lending programs under which shares of an issuer may be on loan while that issuer is conducting a proxy solicitation. Shares that are on loan are not eligible to be voted. Generally, LMCG does not recall shares out on loan and therefore, shares that are on loan over record date are not voted. Additionally, LMCG may purchase a company’s “non-voting” shares. In this case, the shares are not eligible to be voted.
Proxy voting in some foreign countries requires “share blocking”, which prevents selling of the shares for a period of time around the date of the annual meeting. LMCG feels that the risks associated with loss of liquidity outweigh the benefits of voting a proxy ballot. Therefore, in general, LMCG will not vote proxy ballots in countries that require share blocking.
Conflicts of Interest
LMCG recognizes that the potential for conflicts of interest could arise in situations where we have discretion to vote client proxies and where LMCG has material business relationships or material personal or family relationships. A conflict of interest may exist when client portfolios hold shares of a publicly traded company that is also an LMCG client. To address potential conflicts, we have established a Proxy Voting Committee (“Committee”). The Committee consists of representatives from the Compliance and Operations departments including the Chief Compliance Officer, Head of Operations and relevant Portfolio Manager (or their designee). The Committee will use reasonable efforts to determine whether a potential conflict exists, including maintaining a list of clients or securities that may pose a potential conflict.
Securities identified as potential conflicts will be provided to ISS and flagged on the proxy voting system. Members of the Committee will receive an email weekly from ISS notifying them of a proxy vote taking place on a security from the list. Generally, votes cast for a security that represents a potential conflict of interest will default to LMCG’s standard voting policies. If a portfolio manager wishes to change the vote, the rationale for the change must be provided in writing to the Committee and the Committee will review the request for conflicts. If no conflicts exist, the Committee will authorize the Proxy Voting Administrator to process the vote change. All meeting minutes and Committee decisions will be kept by the designated Committee member.
Recordkeeping
LMCG shall maintain proxy voting records pursuant to Section 206-2 of the Advisers Act. Such records will include a copy of policies and procedures, proxy statements, a record of each vote that is cast, any document created that was material to the decision on how to vote, as well as a copy of client requests for proxy voting information and responses to such requests. LMCG’s Compliance Office also relies on ISS to provide certain proxy voting details promptly upon request in order to respond to certain requests for information or records.
Last amended: October 2023
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LOOMIS, SAYLES & COMPANY | |
PROXY VOTING POLICIES AND PROCEDURES | |
March 24, 2022 |
Proxy Voting Policies and Procedures
1. | GENERAL |
A. | Introduction. |
Loomis, Sayles & Company, L.P. (“Loomis Sayles”) will vote proxies of the securities held in its clients’ portfolios on behalf of each client that has delegated proxy voting authority to Loomis Sayles as investment adviser. Loomis Sayles has adopted and implemented these policies and procedures (“Proxy Voting Procedures”) to ensure that, where it has voting authority, proxy matters are handled in the best interests of clients, in accordance with Loomis Sayles’ fiduciary duty, and all applicable law and regulations. The Proxy Voting Procedures, as implemented by the Loomis Sayles Proxy Committee (as described below), are intended to support good corporate governance, including those corporate practices that address environmental and social issues (“ESG Matters”), in all cases with the objective of protecting shareholder interests and maximizing shareholder value.
Loomis Sayles uses the services of third parties (each a “Proxy Voting Service” and collectively the “Proxy Voting Services”), to provide research, analysis and voting recommendations and to administer the process of voting proxies for those clients for which Loomis Sayles has voting authority. Any reference in these Proxy Voting Procedures to a “Proxy Voting Service” is a reference either to the Proxy Voting Service that provides research, analysis and voting recommendations to Loomis Sayles or to the Proxy Voting Service that administers the process of voting proxies for Loomis Sayles or to both, as the context may require. Loomis Sayles will generally follow its express policy with input from the Proxy Voting Service that provides research, analysis and voting recommendations to Loomis Sayles unless the Proxy Committee determines that the client’s best interests are served by voting otherwise.
B. | General Guidelines. |
The following guidelines will apply when voting proxies on behalf of accounts for which Loomis Sayles has voting authority.
1. | Client’s Best Interests. The Proxy Voting Procedures are designed and implemented in a way that is reasonably expected to ensure that proxy matters are conducted in the best interests of clients. When considering the best interests of clients, Loomis Sayles has determined that this means the best investment interest of its clients as shareholders of the issuer. To protect its clients’ best interests, Loomis Sayles has integrated the consideration of ESG Matters into its investment process. The Proxy Voting Procedures are intended to reflect the impact of these factors in cases where they are material to the growth and sustainability of an issuer. Loomis Sayles has established its Proxy Voting Procedures to assist it in making its proxy voting decisions with a view toward enhancing the value of its clients’ interests in an issuer over the period during which it expects its clients to hold their investments. Loomis Sayles will vote against proposals that it believes could adversely impact the current or future market value of the issuer’s securities during the expected holding period. Loomis Sayles also believes that protecting the best interests of clients requires the consideration of potential material impacts of proxy proposals associated with ESG Matters. |
Loomis, Sayles & Company, L.P. March 2022 All Rights Reserved
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Proxy Voting Policies and Procedures
For the avoidance of doubt, and notwithstanding any other provisions of these Proxy Voting Procedures, in all instances in which Loomis Sayles votes proxies on behalf of clients that are employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), Loomis Sayles (a) will act solely in accordance with the economic interest of the plan and its participants and beneficiaries, and (b) will not subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to any other objective, or promote benefits or goals unrelated to those financial interests of the plan’s participants and beneficiaries.
2. | Client Proxy Voting Policies. Rather than delegating proxy voting authority to Loomis Sayles, a client may (a) retain the authority to vote proxies on securities in its account; (b) delegate voting authority to another party; or (c) instruct Loomis Sayles to vote proxies according to a policy that differs from the Proxy Voting Procedures. Loomis Sayles will honor any of these instructions if the instruction is agreed to in writing by Loomis Sayles in its investment management agreement with the client. If Loomis Sayles incurs additional costs or expenses in following any such instruction, it may request payment for such additional costs or expenses from the client. |
3. | Stated Policies. In the interest of consistency in voting proxies on behalf of its clients where appropriate, Loomis Sayles has adopted policies that identify issues where Loomis Sayles will (a) generally vote in favor of a proposal; (b) generally vote against a proposal; (c) generally vote as recommended by the Proxy Voting Service; and (d) specifically consider its vote for or against a proposal. However, these policies are guidelines and each vote may be cast differently than the stated policy, taking into consideration all relevant facts and circumstances at the time of the vote. In certain cases where the recommendation of the Proxy Voting Service and the recommendation of the issuer’s management are the same, the vote will generally be cast as recommended and will not be reviewed on a case-by-case basis by the Proxy Committee. In cases where the portfolio manager of an account that holds voting securities of an issuer or the analyst covering the issuer or its securities recommends a vote, the proposal(s) will be voted according to these recommendations after a review for any potential conflicts of interest is conducted and will not be reviewed on a case-by-case basis by the Proxy Committee. There may be situations where Loomis Sayles casts split votes despite the stated policies. For example, Loomis Sayles may cast a split vote when different clients may be invested in strategies with different investment objectives, or when different clients may have different economic interests in the outcome of a particular proposal. Loomis Sayles also may cast a split vote on a particular proposal when its investment teams have differing views regarding the impact of the proposal on their clients’ investment interests. |
Loomis, Sayles & Company, L.P. March 2022 All Rights Reserved
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Proxy Voting Policies and Procedures
4. | Abstentions and Other Exceptions. Loomis Sayles’ general policy is to vote rather than abstain from voting on issues presented, unless the Proxy Committee determines, pursuant to its best judgment, that the client’s best interests require abstention. However, in the following circumstances Loomis Sayles may not vote a client’s proxy: |
● | The Proxy Committee has concluded that voting would have no meaningful, identifiable economic benefit to the client as a shareholder, such as when the security is no longer held in the client’s portfolio or when the value of the portfolio holding is insignificant. |
● | The Proxy Committee has concluded that the costs of or disadvantages resulting from voting outweigh the economic benefits of voting. For example, in some non-US jurisdictions, the sale of securities voted may be legally or practically prohibited or subject to some restrictions for some period of time, usually between the record and meeting dates (“share blocking”). Loomis Sayles believes that the loss of investment flexibility resulting from share blocking generally outweighs the benefit to be gained by voting. Information about share blocking is often incomplete or contradictory. Loomis Sayles relies on the client’s custodian and on its Proxy Voting Service to identify share blocking jurisdictions. To the extent such information is wrong, Loomis Sayles could fail to vote shares that could have been voted without loss of investment flexibility, or could vote shares and then be prevented from engaging in a potentially beneficial portfolio transaction. |
Loomis, Sayles & Company, L.P. March 2022 All Rights Reserved
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Proxy Voting Policies and Procedures
● | Administrative requirements for voting proxies in certain foreign jurisdictions (which may be imposed a single time or may be periodic), such as providing a power of attorney to the client’s local sub-custodian, cannot be fulfilled due to timing of the requirement, or the costs required to fulfill the administrative requirements appear to outweigh the benefits to the client of voting the proxy. |
● | The client, as of the record date, has loaned the securities to which the proxy relates and Loomis Sayles has concluded that it is not in the best interest of the client to recall the loan or is unable to recall the loan in order to vote the securities1. |
● | The client so directs Loomis Sayles. |
The Proxy Committee will generally vote against, rather than abstain from voting on, ballot issues where the issuer does not provide sufficient information to make an informed decision. In addition, there may be instances where Loomis Sayles is not able to vote proxies on a client's behalf, such as when ballot delivery instructions have not been processed by a client's custodian, when the Proxy Voting Service has not received a ballot for a client's account (e.g., in cases where the client’s shares have been loaned to a third party), when proxy materials are not available in English, and under other circumstances beyond Loomis Sayles’ control.
5. | Oversight. All issues presented for shareholder vote are subject to the oversight of the Proxy Committee, either directly or by application of this policy. All non-routine issues will generally be considered directly by the Proxy Committee and, when necessary, the investment professionals responsible for an account holding the security, and will be voted in the best investment interests of the client. All routine “for” and “against” issues will be voted according to this policy unless special factors require that they be considered by the Proxy Committee and, when necessary, the investment professionals responsible for an account holding the security. |
6. | Availability of Procedures. Loomis Sayles publishes these Proxy Voting Procedures, as updated from time to time, on its public website, www.loomissayles.com, and includes a description of its Proxy Voting Procedures in Part 2A of its Form ADV. Upon request, Loomis Sayles also provides clients with a copy of its Proxy Voting Procedures. |
1 Loomis Sayles does not engage in securities lending. However, some clients do opt to lend securities, availing themselves of their custodians’ services.
Loomis, Sayles & Company, L.P. March 2022 All Rights Reserved
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Proxy Voting Policies and Procedures
7. | Disclosure of Vote. Loomis Sayles makes certain disclosures regarding its voting of proxies in the aggregate (not specific as to clients) on its website, www.loomissayles.com. For mutual funds that it manages, Loomis Sayles is required by law to make certain disclosures regarding its voting of proxies annually. This information is also available on the Loomis Sayles website. Additionally, Loomis Sayles will, upon request by a client, provide information about how each proxy was voted with respect to the securities in that client’s account. Loomis Sayles’ policy is not to disclose a client’s proxy voting records to third parties except as required by applicable law and regulations. |
C. | Proxy Committee. |
1. | Proxy Committee. Loomis Sayles has established a Proxy Committee. The Proxy Committee is composed of senior representatives from firm investment teams and members of the Legal and Compliance Department, and other employees of Loomis Sayles as needed. In the event that any member is unable to participate in a meeting of the Proxy Committee, he or she may designate another individual to act on his or her behalf. A vacancy in the Proxy Committee is filled by the prior member’s successor in position at Loomis Sayles or a person of equivalent experience. Each portfolio manager of an account that holds voting securities of an issuer or the analyst covering the issuer or its securities may be an ad hoc member of the Proxy Committee in connection with voting proxies of that issuer. Voting determinations made by the Proxy Committee generally will be memorialized electronically (e.g., by email). |
2. | Duties. The Proxy Committee’s specific responsibilities include the following: |
a. | developing, authorizing, implementing and updating the Proxy Voting Procedures, including: |
(i) | annually reviewing the Proxy Voting Procedures to ensure consistency with internal policies and regulatory agency policies, including determining the continuing adequacy of the Proxy Voting Procedures to confirm that they have been formulated reasonably and implemented effectively, including whether they continue to be reasonably designed to ensure that proxy votes are cast in clients’ best interest, |
(ii) | annually reviewing existing voting guidelines and developing of additional voting guidelines to assist in the review of proxy proposals, and |
(iii) | annually reviewing the proxy voting process and addressing any general issues that relate to proxy voting; |
Loomis, Sayles & Company, L.P. March 2022 All Rights Reserved
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Proxy Voting Policies and Procedures
b. | overseeing the proxy voting process, including: |
(i) | overseeing the vote on proposals according to the predetermined policies in the voting guidelines, |
(ii) | directing the vote on proposals where there is reason not to vote according to the predetermined policies in the voting guidelines or where proposals require special consideration, |
(iii) | consulting with the portfolio managers and analysts for the accounts holding the security when necessary or appropriate, and |
(iv) | periodically sampling or engaging an outside party to sample proxy votes to ensure they comply with the Proxy Voting Procedures and are cast in accordance with the clients’ best interests; |
c. | engaging and overseeing third-party vendors that materially assist Loomis Sayles with respect to proxy voting, such as the Proxy Voting Services, including: |
(i) | determining and periodically reassessing whether, as relevant, the Proxy Voting Service has the capacity and competency to adequately analyze proxy issues by considering: |
(a) | the adequacy and quality of the Proxy Voting Service’s staffing, personnel and technology, |
(b) | whether the Proxy Voting Service has adequately disclosed its methodologies in formulating voting recommendations, such that Loomis Sayles can understand the factors underlying the Proxy Voting Service’s voting recommendations, |
(c) | the robustness of the Proxy Voting Service’s policies and procedures regarding its ability to ensure that its recommendations are based on current, materially complete and accurate information, and |
(d) | the Proxy Voting Service’s policies and procedures regarding how it identifies and addresses conflicts of interest, including whether the Proxy Voting Service’s policies and procedures provide for adequate disclosure of its actual and potential conflicts of interest with respect to the services it provides to Loomis Sayles. |
(ii) | providing ongoing oversight of the Proxy Voting Services to ensure that proxies continue to be voted in the best interests of clients and in accordance with these Proxy Voting Procedures and the determinations and directions of the Proxy Committee, |
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(iii) | receiving and reviewing updates from the Proxy Voting Services regarding relevant business changes or changes to the Proxy Voting Services’ conflict policies and procedures, and |
(iv) | in the event that the Proxy Committee becomes aware that a recommendation of the Proxy Voting Service was based on a material factual error (including materially inaccurate or incomplete information): investigating the error, considering the nature of the error and the related recommendation, and determining whether the Proxy Voting Service has taken reasonable steps to reduce the likelihood of similar errors in the future; and |
d. | further developing and/or modifying these Proxy Voting Procedures as otherwise appropriate or necessary. |
3. | Standards. |
a. | When determining the vote of any proposal for which it has responsibility, the Proxy Committee shall vote in the client’s best interests as described in section 1(B)(1) above. In the event a client believes that its other interests require a different vote, Loomis Sayles shall vote as the client instructs if the instructions are provided as required in section 1(B)(2) above. |
b. | When determining the vote on any proposal, the Proxy Committee shall not consider any benefit to Loomis Sayles, any of its affiliates, any of its or their clients or service providers, other than benefits to the owner of the securities to be voted. |
c. | If Loomis Sayles becomes aware of additional information relevant to the voting of a shareholder meeting after a vote has been entered but before the applicable voting deadline has passed, it will consider whether or not such information impacts the vote determination entered, and if necessary, use reasonable efforts to change the vote instruction. |
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D. | Conflicts of Interest. |
Loomis Sayles has established policies and procedures to ensure that proxy votes are voted in its clients’ best interests and are not affected by any possible conflicts of interest. First, except in certain limited instances, Loomis Sayles votes in accordance with its pre-determined policies set forth in these Proxy Voting Procedures. Second, where these Proxy Voting Procedures allow for discretion, Loomis Sayles will generally consider the recommendations of the Proxy Voting Service in making its voting decisions. However, if the Proxy Committee determines that the Proxy Voting Service’s recommendation is not in the best interests of the firm’s clients, then the Proxy Committee may use its discretion to vote against the Proxy Voting Service’s recommendation, but only after taking the following steps: (1) conducting a review for any material conflict of interest Loomis Sayles may have, and (2) if any material conflict is found to exist, excluding anyone at Loomis Sayles who is subject to that conflict of interest from participating in the voting decision in any way. However, if deemed necessary or appropriate by the Proxy Committee after full disclosure of any conflict, that person may provide information, opinions or recommendations on any proposal to the Proxy Committee. In such event, prior to directing any vote, the Proxy Committee will make reasonable efforts to obtain and consider information, opinions and recommendations from or about the opposing position.
E. | Recordkeeping. |
Loomis Sayles or the Proxy Voting Service will maintain records of proxies voted pursuant to Rule 204-2 under the Advisers Act. The records include: (1) a copy of its Proxy Voting Procedures; (2) proxy statements received regarding client securities; (3) a record of each vote cast; (4) a copy of any document created by Loomis Sayles that is material to making a decision how to vote proxies on behalf of a client or that memorializes the basis for that decision; and (5) each written client request for proxy voting records and Loomis Sayles’ written response to any (written or oral) client request for such records.
Proxy voting books and records are maintained in an easily accessible place for a period of five years, the first two in an appropriate office of Loomis Sayles.
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Proxy Voting Policies and Procedures
2. | PROXY VOTING |
A. | Introduction |
Loomis Sayles has established certain specific guidelines intended to achieve the objective of the Proxy Voting Procedures: to support good corporate governance, including ESG Matters, in all cases with the objective of protecting shareholder interests and maximizing shareholder value.
B. | Board of Directors |
Loomis Sayles believes that an issuer’s independent, qualified board of directors is the foundation of good corporate governance. Loomis Sayles supports proxy proposals that reflect the prudent exercise of the board’s obligation to provide leadership and guidance to management in fulfilling its obligations to its shareholders. As an example, it may be prudent not to disqualify a director from serving on a board if they participated in affiliated transactions if all measures of independence and good corporate governance were met.
Annual Election of Directors: Vote for proposals to repeal classified boards and to elect all directors annually.
Chairman and CEO are Separate Positions: Vote for proposals that require the positions of chairman and CEO to be held by different persons.
Director and Officer Indemnification and Liability Protection:
A. | Vote against proposals concerning director and officer indemnification and liability protection that limit or eliminate entirely director and officer liability for monetary damages for violating the duty of care, or that would expand coverage beyond legal expenses to acts such as gross negligence that are more serious violations of fiduciary obligations than mere carelessness. |
B. | Vote for only those proposals that provide such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if (i) the director or officer was found to have acted in good faith and in a manner that the director or officer reasonably believed was in the best interests of the company, and (ii) if the director's or officer’s legal expenses only would be covered. |
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Proxy Voting Policies and Procedures
Director Nominees in Contested Elections: Votes in a contested election of directors or a “vote no” campaign must be evaluated on a case-by-case basis, considering the following factors: (1) long-term financial performance of the issuer relative to its industry; management's track record; (2) background to the proxy contest; qualifications of director nominees (both slates); (3) evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and (4) stock ownership positions.
Director Nominees in Uncontested Elections:
A. | Vote for proposals involving routine matters such as election of directors, provided that at least two-thirds of the directors would be independent, as determined by the Proxy Voting Service, and affiliated or inside nominees do not serve on any key board committee, defined as the Audit, Compensation, Nominating and/or Governance Committees. |
B. | Vote against nominees that are CFOs of the subject company. Generally, vote against nominees that the Proxy Voting Service has identified as not acting in the best interests of shareholders (e.g., due to over-boarding, risk management failures, a lack of diversity, etc.). Vote against nominees that have attended less than 75% of board and committee meetings, unless a reasonable cause (e.g., health or family emergency) for the absence is noted and accepted by the Proxy Voting Service and the board. Vote against affiliated or inside nominees who serve on a key board committee (as defined above). Vote against affiliated and inside nominees if less than two-thirds of the board would be independent. Vote against Governance or Nominating Committee members if both the following are true: a) there is no independent lead or presiding director; and b) the position of CEO and chairman are not held by separate individuals. Generally, vote against Audit Committee members if auditor ratification is not proposed, except in cases involving: (i) investment company board members, who are not required to submit auditor ratification for shareholder approval pursuant to Investment Company Act of 1940 rules; or (ii) any other issuer that is not required by law or regulation to submit a proposal ratifying the auditor selection. Vote against Compensation Committee members when Loomis Sayles or the Proxy Voting Service recommends a vote against the issuer's "say on pay" advisory vote. |
C. | Generally, vote against all members of a board committee and not just the chairman or a representative thereof in situations where the Proxy Voting Service finds that the board committee has not acted in the best interests of shareholders. |
D. | Vote as recommended by the Proxy Voting Service when directors are being elected as a slate and not individually. |
E. | When electing directors for any foreign-domiciled issuer to which the Proxy Voting Service believes it is reasonable to apply U.S. governance standards, we generally will vote in accordance with our policies set forth in (A) through (D) above. When electing directors for any other foreign-domiciled issuers, a recommendation of the Proxy Voting Service will generally be followed in lieu of the above stipulations. |
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Proxy Voting Policies and Procedures
Independent Audit, Compensation and Nominating and/or Governance Committees: Vote for proposals requesting that the board Audit, Compensation and/or Nominating and/or Governance Committees include independent directors exclusively.
Independent Board Chairman:
A. | Vote for shareholder proposals that generally request the board to adopt a policy requiring its chairman to be "independent" (based on some reasonable definition of that term) with respect to any issuer whose enterprise value is, according to the Proxy Voting Service, greater than or equal to $10 billion. |
B. | Vote such proposals on a case-by-case basis when, according to the Proxy Voting Service, the issuer's enterprise value is less than $10 billion. |
Multiple Directorships: Generally vote against a director nominee who serves as an executive officer of any public company while serving on more than two total public company boards and any other director nominee who serves on more than five total public company boards, unless a convincing argument to vote for that nominee is made by the Proxy Voting Service, in which case, the recommendation of the Proxy Voting Service will generally be followed.
Staggered Director Elections: Vote against proposals to classify or stagger the board.
Stock Ownership Requirements: Generally vote against shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director, or to remain on the board.
Term of Office: Vote against shareholder proposals to limit the tenure of outside directors.
C. | Ratification of Auditor |
Loomis Sayles generally supports proposals for the selection or ratification of independent auditors, subject to consideration of various factors such as independence and reasonableness of fees.
A. | Generally vote for proposals to ratify auditors. |
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B. | Vote against ratification of auditors where an auditor has a financial interest in or association with the company, and is therefore not independent; or there is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position. |
C. | In general, if non-audit fees amount to 35% or more of total fees paid to a company's auditor we will vote against ratification and against the members of the Audit Committee unless the Proxy Voting Service states that the fees were disclosed and determined to be reasonable. In such instances, the recommendation of the Proxy Voting service will generally be followed. |
D. | Vote against ratification of auditors and vote against members of the Audit Committee where it is known that an auditor has negotiated an alternative dispute resolution procedure. |
E. | Vote against ratification of auditors if the Proxy Voting Service indicates that a vote for the ratification of auditors it is not in the best long term interest of shareholders. |
D. | Remuneration and Benefits |
Loomis Sayles believes that an issuer’s compensation and benefit plans must be designed to ensure the alignment of executives’ and employees’ interests with those of its shareholders.
401(k) Employee Benefit Plans: Vote for proposals to implement a 401(k) savings plan for employees.
Compensation Plans: Proposals with respect to compensation plans generally will be voted as recommended by the Proxy Voting Service.
Compensation in the Event of a Change in Control: Votes on proposals regarding executive compensation in the event of a change in control of the issuer will be considered on a case-by-case basis.
Director Related Compensation: Vote proposals relating to director compensation, that are required by and comply with applicable laws (domestic or foreign) or listing requirements governing the issuer, as recommended by the Proxy Voting Service.
Employee Stock Ownership Plans (“ESOPs”): Vote for proposals that request shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number of shares allocated to the ESOP is "excessive" (i.e., generally greater than five percent of outstanding shares), in which case the recommendation of the Proxy Voting Service will generally be followed.
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Proxy Voting Policies and Procedures
Golden Coffins: Review on a case-by-case basis all proposals relating to the obligation of an issuer to provide remuneration or awards to survivors of executives payable upon such executive's death.
Golden and Tin Parachutes:
A. | Vote for shareholder proposals to have golden (top management) and tin (all employees) parachutes submitted for shareholder ratification. |
B. | Review on a case-by-case basis all proposals to ratify or cancel golden or tin parachutes. |
OBRA (Omnibus Budget Reconciliation Act)-Related Compensation Proposals:
A. | Vote for proposals to amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of OBRA. |
B. | Vote for amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA. |
C. | Vote for cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of OBRA. |
D. | Votes on amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of Section 162(m) should be evaluated on a case-by-case basis. |
Shareholder Proposals to Limit Executive and Director Pay Including Executive Compensation Advisory Resolutions (“Say on Pay”):
A. | Generally, vote for shareholder proposals that seek additional disclosure of executive and director pay information. |
B. | Review on a case-by-case basis (1) all shareholder proposals that seek to limit executive and director pay and (2) all advisory resolutions on executive pay other than shareholder resolutions to permit such advisory resolutions. |
C. | Vote against proposals to link all executive or director variable compensation to performance goals. |
D. | Vote for an annual review of executive compensation. |
E. | Non-binding advisory votes on executive compensation will be voted as recommended by the Proxy Voting Service. |
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F. | For foreign domiciled issuers where a non-binding advisory vote on executive compensation is proposed concurrently with a binding vote on executive compensation, and the recommendation of the Proxy Voting Service is the same for each proposal, a vote will be entered as recommended by the Proxy Voting Service. |
Share Retention by Executives: Generally vote against shareholder proposals requiring executives to retain shares of the issuer for fixed periods unless the board and the Proxy Voting Service recommend voting in favor of the proposal.
Stock Option Plans: A recommendation of the Proxy Voting Service will generally be followed using the following as a guide:
A. | Vote against stock option plans which expressly permit repricing of underwater options. |
B. | Vote against proposals to make all stock options performance based. |
C. | Vote against stock option plans that could result in an earnings dilution above the company specific cap considered by the Proxy Voting Service. |
D. | Vote for proposals that request expensing of stock options. |
E. | Capital Structure Management Issues |
Adjustments to Par Value of Common Stock: Vote for management proposals to reduce the par value of common stock.
Authority to Issue Shares: Vote for proposals by boards to authorize the issuance of shares (with or without preemptive rights) to the extent the size of the proposed issuance in proportion to the issuer’s issued ordinary share capital is consistent with industry standards and the recommendations of the issuer’s board and the Proxy Voting Service are in agreement. Proposals that do not meet the above criteria will be reviewed on a case-by-case basis.
Blank Check Preferred Authorization:
A. | Vote for proposals to create blank check preferred stock in cases when the company expressly states that the stock will not be used as a takeover defense or carry superior voting rights, and expressly states conversion, dividend, distribution and other rights. |
B. | Vote for shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification. |
C. | Review proposals to increase the number of authorized blank check preferred shares on a case-by-case basis. |
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Proxy Voting Policies and Procedures
Common Stock Authorization: Vote against proposed common stock authorizations that increase the existing authorization by more than 100% unless a clear need for the excess shares is presented by the company. A recommendation of the Proxy Voting Service will generally be followed.
Greenshoe Options (French issuers only): Vote for proposals by boards of French issuers in favor of greenshoe options that grant the issuer the flexibility to increase an over-subscribed securities issuance by up to 15% so long as such increase takes place on the same terms and within thirty days of the initial issuance, provided that the recommendation of the issuer’s board and the Proxy Voting Service are in agreement. Proposals that do not meet the above criteria will be reviewed on a case-by-case basis.
Reverse Stock Splits: Vote for management proposals to reduce the number of outstanding shares available through a reverse stock split.
Share Cancellation Programs: Vote for management proposals to reduce share capital by means of cancelling outstanding shares held in the issuer's treasury.
Share Repurchase Programs: Vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.
Stock Distributions, Splits and Dividends: Generally vote for management proposals to increase common share authorization, provided that the increase in authorized shares following the split or dividend is not greater than 100 percent of existing authorized shares.
F. | Mergers, Asset Sales and Other Special Transactions |
Proposals for transactions that have the potential to affect the ownership interests and/or voting rights of the issuer’s shareholders, such as mergers, asset sales and corporate or debt restructuring, will be considered on a case-by-case basis, based on (1) whether the best economic result is being created for shareholders, (2) what changes in corporate governance will occur, (3) what impact they will have on shareholder rights, (4) whether the proposed transaction has strategic merit for the issuer, and (5) other factors as noted in each section below, if any.
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Proxy Voting Policies and Procedures
Asset Sales: Votes on asset sales will be determined on a case-by-case basis after considering the impact on the balance sheet/working capital, value received for the asset, and potential elimination of inefficiencies.
Conversion of Debt Instruments: Votes on the conversion of debt instruments will be considered on a case-by-case basis after the recommendation of the relevant Loomis Sayles equity or fixed income analyst is obtained.
Corporate Restructuring: Votes on corporate restructuring proposals, including minority squeeze-outs, leveraged buyouts, spin-offs, liquidations, and asset sales will be considered on a case-by-case basis.
Debt Restructurings: Review on a case-by-case basis proposals to increase common and/or preferred shares and to issue shares as part of a debt-restructuring plan. Consider the following issues:
A. | Dilution - How much will ownership interest of existing shareholders be reduced, and how extreme will dilution to any future earnings be? |
B. | Change in Control - Will the transaction result in a change in control of the company? |
C. | Bankruptcy – Loomis Sayles’ Corporate Actions Department is responsible for consents related to bankruptcies and debt holder consents related to restructurings. |
D. | Potential Conflicts of Interest – For example, clients may own securities at different levels of the capital structure; in such cases, Loomis Sayles will exercise voting or consent rights for each such client based on that client’s best interests, which may differ from the interests of other clients. |
Delisting a Security: Proposals to delist a security from an exchange will be evaluated on a case-by-case basis.
Fair Price Provisions:
A. | Vote for fair price proposals, as long as the shareholder vote requirement embedded in the provision is no more than a majority of disinterested shares. |
B. | Vote for shareholder proposals to lower the shareholder vote requirement in existing fair price provisions. |
Greenmail:
A. | Vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments. |
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B. | Review anti-greenmail proposals on a case-by-case basis when they are bundled with other charter or bylaw amendments. |
C. | Vote for proposals to eliminate an anti-greenmail bylaw if the recommendations of management and the Proxy Voting Service are in agreement. If they are not in agreement, review and vote such proposals on a case-by-case basis. |
Liquidations: Proposals on liquidations will be voted on a case-by-case basis after reviewing relevant factors including but not necessarily limited to management's efforts to pursue other alternatives, the appraisal value of assets, and the compensation plan for executives managing the liquidation.
Mergers and Acquisitions: Votes on mergers and acquisitions should be considered on a case-by-case basis, generally taking into account relevant factors including but not necessarily limited to: anticipated financial and operating benefits; offer price (cost vs. premium); prospects of the combined companies; how the deal was negotiated; golden parachutes; financial benefits to current management; and changes in corporate governance and their impact on shareholder rights.
Poison Pills:
A. | Vote for shareholder proposals that ask a company to submit its poison pill for shareholder ratification. |
B. | Review on a case-by-case basis shareholder proposals to redeem a company's poison pill. |
C. | Review on a case-by-case basis management proposals to ratify a poison pill. |
Reincorporation Provisions: Proposals to change a company's domicile will be evaluated on a case-by-case basis.
Right to Adjourn: Vote for the right to adjourn in conjunction with a vote for a merger or acquisition or other proposal, and vote against the right to adjourn in conjunction with a vote against a merger or acquisition or other proposal.
Spin-offs: Votes on spin-offs will be considered on a case-by-case basis depending on relevant factors including but not necessarily limited to the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives.
Tender Offer Defenses: Proposals concerning tender offer defenses will be evaluated on a case-by-case basis.
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G. | Shareholder Rights |
Loomis Sayles believes that issuers have a fundamental obligation to protect the rights of their shareholders. Pursuant to its fiduciary duty to vote shares in the best interests of its clients, Loomis Sayles considers proposals relating to shareholder rights based on whether and how they affect and protect those rights.
Appraisal Rights: Vote for proposals to restore, or provide shareholders with, rights of appraisal.
Bundled Proposals: Review on a case-by-case basis bundled or "conditioned" proxy proposals. In the case of items that are conditioned upon each other, examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests, vote against the proposals. If the combined effect is positive, support such proposals.
Confidential Voting: Vote for shareholder proposals that request corporations to adopt confidential voting, use independent tabulators and use independent inspectors of election as long as the proposals include clauses for proxy contests as follows: in the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents do not agree, the confidential voting policy is waived. Vote for management proposals to adopt confidential voting.
Counting Abstentions: Votes on proposals regarding counting abstentions when calculating vote proposal outcomes will be considered on a case-by-case basis.
Cumulative Voting: Vote for proposals to permit cumulative voting, except where the issuer already has in place a policy of majority voting.
Equal Access: Vote for shareholder proposals that would allow significant company shareholders equal access to management's proxy material in order to evaluate and propose voting recommendations on proxy proposals and director nominees, and in order to nominate their own candidates to the board.
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Proxy Voting Policies and Procedures
Exclusive Forum Provisions: Vote against proposals mandating an exclusive forum for any shareholder lawsuits. Vote against the members of the issuer’s Governance Committee in the event of a proposal mandating an exclusive forum without shareholder approval.
Independent Proxy: Vote for proposals to elect an independent proxy to serve as a voting proxy at shareholder meetings.
Majority Voting: Vote for proposals to permit majority rather than plurality or cumulative voting for the election of directors/trustees.
Preemptive Rights: Votes with respect to preemptive rights generally will be voted as recommended by the Proxy Voting Service subject to the Common Stock Authorization requirements above.
Proxy Access: A recommendation of the Proxy Voting Service will generally be followed with regard to proposals intended to grant shareholders the right to place nominees for director on the issuer’s proxy ballot (“Proxy Access”). Vote for such proposals when they require the nominating shareholder(s) to hold, in aggregate, at least 3% of the voting shares of the issuer for at least three years, and be allowed to nominate up to 25% of the nominees. All other proposals relating to Proxy Access will be reviewed on a case-by-case basis.
Shareholder Ability to Alter the Size of the Board:
A. | Vote for proposals that seek to fix the size of the board. |
B. | Vote against proposals that give management the ability to alter the size of the board without shareholder approval. |
Shareholder Ability to Remove Directors:
A. | Vote against proposals that provide that directors may be removed only for cause. |
B. | Vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies. |
C. | Vote for proposals to restore shareholder ability to remove directors with or without cause and proposals that permit shareholders to elect directors to fill board vacancies. |
Shareholder Advisory Committees: Proposals to establish a shareholder advisory committee will be reviewed on a case-by-case basis.
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Proxy Voting Policies and Procedures
Shareholder Rights Regarding Special Meetings:
A. | Vote for proposals that set a threshold of 10% of the outstanding voting stock as a minimum percentage allowable to call a special meeting of shareholders. Vote against proposals that increase or decrease the threshold from 10%. |
B. | Vote against proposals to restrict or prohibit shareholder ability to call special meetings. |
Supermajority Shareholder Voting Requirements: Vote for all proposals to replace supermajority shareholder voting requirements with simple majority shareholder voting requirements, subject to applicable laws and regulations. Vote against management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments.
Unequal Voting Rights:
A. | Vote against dual class exchange offers and dual class recapitalizations. |
B. | Vote on a case-by-case basis on proposals to eliminate an existing dual class voting structure. |
Written Consent: Vote for proposals regarding the right to act by written consent when the Proxy Voting Service recommends a vote for the proposal. Proposals regarding the right to act by written consent where the Proxy Voting Service recommends a vote against will be sent to the Proxy Committee for determination. Generally vote against proposals to restrict or prohibit shareholder ability to take action by written consent.
H. | Environmental and Social Matters |
Loomis Sayles has a fiduciary duty to act in the best interests of its clients.
Loomis Sayles believes good corporate governance, including those practices that address ESG Matters, is essential to the effective management of a company’s financial, litigation and reputation risk, the maximization of its long-term economic performance and sustainability, and the protection of its shareholders’ best interests, including the maximization of shareholder value.
Proposals on environmental and social matters cover a wide range of issues, including environmental and energy practices and their impacts, labor matters, diversity and human rights. These proposals may be voted as recommended by the Proxy Voting Service or may, in the determination of the Proxy Committee, be reviewed on a case-by-case basis if the Proxy Committee believes that a particular proposal (i) could have a material impact on an industry or the growth and sustainability of an issuer; (ii) is appropriate for the issuer and the cost to implement would not be excessive; (iii) is appropriate for the issuer in light of various factors such as reputational damage or litigation risk; or (iv) is otherwise appropriate for the issuer.
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Loomis Sayles will consider whether such proposals are likely to enhance the value of the client’s investments after taking into account the costs involved, pursuant to its fiduciary duty to its clients.
Climate Reporting: Generally vote for proposals requesting the issuer produce a report, at reasonable expense, on the issuer’s climate policies. A recommendation against such proposals by the Proxy Voting Service will be considered by the Proxy Committee.
Workplace Diversity Reporting: Generally vote for proposals requesting the issuer produce a report, at reasonable expense, on the issuer’s workforce diversity or equity policies and/or performance. A recommendation against such proposals by the Proxy Voting Service will be considered by the Proxy Committee.
I. | General Corporate Governance |
Loomis Sayles has a fiduciary duty to its clients with regard to proxy voting matters, including routine proposals that do not present controversial issues. The impact of proxy proposals on its clients’ rights as shareholders must be evaluated along with their potential economic benefits.
Changing Corporate Name: Vote for management proposals to change the corporate name.
Charitable and Political Contributions and Lobbying Expenditures: Votes on proposals regarding charitable contributions, political contributions, and lobbying expenditures, should be considered on a case-by-case basis. Proposals of UK issuers concerning political contributions will be voted for if the issuer states that (a) it does not intend to make any political donations or incur any expenditures in respect to any political party in the EU; and (b) the proposal is submitted to ensure that the issuer does not inadvertently breach the Political Parties, Elections and Referendums Act 2000 and sections 366 and 367 of the Companies Act 2006.
Delivery of Electronic Proxy Materials: Vote for proposals to allow electronic delivery of proxy materials to shareholders.
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Proxy Voting Policies and Procedures
Disclosure of Prior Government Service: Review on a case-by-case basis all proposals to disclose a list of employees previously employed in a governmental capacity.
Financial Statements: Generally, proposals to accept and/or approve the delivery of audited financial statements shall be voted as recommended by the Proxy Voting Service. In certain non-US jurisdictions where local regulations and/or market practices do not require the release of audited financial statements in advance of custodian vote deadlines (e.g., Korea), and the Proxy Voting Service has not identified any issues with the company’s past financial statements or the audit procedures used, then Loomis Sayles shall vote for such proposals.
Non-Material Miscellaneous Bookkeeping Proposals: A recommendation of the Proxy Voting Service will generally be followed regarding miscellaneous bookkeeping proposals of a non-material nature.
Ratification of Board and/or Management Acts: Generally, proposals concerning the ratification or approval of the acts of the board of directors and/or management of the issuer for the past fiscal year shall be voted as recommended by the Proxy Voting Service.
Reimbursement of Proxy Contest Defenses: Generally, proposals concerning all proxy contest defense cost reimbursements should be evaluated on a case-by-case basis.
Reimbursement of Proxy Solicitation Expenses: Proposals to provide reimbursement for dissidents waging a proxy contest should be evaluated on a case-by-case basis.
State Takeover Statutes: Review on a case-by-case basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freeze out provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions).
Technical Amendments to By-Laws: A recommendation of the Proxy Voting Service will generally be followed regarding technical or housekeeping amendments to by-laws or articles designed to bring the by-laws or articles into line with current regulations and/or laws.
Transaction of Other Business: Vote against proposals asking for authority to transact open-ended other business without any information provided by the issuer at the time of voting.
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Proxy Voting Policies and Procedures
Transition Manager Ballots: Any ballot received by Loomis Sayles for a security that was held for a client by a Transition Manager prior to Loomis Sayles’ management of the client’s holdings will be considered on a case-by case basis by the Proxy Committee (without the input of any Loomis Sayles analyst or portfolio manager) if such security is no longer held in the client’s account with Loomis Sayles.
J. | Investment Company Matters |
Election of Investment Company Trustees: Vote for nominees who oversee fewer than 60 investment company portfolios. Vote against nominees who oversee 60 or more investment company portfolios that invest in substantially different asset classes (e.g., if the applicable portfolios include both fixed income funds and equity funds). Vote on a case-by-case basis for or against nominees who oversee 60 or more investment company portfolios that invest in substantially similar asset classes (e.g., if the applicable portfolios include only fixed income funds or only equity funds). These policies will be followed with respect to funds advised by Loomis Sayles and its affiliates, as well as funds for which Loomis Sayles acts as subadviser and other third parties.
Mutual Fund Distribution Agreements: Votes on mutual fund distribution agreements should be evaluated on a case-by-case basis.
Investment Company Fundamental Investment Restrictions: Votes on amendments to an investment company’s fundamental investment restrictions should be evaluated on a case-by-case basis.
Investment Company Investment Advisory Agreements: Votes on investment company investment advisory agreements should be evaluated on a case-by-case basis.
Loomis, Sayles & Company, L.P. March 2022 All Rights Reserved
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Sustainable Investing& Proxy Voting Policy The information contained herein is the property of Lord Abbett and may not copied, or disclosed in whole or in part, stored in a retrieval system or transmitted in any form or by any means (electronic, mechanical, reprographic, recording or otherwise) outside of Lord Abbett without prior written permission. November 2022 |
2 Contents Sustainable Investment Policy 3 • Introduction 3 • Governance of Sustainable Investing 4 • Fundamental Analysis 4 • Engagement 7 • Corporate Governance Guidelines 8 Proxy Voting Policies 9 • ESG 10 • Board of Directors 12 • Compensation and Benefits 15 • Shareholder Rights 17 • Corporate Matters 19 • Auditors 20 Proxy Voting Process 21 • Overview 21 • Retention and Oversight of Proxy Service Provider 22 • Conflicts of Interest 22 • Securities Lending 23 • Shareholder Resolutions 23 • Share Blocking 23 Appendix – Targeted Exclusions Policy 24 SUSTAINABLE INVESTMENT POLICY PROXY VOTING PROCESS PROXY VOTING POLICIES |
3 Sustainable Investment Policy Introduction We consider ESG factors as part of the mosaic of information our investment professionals develop for each security. To maximize our potential, it is essential to provide our investors with access to powerful tools and extensive data. We consider ESG factors as key inputs to fundamental research. Our investment professionals assess relevant ESG considerations during their due diligence and monitoring processes. SUSTAINABLE INVESTMENT POLICY |
4 Engaging with issuers is instrumental to our ability to develop a full understanding of each issuer’s business and strategy. We leverage various forms of engagement, including proxy voting, with the intent of understanding, exchanging and potentially influencing perspectives on ESG issues. Lord Abbett is a signatory to the United Nations-supported Principles for Responsible Investment (“PRI”). We support the PRI framework in its efforts to understand the investment implications of ESG factors and to support its signatories in incorporating these factors into investment and ownership decisions. Our definition of responsible investing is aligned with the PRI definition, which is a strategy and practice to incorporate environmental, social and governance factors in investment decisions and active ownership. In accordance with PRI guidance, we seek to use responsible investment to enhance returns and better manage risks. The intent of our Sustainable Investing & Proxy Voting Policy is to express our commitment to sustainable investing, and to outline the key pillars of our approach across all investment strategies. Our sustainable investing policy informs our investment process across all asset classes, and we regularly review it to ensure its continued relevance. Governance of Sustainable Investing Three governance committees guide and oversee our approach to sustainable investing: • Executive Committee: One of two committees focused on leading and operating the firm, this committee provides leadership, strategic direction, and risk management for the organization. • Investment Committee: One of two committees focused on leading and operating the firm, this committee is responsible for fostering a culture of trust and respect that empowers the investment teams to operate at peak performance. • Global Corporate Citizenship Committee: This committee is responsible for serving as steward of our mission and ensuring our ongoing progress against our sustainability commitments. Fundamental Analysis We strive to deliver superior long-term, risk-adjusted investment performance across all strategies. We recognize that ESG Risk factors can materially impact the investment performance of our portfolios. Our investment teams therefore focus on the ESG Risk factors that are material to each issuer, industry, and asset class, incorporating the analysis into our investment process to fully assess both the risk and return potential of all investments. We utilize quantitative risk scoring to facilitate comparative analysis across issuers, industries, and sectors. We incorporate ESG risk scores, controversy scores, and other relevant ESG-related metrics offered by third-party research providers to supplement our own analysis. In segments of the market where external ESG research is not available or does not cover the full spectrum of our holdings, we have developed proprietary scoring methodologies that are unique to each asset class. We expect our approach to the integration of ESG factors to continue to evolve, as the availability of data improves, and as research and regulatory standards and expectations regarding ESG issues continue to evolve. SUSTAINABLE INVESTMENT POLICY |
5 Corporate Issuers When analyzing the risk/reward profile of a security, we evaluate the impact of ESG risks on the operations and enterprise value and, as with any other risks, seek to ensure that the expected return for every investment is commensurate with those risks. Our investment professionals rely on information from various sources, including companies’ filings, financial press, third party ESG research providers, and rating agencies. ESG scores - proprietary and provided by third party vendors - supplement our qualitative analysis. ESG risk and controversy scores are available to our investment professionals in our proprietary systems. Additionally, regular engagement with management teams provides important insights into the material ESG risk factors impacting the company as well as a better understanding of the initiatives in place to mitigate these risks. Sovereign Issuers Our ESG integration approach for sovereign issuers is also rooted in three process pillars: quantitative data, qualitative analysis, and engagement. ESG considerations are important factors in our analysis of global macro drivers and country selection, and company and sector fundamentals. When evaluating environmental risks, we assess each country’s vulnerability to climate change and other natural disaster risks, evaluating each country’s performance on various metrics, including natural resource management, emissions, and energy use. When assessing social factors, we consider measures of human development, inequality, employment, health, and education/literacy. In our assessments of governance, we focus our review on government effectiveness, political stability/rule of law, human rights, and the economic environment. Our systematic sovereign risk assessments include quantitative analysis based on ESG data derived from third-party providers. We review historical trends and assess countries on a relative basis against regional and rating peers. These country level data are also available in our proprietary systems and can be easily accessed by our investment professionals. We also incorporate a qualitative analysis of ESG factors to complement the data, leveraging our country visits and interactions with government officials, academic institutions, regulators, and multilateral organizations. Municipal Issuers We developed a proprietary framework for municipal bonds that assigns ESG ratings to all credits held in portfolios we manage. In developing this framework, we created a series of matrices for municipal bond sectors. Each matrix includes a list of ESG subfactors we deem material and a series of metrics that we track and evaluate. These factors and metrics are weighted based on materiality and ultimately enable us to assign an ESG rating to each credit. In addition to providing ESG ratings, we evaluate use of proceeds for each credit. The ESG proprietary ratings are captured in our proprietary platform and are easily accessible by analysts and portfolio managers. As for the other asset classes, our municipal bond ESG integration process is fluid, as research regarding ESG issues continues to evolve. Many of the metrics that we consider to be meaningful today may change in the future. Therefore, we continue to study ESG trends in each sector and review our framework periodically to ensure efficacy. SUSTAINABLE INVESTMENT POLICY |
6 Securitized Products We developed a proprietary framework to incorporate ESG Risk considerations in our analysis of securitized products that focuses on governance and long-term sustainability. It is our long-term objective to invest in securities that will outperform on the basis of our variant perception on ESG factors and in turn lower the cost of capital for the issuers of those securities. The process begins with an assessment of key parties related to the securitization, including servicer, sponsor, manager, and originator. Our approach includes asset-class adjustments to account for inherent risks that are generally difficult to mitigate. We then perform security-level evaluation based on various factors we deem material and assess market structure by examining the economic drivers of each sector, including major stakeholder behavior, regulatory frameworks, and liquidity in end markets. Our process relies on the analysis of deal disclosure documents and filings, ratings agency reports, collateral datafiles, relevant historical asset performance, financial statements and presentations of related parties, pricing and commentary on related securities, web searches, and engagement with company management. Collectively, the insights derived from these steps enable us to assign an ESG score to each issue. Our ESG scoring system is accessible in our proprietary system and available to our investment professionals. SUSTAINABLE INVESTMENT POLICY |
7 Engagement Engaging with issuers allows us to develop a more complete understanding of each company’s business and offers us the potential to positively influence long-term performance. In addition to corporate governance, we focus on topics that we believe represent the greatest sources of risk and opportunity facing our global society: Methods of Engagement We utilize several methods of engagement in our stewardship efforts. The teams involved, frequency of engagements, and method used vary by situation, but typically depend on the issuer, issue, and asset class. Company Meetings: Our investment teams routinely engage directly with issuers on ESG issues as part of our approach to fundamental research. These meetings enable us to develop a more complete understanding of each company’s business and offer us the potential to positively influence long-term performance. We approach engagement as a strategic partnership with the issuers in which we invest. Collective Engagements: When significant ESG risk has been identified, Lord Abbett may work in collaboration with external organizations, such as Climate Action 100+, to join like-minded investors in our engagement efforts. Collective engagement presents an opportunity to address key issues, while enabling us to contribute to and learn from industry peers. Written Communications: In instances when direct engagement is difficult or impractical, we may utilize more formal written communications to convey our polices or solicit information. Examples include letters to company management, governmental or regulatory bodies, and surveys/ questionnaires. Published Works: We value transparency and, therefore, seek to publish policies and other content that signal our positions on key ESG-related topics. These published works augment our direct engagement efforts and allow issuers and other stakeholders to gain an understanding of our values, priorities, and beliefs. Proxy Voting: Proxy Voting is a key lever of engagement that is used to influence company behavior and signal our positions on key ESG issues. We evaluate and vote proxies in a manner that we believe maximizes shareholder value. SUSTAINABLE INVESTMENT POLICY CLIMATE Identifying investment opportunities associated with capital directed toward green innovation EQUITY Closing opportunity gaps for underrepresented communities for a more inclusive future WELL-BEING Empowering well-being – physical, mental, and financial – for a more resilient future |
8 Corporate Governance Guidelines Lord Abbett believes that companies with strong corporate governance practices are better positioned for long-term success. Our fundamental research process includes a thorough review of companies’ corporate governance profiles, with a particular focus on the following key factors: • Board of Directors – An independent and effective board is critical to the long-term success of a company. Particular attention is paid to board composition, including: – Director Independence – Diversity (background, gender, race, etc.) – Board Committees and Leadership • Auditors – Independent auditors are necessary to ensure the accuracy and legitimacy of company finances and disclosures. • Capital Structure – Companies should make capital structure and allocation decisions with the goal of maximizing long-term shareholder value. • Compensation – Executive compensation, including equity-based incentive plans, should be aligned with long-term shareholder objectives. • Shareholder Rights – Shareholders should be afforded certain rights, including the right to vote, to ensure accountability of the board to the company’s shareholders. • Disclosure – Companies should provide robust public disclosure of relevant information to allow for a full and accurate assessment of a security by investors. As an active manager, we incorporate each of these corporate governance factors into our fundamental analysis and decision-making process. SUSTAINABLE INVESTMENT POLICY |
9 Proxy Voting Policies Under the Investment Advisers Act of 1940, as amended, Lord Abbett acts as a fiduciary that owes each of its clients’ duties of care and loyalty with respect to all services undertaken on the client’s behalf, including proxy voting. This means that Lord Abbett is required to vote proxies in the manner we believe is in the best interests of each client, including the Lord Abbett Funds (the “Funds”) and their shareholders. We take a long-term perspective in investing our clients’ assets and employ the same perspective in voting proxies on their behalf. We view proxy voting as a critical form of engagement that enables us to use our voice together with other levers of engagement. We evaluate all proxy proposals based on their potential effects on our clients’ long-term interests and incorporate vote themes into our ongoing engagement with issuers. Set forth below are the policies and principles we apply in voting proxies on our clients’ behalf. PROXY VOTING POLICIES |
10 Environmental, Social, and Governance Proposals related to ESG issues are typically initiated by shareholders and urge a company to disclose certain information or change certain business practices. Lord Abbett will vote for proposals related to ESG factors when they seek useful disclosure or positive changes to business practices. We will vote against proposals we believe are unduly burdensome or which impose substantial costs on a company with no countervailing economic benefits to the company’s shareholders. We evaluate proposals involving ESG matters on a case-by-case basis, understanding that ESG risks and opportunities can vary greatly by industry and company. As a result, we may vote similar proposals differently based on the particular facts and circumstances. When voting, we will pay particular attention to highly controversial issues, as well as instances where management has failed repeatedly to take corrective actions with respect to an issue. Climate The transition to a low carbon economy is driving innovation and creating investment opportunities. As investors, it is critical to understand and participate in this significant transformation. We incorporate risks associated with the transition to a low carbon economy into our investment process and we expect companies to publicly disclose material data related to climate-related risk and opportunities. Lord Abbett is a supporter of Climate Action 100+, and expects that companies in carbon intensive industries will: • Implement a governance framework which clearly articulates board oversight of climate-related risks and opportunities; • Disclose a climate transition plan or roadmap for reduced emissions; • Maintain disclosure in-line with the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”). Lord Abbett generally supports proposals that request a company to disclose greenhouse gas (“GHG”) emissions or report on plans to reduce GHG emissions. In evaluating climate-related proposals, Lord Abbett will consider current company disclosures, a company’s current GHG emissions, GHG reduction goals, peer disclosures, engagement, and other climate-related commitments, among other factors. Equity Lord Abbett believes that closing opportunity gaps for underrepresented communities is imperative for a more inclusive future and that equity is vital to a company’s long-term, sustainable success. We believe that organizations with inclusive environments that embrace diversity of thought, background, and experience are more successful in attracting and retaining talent and generally more agile, more impactful, and better prepared for the future. Given the importance of equity, Lord Abbett expects and encourages companies to have clear diversity policies, and strategies in place to facilitate equity within their organizations, as well as a broader range of stakeholders, including local and global communities. Further, we expect companies to disclose milestones and targets towards achieving stated equity goals. Lord Abbett also expects the disclosure of workforce diversity metrics consistent with data provided on EEO-1 reports or other comparable data and will generally support proposals requesting additional disclosure of these metrics and initiatives. PROXY VOTING POLICIES |
11 In evaluating proposals related to equity, Lord Abbett will consider current company disclosures, peer disclosures, engagement, and diversity-related controversies, among other factors. Well-Being Lord Abbett believes that companies that nurture holistic well-being – physical, emotional, and financial – as a mindset, skill, and measurable strategic priority will build more resilient workforces and contribute to a more resilient global economy. Lord Abbett expects companies to implement strategies and governance structures to facilitate well-being and disclose existing initiatives. Further, we expect companies to comply with the principles laid out by the U.N. Global Compact Initiative, specifically the principles focused on labor and human rights. We agree with the principles that businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining, the elimination of all forms of forced labor, the effective abolition of child labor, and the elimination of discrimination in respect of employment. We believe it is important to consider the human rights impact that companies can have on employees, such as through the supply chain and their communities, as well as consumers, through the products and services they provide. We call on companies to support and respect the protection of internationally proclaimed human rights and ensure that they are not complicit in human rights abuses. Lord Abbett encourages companies to articulate the role that they play in fostering well-being within their local and global communities. Lord Abbett generally supports proposals requesting disclosure of well-being initiatives and related metrics. In evaluating proposals related to well-being, Lord Abbett will consider current company disclosures, peer disclosures, engagement, and related controversies, among other factors. Governance Investors have benefited from positive changes in corporate governance that have benefited businesses and their investors. Shareholders have taken a more active role in businesses in which they invest, and companies are communicating more with shareholders. Companies are more conscious of the need for transparent and effective governance policies, and there has been progress in the evolution of these practices. Companies with a principled governance approach are better positioned to manage the risks inherent in business and recognize opportunities that help deliver sustainable growth and returns for shareholders. In formulating our approach, we are focused on best practice standards for governance, including industry approved frameworks and guidance. Given the materiality of certain ESG factors, we also believe that companies should formalize oversight of ESG within their governance structures through board and management level committees. Political Contributions and Lobbying Lord Abbett recognizes that companies may participate in the political process within legal limits to help shape public policy consistent with a company’s strategy. While Lord Abbett understands the rationale for involvement in certain political activities, we encourage transparency in the process; specifically, Lord Abbett encourages the disclosure of oversight mechanisms related to political contributions and lobbying processes, including board oversight. Lord Abbett will vote proposals related to political contributions and lobbying on a case-by-case basis. In evaluating these proposals, Lord Abbett will consider the current level of disclosure, previous litigation or controversies, peer disclosure, engagement, and reputational or legal risks, among other factors. PROXY VOTING POLICIES |
12 Board of Directors The board of directors of a company oversees all aspects of the company’s business. Companies and, under certain circumstances, their shareholders, may nominate directors for election by shareholders. In evaluating the candidacy of a director nominee to the board of a company, Lord Abbett will consider the following factors, among others: (1) the nominee’s experience, qualifications, attributes, and skills, as disclosed in the company’s proxy statement; (2) the composition of the board and its committees, including overall board diversity; (3) whether the nominee is independent of the company’s management; (4) the nominee’s board meeting attendance; (5) the nominee’s history of representing shareholder interests on the company’s board or other boards; (6) the total number of outside board positions held by the nominee; PROXY VOTING POLICIES |
13 (7) the nominee’s investment in the company; (8) the company’s long-term performance relative to a relevant market index; and (9) takeover activity. Lord Abbett may withhold votes for some or all a company’s director nominees on a case-by-case basis. In evaluating an audit, nominating, governance, or compensation committee nominee’s candidacy, Lord Abbett will consider additional factors related to the specific committee’s oversight responsibilities. Board Diversity A growing body of research has found that companies that are more diverse and inclusive outperform companies that are less diverse and inclusive. Lord Abbett believes companies that draw from a larger pool of perspectives and attract, inspire, and retain talent from many backgrounds are better positioned for long-term, sustainable success. We believe that a company’s tone on diversity and inclusion must be set at the top, including maintaining a diverse board of directors. Diversity is multidimensional, and we therefore encourage companies to consider a wide range of diverse characteristics within board composition, including age, disabilities, education, ethnicity, gender, military service, race, religion, sexual orientation, and skills, among other factors. Lord Abbett has vocalized support for NASDAQ’s board diversity expectations for listed companies and believes strongly in the ideals expressed in this proposal which calls for increased board diversity and disclosure. Lord Abbett believes that companies with diverse boards are better positioned for long-term success, and therefore expects companies to maintain a minimum of 30% gender diversity. We expect companies below this threshold to articulate a plan to increase board diversity, and we will actively partner with companies through engagement to encourage and monitor progress. In 2022, Lord Abbett will consider voting against the nominating committee or other relevant directors if there is less than 20% women on the board and no plan has been articulated to diversify board membership. Lord Abbett will also consider voting against the nominating committee or other relevant directors at companies in the Russell 3000, S&P 1500, and FTSE 100 indices if there is no apparent racial or ethnic diversity represented on the board. We expect these minimum thresholds to increase as market standards evolve. Lord Abbett values transparency and believes that reliable and consistent information is necessary to make informed investment decisions. To that end, Lord Abbett strongly encourages the reporting of board diversity statistics, including gender, racial and ethnic diversity, in a clear, consistent manner, and will treat a lack of disclosure as an indication that the board lacks diversity. Lord Abbett will consider our engagement history with a company and vote on a case-by-case basis if we have engaged with the company and they have articulated a plan for advancing diversity on the board. Overboarding Lord Abbett believes that director nominees should be able to dedicate sufficient time to each of the companies they represent to fully execute their board oversight responsibilities. We believe it is important that directors not be “overboarded” to avoid excessive time-commitments and provide consistent contributions to all boards on which they serve. Lord Abbett may vote against directors that we deem to be “overboarded” and will consider voting against director nominees if they sit on more than five public company boards, or if they are an active CEO who sits on more than two outside public company boards. Governance Structure Lord Abbett may consider a vote against certain director nominees at companies that have material governance shortcomings, including those implemented at the time of IPO, with no articulated plan to sunset certain provisions. Governance shortcomings may include dual-class voting structures, classified boards, or supermajority vote standards, among others. PROXY VOTING POLICIES |
14PROXY VOTING POLICIES Environmental and Social Factors Lord Abbett believes that boards should maintain oversight over material ESG risks and opportunities, and clearly articulate board and committee responsibilities related to ESG matters. Lord Abbett may consider a vote against certain director nominees at companies that have material ESG shortcomings, such as unmitigated risks associated with climate, equity or well-being that the company and its board have failed to address. Majority Voting Lord Abbett generally favors a majority voting standard, under which director nominees are elected by an affirmative majority of the votes cast. We will generally support proposals that seek to adopt a majority voting standard. Board Classification Lord Abbett generally believes that directors should be elected annually, and we will typically support proposals that seek to remove a classified board structure. When evaluating board classification proposals, Lord Abbett may consider the following factors, among others: (1) the company’s long-term strategic plan; (2) the extent to which continuity of leadership is necessary to advance that plan; and (3) the need to guard against takeover attempts. Board Independence Lord Abbett believes that independent board oversight is key to a company’s long-term performance and believes that a majority of board members should be independent from the company. While company boards may apply different standards in assessing director independence, including any applicable standards prescribed by stock exchanges and federal securities laws, a director generally is determined to qualify as independent if the director is not employed by the company and does not have any material relationship with the company (either directly or indirectly) based on all relevant facts and circumstances. Material relationships can include employment, business, and familial relationships, among others. Lord Abbett may vote against non-independent board nominees if their election would cause a majority of board members to be non-independent. Independent Board Chair Proponents of proposals to require independent board chair seek to enhance board accountability and mitigate a company’s risk-taking behavior by requiring that the role of the chair of the company’s board of directors be filled by an independent director. Lord Abbett votes on a case-by-case basis on proposals that call for an independent board chair, and will consider a variety of factors, including whether we believe that a company’s governance structure promotes independent oversight through other means, such as a lead director, a board composed of a majority of independent directors, or independent board committees. In evaluating independent chair proposals, we will focus on the presence of a lead director, who is an independent director designated by a board with a non-independent chair to serve as the primary liaison between company management and the independent directors and act as the independent directors’ spokesperson. |
PROXY VOTING POLICIES 15 Compensation and Benefits Lord Abbett pays particular attention to the nature and amount of compensation paid by a company to its executive officers and other employees. Lord Abbett believes that because a company has exclusive knowledge of material information not available to shareholders regarding its business, financial condition, and prospects, the company itself usually is in the best position to make decisions about compensation and benefits. However, we believe that companies should provide detailed disclosure of their compensation practices to allow investors to properly analyze the effectiveness and appropriateness of the company’s compensation structure. Lord Abbett reviews all issues related to compensation on a case-by-case basis and may oppose management if: (1) we deem a company’s compensation to be excessive or inconsistent with that of its peers; (2) we believe a company’s compensation measures do not foster a long-term focus among its executive officers and other employees; or (3) we believe a company has not met performance expectations, among other reasons. PROXY VOTING POLICIES |
16 Advisory Vote on Executive Compensation “Say-on-pay” proposals give shareholders a nonbinding vote on executive compensation and serve as a means of conveying to company management shareholder concerns, if any, about executive compensation. Lord Abbett generally prefers that say-on-pay proposals occur on an annual basis. Lord Abbett will evaluate say-on-pay proposals on a case-by-case basis and will consider a variety of factors in evaluating compensation, including whether we believe that compensation has been excessive or not properly aligned with long-term performance and whether we engaged with the company and they provided more detailed information regarding compensation. Equity Compensation Plans Equity compensation plans are intended to reward an executive’s performance through various stock-based incentives and should be designed to align an executive’s compensation with a company’s long-term performance. Lord Abbett will vote on equity compensation plans on a case-by-case basis, and in evaluating such proposals we will consider the following factors, among others: (1) whether or to what extent the plan has any potential to dilute the voting power or economic interests of other shareholders; (2) the rate at which a company grants equity awards; (3) the features of the plan and costs associated with it; (4) whether the plan allows for repricing or replacement of underwater stock options; and (5) quantitative data regarding compensation ranges by industry and company size. We carefully scrutinize any proposed repricing or replacement of underwater stock options, taking into consideration the stock’s volatility, management’s rationale for the repricing or replacement, the new exercise price, and any other factors we deem relevant. Clawback Provisions Lord Abbett believes that clawback provisions generally encourage executive accountability and help mitigate a company’s risk-taking behavior. Lord Abbett will evaluate proposals to require clawback provisions on a case-by-case basis and will consider a variety of factors, including concerns about the amount of compensation paid to the executive, the executive’s or the company’s performance, or accounting irregularities, among other factors we may deem relevant. Tax Gross-ups Lord Abbett generally favors adoption of anti-tax gross-up policies, which limit payments by a company to an executive intended to reimburse some or all the executive’s tax liability with respect to compensation, perquisites, and other benefits. Severance Agreements Severance or so-called “golden parachute” payments are sometimes made to departing executives after termination or upon a company’s change in control. Lord Abbett will consider severance arrangements in the overall evaluation of executive compensation and may scrutinize cases in which benefits are especially lucrative, granted despite the executive’s or the company’s poor performance, or materially amended shortly before a triggering event. Employee Stock Purchase Plans Employee stock purchase plans permit employees to purchase company stock at discounted prices and, under certain circumstances, receive favorable tax treatment when they sell the stock. Lord Abbett will vote on a case-by-case basis on employee stock purchase plans and will consider overall incentive structure and any dilutive effects of such plans, among other factors. PROXY VOTING POLICIES |
17 Shareholder Rights Proxy access Proxy access proposals advocate permitting shareholders to have their nominees for election to a company’s board of directors included in the company’s proxy statement in opposition to the company’s own nominees. Proxy access initiatives enable shareholders to nominate their own directors without incurring the often substantial cost of preparing and mailing a proxy statement, making it less expensive and easier for shareholders to challenge incumbent directors. Lord Abbett votes on a case-by-case basis and will evaluate proposals that seek to allow proxy access based on the merits of each situation. Similarly, Lord Abbett evaluates proposals that seek to amend the terms of an already existing proxy access by-law (“proxy fix-it” proposals) on a case-by-case basis, but may vote against these proposals if the existing proxy access by-law has reasonable provisions already in place. Shareholder Rights Plans Shareholder rights plans or “poison pills” are a mechanism of defending a company against takeover efforts. Poison pills allow current shareholders to purchase stock at discounted prices or redeem shares at a premium after a takeover, effectively making the company more expensive and less attractive to potential acquirers. Lord Abbett believes that poison pills can serve to entrench management and discourage takeover offers that may be attractive to shareholders; therefore, we generally vote in favor of proposals to eliminate poison pills and proposals to require that companies submit poison pills for shareholder ratification. In evaluating a poison pill proposal, however, Lord Abbett may consider the following factors, among others: (1) the duration of the poison pill; (2) whether we believe the poison pill facilitates a legitimate business strategy that is likely to enhance shareholder value; (3) our level of confidence in management; (4) whether we believe the poison pill will be used to force potential acquirers to negotiate with management and assure a degree of stability that will support good long-range corporate goals; and (5) the need to guard against takeover attempts. PROXY VOTING POLICIES |
18 Rights to Call Special Shareholder Meetings Lord Abbett typically supports the right to call special shareholder meetings and in evaluating such a proposal, will consider the following factors, among others: (1) the stock ownership threshold required to call a special meeting; (2) the purposes for which shareholders may call a special meeting; (3) whether the company’s annual meetings offer an adequate forum in which shareholders may raise their concerns; and (4) the anticipated economic impact on the company of having to hold additional shareholder meetings. Similarly, Lord Abbett evaluates proposals that seek to amend the terms of an existing special meeting right on a case-by-case basis but may vote against these proposals if the existing provision has a reasonable threshold in place. Rights to Act by Written Consent Lord Abbett votes on a case-by-case basis on proposals requesting rights to act by written consent, though may vote against these proposals if the company already grants shareholders the right to call special shareholder meetings at a reasonable threshold. Supermajority Vote Requirements A proposal that is subject to a supermajority vote must receive the support of more than a simple majority to pass. Supermajority vote requirements can have the effect of entrenching management by making it more difficult to effect change for a company and its corporate governance practices. Lord Abbett typically supports shareholders’ ability to approve or reject proposals based on a simple majority vote and will generally vote for proposals to remove supermajority vote requirements and against proposals to add them. Cumulative Voting Under cumulative or proportional voting, each shareholder is allotted a number of votes equal to the number of shares owned multiplied by the number of directors to be elected. This voting regime strengthens the voting power of minority shareholders because it enables shareholders to cast multiple votes for a single nominee. Lord Abbett believes that a shareholder, or group of shareholders, using this technique to elect a director may seek to have the director represent a narrow special interest rather than the interests of the broader shareholder population. Accordingly, we generally vote against cumulative voting proposals. Confidential Voting Lord Abbett believes that confidential voting allows shareholders to vote without fear of retribution or coercion based on their views. Thus, we generally support proposals that seek to preserve shareholders’ anonymity. Reimbursing Proxy Solicitation Expenses Lord Abbett votes on a case-by-case basis on shareholder proposals to require a company to reimburse reasonable expenses incurred by one or more shareholders in a successful proxy contest. Transacting Other Business Lord Abbett believes that proposals to allow shareholders to transact other business at a meeting may deprive other shareholders of sufficient time and information needed to carefully evaluate the relevant business issues and determine how to vote with respect to them. Therefore, Lord Abbett typically votes against such proposals. PROXY VOTING POLICIES |
19 Corporate Matters Charter Amendments A company’s charter documents, which may consist of articles of incorporation or a declaration of trust and bylaws, govern the company’s organizational matters and affairs. Lord Abbett considers proposals related to charter amendments on a case-by-case basis to the extent they are not explicitly covered by these guidelines. Capital Structure A company may propose amendments to its charter documents to change the number of authorized shares or create new classes of stock. Lord Abbett will generally support proposals to increase a company’s number of authorized shares if the company has articulated a clear and reasonable purpose for the increase (for example, to facilitate a stock split, merger, acquisition, or restructuring). However, we generally oppose share capital increases that would have a substantial dilutive effect. Lord Abbett generally believes that all shares should have equal voting rights at publicly traded companies. Lord Abbett will generally oppose proposals to create a new class of stock with superior voting rights and will typically vote for proposals to eliminate a dual or multi-class voting structure. Reincorporation We generally follow management’s recommendation regarding proposals to change a company’s state of incorporation, although we consider the rationale for the reincorporation and the financial, legal, and corporate governance implications of the reincorporation. We will vote against reincorporation proposals that we believe contravene shareholders’ interests. Mergers, Acquisitions, and Restructurings Lord Abbett views the decision to approve or reject a potential merger, acquisition, or restructuring as being equivalent to an investment decision. In evaluating such a proposal, Lord Abbett may consider the following factors, among others: (1) the anticipated financial and operating benefits; (2) the offer price; (3) the prospects of the resulting company; and (4) any expected changes in corporate governance and their impact on shareholder rights. PROXY VOTING POLICIES |
20 Auditors Auditors are responsible for examining, correcting, and verifying the accuracy of a company’s financial statements. Lord Abbett believes that companies normally are in the best position to select their auditors. However, we will evaluate such proposals on a case-by-case basis and may consider any concerns about impaired independence, accounting irregularities, controversies, or failure of the auditors to act in shareholders’ best economic interests, among other factors we may deem relevant. PROXY VOTING POLICIES |
21 Proxy Voting Process Overview Lord Abbett encourages good governance and sustainable corporate practices, which contribute to long-term shareholder value creation. We have procedures in place to ensure that we vote proxies in the best interest of our clients. With this in mind, Lord Abbett has implemented the following approach to the proxy voting process: • The Investment Stewardship team provides recommendations on how to vote the security to the relevant investment team, who makes the final decision for their client portfolios, absent a material conflict of interest, as described in the “Conflicts of Interest” section included herein. From time to time, there may be votes that the Investment Stewardship team deems appropriate to address with members of the Executive and Investment Committees, and/or other leadership teams. The votes are presented, and a final decision is agreed upon. Once a voting decision has been made, the Investment Stewardship team is responsible for submitting Lord Abbett’s vote. • When multiple investment teams manage one or more portfolios that hold the same voting security, the investment team that manages the largest number of shares of the security will be considered to have the dominant position. The investment team with the dominant position, in consultation with the Investment Stewardship team, will be responsible for determining a vote recommendation. Lord Abbett will vote all shares on behalf of all clients in accordance with that vote recommendation. • For institutional accounts managed on behalf of multi-employer pension or benefit plans, commonly referred to as “Taft- Hartley plans,” Lord Abbett generally will vote proxies in accordance with the Proxy Voting Guidelines issued by the AFL-CIO, rather than the guidelines described above, unless instructed otherwise by the client. These guidelines provide a general summary of Lord Abbett’s views on specific proxy voting items. We reserve the flexibility to vote in a manner contrary to our general views on particular issues if we believe doing so is in the best interests of our clients, including the Funds, and their shareholders. Many different types of proposals may arise under the broad categories discussed in this document, and we will vote on proposals concerning issues not expressly covered by these guidelines based on the specific factors that we believe are relevant. PROXY VOTING PROCESS |
22 Retention and Oversight of Proxy Service Provider Lord Abbett has retained an independent third party service provider (the “Proxy Service Provider”) to analyze proxy issues and recommend how to vote on those issues, and to provide assistance in the administration of the proxy process, including maintaining complete proxy voting records.1 While Lord Abbett takes into consideration the information and recommendations of the Proxy Service Provider, Lord Abbett votes all proxies based on its own proxy voting policies, including Lord Abbett’s conclusions regarding the best interests of the Funds, their shareholders, and other advisory clients, rather than basing decisions solely on the Proxy Service Provider’s recommendations. Lord Abbett monitors the Proxy Service Provider’s capacity, competency, and conflicts of interest to ensure that we continue to vote proxies in the best interests of our clients. As part of its ongoing oversight of the Proxy Service Provider, Lord Abbett performs periodic due diligence on the Proxy Service Provider. The topics included in these due diligence reviews include ESG thought leadership, conflicts of interest, methodologies for developing vote recommendations, changes in leadership and control, and resources, among other things. Conflicts of Interest Conflicts of interest may arise in the proxy voting process. Such a conflict may exist, for example, when a client’s account holds shares of a company that also is a client of Lord Abbett. We have adopted safeguards designed to ensure that conflicts of interest are identified and resolved in our clients’ best interests rather than our own. These safeguards include, but are not limited to, the following: • Lord Abbett has implemented special voting measures with respect to companies for which one of the Funds’ independent directors/trustees also serves on the board of directors or is a nominee for election to the board of directors. If a Fund owns stock in such a company, Lord Abbett will notify the Funds’ ESG & Proxy Committee2 (the “Committee”) and seek voting instructions from the Committee only in those situations where Lord Abbett proposes not to follow the Proxy Service Provider’s recommendations. In these instances, if applicable, the independent director/trustee will abstain from any discussions and voting by the Committee regarding the company. • Lord Abbett also has implemented special voting measures with respect to any company (including any subsidiary of a company or retirement plan sponsored by a company) that has a significant business relationship with Lord Abbett. For this purpose, a “significant business relationship” means: (1) a broker dealer firm that is responsible for one percent or more of the Funds’ total dollar amount of shares sold for the last 12 months; (2) a firm that is a sponsor firm with respect to Lord Abbett’s separately managed account business; (3) an institutional account client that has an investment management agreement with Lord Abbett; (4) an institutional investor that, to Lord Abbett’s knowledge, holds at least $5 million in shares of the Funds; and/ or (5) a retirement plan client that, to Lord Abbett’s knowledge, has at least $5 million invested in the Funds. 1 Lord Abbett currently retains Institutional Shareholder Services Inc. as the Proxy Service Provider. 2 The Boards of Directors and Trustees of the Funds have delegated oversight of proxy voting to An ESG & Proxy Committee comprised solely of independent directors or trustees. The ESG & Proxy Committee is responsible for, among other things: (1) monitoring Lord Abbett’s actions in voting securities owned by the related Fund; (2) evaluating Lord Abbett’s policies in voting securities; and (3) meeting with Lord Abbett to review the policies in voting securities, the sources of information used in determining how to vote on particular matters, and the procedures used to determine the votes in any situation where there may be a conflict of interest. PROXY VOTING PROCESS |
23 If a Fund owns shares of a company with a significant business relationship (“Conflict Shares”) and Lord Abbett seeks to vote contrary to the Proxy Service Provider’s recommendation, then Lord Abbett will notify the Funds’ Committee and seek voting instructions from the Committee members. Lord Abbett generally will vote conflict proposals pursuant to the instruction of a majority of Committee members but will act on the instructions of less than a majority if less than a majority respond and all responding members approve Lord Abbett’s proposed votes on such proposals. In all other cases, Lord Abbett will vote the Funds’ Conflict Shares in accordance with the Proxy Service Provider’s recommendation. Lord Abbett periodically will report to the Funds’ Committee its record of voting the Funds’ Conflict Shares in accordance with Committee member instructions. Absent explicit instructions from an institutional account client to resolve proxy voting conflicts in a different manner, Lord Abbett will vote each such client’s Conflict Shares in the manner it votes the Funds’ Conflict Shares. To serve the best interests of a client that holds a given voting security, Lord Abbett generally will vote proxies without regard to other clients’ investments in different classes or types of securities or instruments of the same issuer that are not entitled to vote. Accordingly, when the voting security in one account is from an issuer whose other, non-voting securities or instruments are held in a second account in a different strategy, Lord Abbett will vote without input from members of the investment team acting on behalf of the second account. Securities Lending The Funds may occasionally participate in a securities lending program. In circumstances where shares are on loan, the voting rights of those shares are transferred to the borrower. Lord Abbett will generally attempt to recall all securities that are on loan prior to the meeting record date, so that the relevant Fund will be entitled to vote those shares. However, Lord Abbett may be unable to recall shares or may choose not to recall shares for several reasons, including if Lord Abbett does not receive timely notice of a meeting, or if Lord Abbett deems the opportunity for a Fund to generate securities lending revenue to outweigh the benefits of voting at a specific meeting. Shareholder Resolutions Lord Abbett may consider sponsoring or co-sponsoring a shareholder resolution to address an issue of concern if engagement and proxy voting are deemed to be ineffective. Share Blocking Certain foreign countries impose share blocking restrictions that would prohibit Lord Abbett from trading a company’s stock during a specified period before the company’s shareholder meeting. Lord Abbett believes that in these situations, the benefit of maintaining liquidity during the share blocking period outweighs the benefit of exercising our right to vote. Therefore, it is Lord Abbett’s general policy to not vote securities in cases where share blocking restrictions apply. PROXY VOTING PROCESS |
24 Appendix A Targeted Exclusion Policy Controversial Weapons Lord Abbett is committed to supporting and upholding conventions that seek to ban the production of controversial weapons. We, therefore, seek to exclude investment in private or public companies involved in the production, development, sale, or maintenance of controversial weapons. For purposes of this policy, we define controversial weapons as: • ANTI-PERSONNEL MINES – as defined by the 1997 Ottawa (Mine Ban) Treaty. • BIOLOGICAL AND CHEMICAL WEAPONS – as defined by the 1972 Biological and Toxin Weapons Convention and the 1993 Chemical Weapons Convention. • CLUSTER WEAPONS – as defined by the 2008 Convention on Cluster Munitions. Lord Abbett has entered into an agreement with an independent, global, third-party ESG research firm to identify companies deemed to be involved in the production, development sale or maintenance of controversial weapons. This information is supplemented with our own proprietary fundamental research. Implementation of our Controversial Weapons Exclusion Policy is managed by our internal Compliance Department. Investments in companies deemed to be involved in controversial weapons are restricted on a pre-trade basis. This Controversial Weapons Exclusion Policy is applicable to all Lord Abbett Funds and portfolios domiciled in Europe. Other Exclusions Lord Abbett is committed to complying with all economic sanctions issued by the United States Department of the Treasury – Office of Foreign Assets Control (“OFAC”). Investments in individuals, groups or entities deemed Specially Designated Nationals and, thus, subject to OFAC’s sanction lists, are restricted on a pre-trade basis. These restrictions are applied across all investment portfolios and products. |
Proxy Voting
Adopted: | October 5, 2004 |
Amended: | January 3, 2011 |
January 22, 2009 |
November 16, 2006 |
Purpose:
The purpose of this policy is to ensure that proxies are voted in accordance with our clients’ best interests or instructions.
Background:
Rule 275.206(4)-6 of the IAA governs proxy voting by investment advisers. It requires advisers to implement written policies and procedures governing how they will vote proxies. It also requires them to disclose to clients, when requested, how they voted certain proxies and to furnish clients with a copy of the advisers’ policies and procedures on proxy voting.
Given the nature of fixed income securities, Merganser is rarely required to vote on proxies. The typical exception occurs with respect to Money Market Mutual Funds that are used as sweep vehicles by custodian banks.
Policy:
1. | Merganser will notify the client giving them the opportunity to vote or instruct us how to vote their proxy. When a client specifically instructs Merganser not to contact them about proxies, Merganser will vote the proxy in a manner which in its best judgment reflects the client’s best economic interest and fosters good corporate governance. In other routine matters, Merganser will vote in accordance with management recommendations. |
2. | If requested, Merganser will offer our clients advice on proxy questions. |
3. | Merganser will facilitate the proxy voting so as to minimize the administrative burden on our clients. Therefore, for all Money Market Mutual Fund proxies, Compliance will vote to approve all auditor, director and legal counsel requests. If Merganser wishes to deviate from this, they shall notify the client of such decision. |
4. | If our contract assigns responsibility for proxy voting to the client or the client otherwise indicates a desire to vote proxies, Merganser will forward all materials to them for voting. |
Procedure(s):
1. | Receipt of proxies |
Upon receipt of proxy material, Merganser will date stamp the ballot and forward all material to the Compliance Department (“Compliance”). Compliance will log the receipt on the Proxy Voting Control sheet.
2. | Review of proxy material |
a. | For all Money Market Mutual Fund proxies, Compliance will vote to approve all auditor, director and legal counsel requests. |
b. | For all non-Money Market Mutual Fund proxies, Compliance will review the material. Compliance will then forward a copy of the ballot and other material to the Portfolio Manager (“PM”) for review and recommendation(s). Compliance will offer the PM recommendations where appropriate. |
c. | PM will review the proxy material and make recommendation(s) for the client’s consideration. The proxy material will be returned to Compliance with the PM’s recommendations. |
3. | Advising clients of our recommendations |
a. | Unless Merganser has been directed by the client to vote all proxies without consulting them, the Relationship Manager (“RM”) will contact the client with our recommendations on voting the proxy and offer the opportunity to instruct us otherwise. |
b. | RM will contact the client by telephone, letter or e-mail to review the proxy material and determine how the client wants to vote. If requested, the RM, with assistance of the PM, may offer advice to the client. A letter with copies of proxy documents will be sent to the client upon request. |
4. | Voting proxies |
a. | The proxy material will be returned to Compliance for voting. The vote will be made via Internet whenever possible. |
5. | Recordkeeping |
a. | A record of the vote, PM recommendations and any client correspondence will be filed in the client legal folder. |
b. | Compliance will update the Proxy Voting Control sheet. |
MASSACHUSETTS FINANCIAL SERVICES COMPANY
PROXY VOTING POLICIES AND PROCEDURES
January 1, 2024
At MFS Investment Management, our core purpose is to create value responsibly. In serving the long-term economic interests of our clients, we rely on deep fundamental research, risk awareness, engagement, and effective stewardship to generate long-term risk-adjusted returns for our clients. A core component of this approach is our proxy voting activity. We believe that robust ownership practices can help protect and enhance long-term shareholder value. Such ownership practices include diligently exercising our voting rights as well as engaging with our issuers on a variety of proxy voting topics. We recognize that environmental, social and governance (“ESG”) issues may impact the long-term value of an investment, and, therefore, we consider ESG issues in light of our fiduciary obligation to vote proxies in what we believe to be in the best long- term economic interest of our clients.
MFS Investment Management and its subsidiaries that perform discretionary investment activities (collectively, “MFS”) have adopted these proxy voting policies and procedures (“MFS Proxy Voting Policies and Procedures”) with respect to securities owned by the clients for which MFS serves as investment adviser and has been delegated the power to vote proxies on behalf of such clients. These clients include pooled investment vehicles sponsored by MFS (an “MFS Fund” or collectively, the “MFS Funds”).
Our approach to proxy voting is guided by the overall principle that proxy voting decisions are made in what MFS believes to be the best long-term economic interests of our clients for which we have been delegated with the authority to vote on their behalf, and not in the interests of any other party, including company management or in MFS' corporate interests, including interests such as the distribution of MFS Fund shares and institutional client relationships. These Proxy Voting Policies and Procedures include voting guidelines that govern how MFS generally will vote on specific matters as well as how we monitor potential material conflicts of interest on the part of MFS that could arise in connection with the voting of proxies on behalf of MFS’ clients.
Our approach to proxy voting is guided by the following additional principles:
1. | Consistency in application of the policy across multiple client portfolios: While MFS generally votes consistently on the same matter when securities of an issuer are held by multiple client portfolios, MFS may vote differently on the matter for different client portfolios under certain circumstances. For example, we may vote differently for a client portfolio if we have received explicit voting instructions to vote differently from such client for its own account. Likewise, MFS may vote differently if the portfolio management team responsible for a particular client account believes that a different voting instruction is in the best long-term economic interest of such account. |
2. | Consistency in application of policy across shareholder meetings in most instances: As a general matter, MFS seeks to vote consistently on similar proxy proposals across all shareholder meetings. However, as many proxy proposals (e.g., mergers, acquisitions, and shareholder proposals) are analyzed on a case-by-case basis in light of the relevant facts and circumstances of the issuer and proposal MFS may vote similar proposals differently at different shareholder meetings. In addition, MFS also reserves the right to override the guidelines with respect to a particular proxy proposal when such an override is, in MFS’ best judgment, consistent with the overall principle of voting proxies in the best long-term economic interests of MFS’ clients. |
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3. | Consideration of company specific context and informed by engagement: As noted above MFS will seek to consider a company’s specific context in determining its voting decision. Where there are significant, complex or unusual voting items we may seek to engage with a company before making the vote to further inform our decision. Where sufficient progress has not been made on a particular issue of engagement, MFS may determine a vote against management may be warranted to reflect our concerns and influence for change in the best long-term economic interests of our clients for which MFS has been delegated with the authority to vote on their behalf. |
4. | Clear decisions to best support issuer processes and decision making: To best support improved issuer decision making we strive to generally provide clear decisions by voting either For or Against each item. We may however vote to Abstain in certain situations if we believe a vote either For or Against may produce a result not in the best long-term economic interests of our clients. |
5. | Transparency in approach and implementation: In addition to the publication of the MFS Proxy Voting Policies and Procedures on our website, we are open to communicating our vote intention with companies, including ahead of the annual meeting. We may do this proactively where we wish to make our view or corresponding rationale clearly known to the company. Our voting data is reported to clients upon request and publicly on a quarterly and annual basis on our website (under Proxy Voting Records & Reports). For more information about reporting on our proxy voting activities, please refer to Section F below. |
A. VOTING GUIDELINES
The following guidelines govern how MFS will generally vote on specific matters presented for shareholder vote. These guidelines are not exhaustive, and MFS may vote on matters not identified below. In such circumstances, MFS will be governed by its general policy to vote in what MFS believes to be in the best long-term economic interest of its clients.
These guidelines are written to apply to the markets and companies where MFS has significant assets invested. There will be markets and companies, such as controlled companies and smaller markets, where local governance practices are taken into consideration and exceptions may need to be applied that are not explicitly stated below. There are also markets and companies where transparency and related data limit the ability to apply these guidelines.
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Board structure and performance
MFS generally supports the election and/or discharge of directors proposed by the board in uncontested or non-contentious elections, unless concerns have been identified, such as in relation to:
Director independence
MFS believes that good governance is enabled by a board with at least a simple majority of directors who are “independent” (as determined by MFS in its sole discretion)1 of management, the company and each other. MFS may not support the non-independent nominees, or other relevant director (e.g., chair of the board or the chair of the nominating committee), where insufficient independence is identified and determined to be a risk to the board’s and/or company’s effectiveness.
As a general matter we will not support a nominee to a board if, as a result of such nominee being elected to the board, the board will consist of less than a simple majority of members who are “independent.” However, there are also governance structures and markets where we may accept lower levels of independence, such as companies required to have non-shareholder representatives on the board, controlled companies, and companies in certain markets. In these circumstances we generally expect the board to be at least one-third independent or at least half of shareholder representatives to be independent, and as a general matter we will not support the nominee to the board if as a result of such nominee’s elections these expectations are not met. In certain circumstances, we may not support another relevant director’s election. For example, in Japan, we will generally not support the most senior director where the board is not comprised of at least one-third independent directors.
MFS also believes good governance is enabled by a board whose key committees, in particular audit, nominating and compensation/remuneration, consist entirely of “independent” directors. For Canada and US companies, MFS generally votes against any non-independent nominee that would cause any of the audit, compensation, nominating committee to not be fully independent. For Australia, Benelux, Ireland, New Zealand, Switzerland, and UK companies MFS generally votes against any non-independent nominee that would cause the audit or compensation/remuneration committee to not be fully independent. For Korea companies MFS generally votes against any non-independent nominee that would cause the audit committee to not be fully independent. In other markets MFS generally votes against non-independent nominees or other relevant director if a majority of committee members or the chair of the audit committee are not independent. However, there are also governance structures (e.g., controlled companies or boards with non-shareholder representatives) and markets where we may accept lower levels of independence for these key committees.
In general, MFS believes that good governance is enabled by a board with at least a simple majority of directors who are independent and whose key committees consist entirely of independent directors. While there are currently markets where we accept lower levels of independence, we expect to expand these independence guidelines to all markets over time.
1 MFS’ determination of “independence” may be different than that of the company, the exchange on which the company is listed, or of a third party (e.g., proxy advisory firm).
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Tenure in leadership roles
For a board with a lead independent director whose overall tenure on the board equals or exceeds twenty (20) years, we will generally engage with the company to encourage refreshment of that role, and we may vote against the long tenured lead director if progress on refreshment is not made or being considered by the company’s board or we identify other concerns that suggest more immediate refreshment is necessary.
Overboarding
All directors on a board should have sufficient time and attention to fulfil their duties and play their part in achieving effective oversight, both in normal and exceptional circumstances.
MFS may also vote against any director if we deem such nominee to have board roles or outside time commitments that we believe would impair their ability to dedicate sufficient time and attention to their director role.
As a general guideline, MFS will generally vote against a director’s election if they:
● | Are not a CEO or executive chair of a public company, but serve on more than four (4) public company boards in total at US companies and more than five (5) public boards for companies in other non-US markets. |
● | Are a CEO or executive chair of a public company, and serve on more than two (2) public company boards in total at US companies and two (2) outside public company boards for companies in non-US markets. In these cases, MFS would only apply a vote against at the meetings of the companies where the director is non-executive. |
MFS may consider exceptions to this guideline if: (i) the company has disclosed the director's plans to step down from the number of public company boards exceeding the above limits, as applicable, within a reasonable time; or (ii) the director exceeds the permitted number of public company board seats solely due to either his/her board service on an affiliated company (e.g., a subsidiary), or service on more than one investment company within the same investment company complex (as defined by applicable law), or iii) after engagement we believe the director’s ability to dedicate sufficient time and attention is not impaired by the external roles.
Diversity
MFS believes that a well-balanced board with diverse perspectives is a foundation for sound corporate governance, and this is best spread across the board rather than concentrated in one or a few individuals. We take a holistic view on the dimensions of diversity that can lead to diversity of perspectives and stronger oversight and governance.
Gender diversity is one such dimension and where good disclosure and data enables a specific expectation and voting guideline.
On gender representation specifically MFS wishes to see companies in all markets achieve a consistent minimum representation of women of at least a third of the board, and we are likely to increase our voting guideline towards this over time.
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Currently, where data is available, MFS will generally vote against the chair of the nominating and governance committee or other most relevant position at any company whose board is comprised of an insufficient representation of directors who are women for example:
● | At US, Canadian, European, Australian, New Zealand companies: less than 24%. |
● | At Brazilian companies: less than 20%. |
● | At Chinese, Hong Kong, Indian, Japanese, Korean, Chilean and Mexican companies: less than 10%. |
As a general matter, MFS will vote against the chair of the nominating committee of US S&P 500 companies and UK FTSE 100 companies that have failed to appoint at least one director who identifies as either an underrepresented ethnic/racial minority or a member of the LGBTQ+ community.
MFS may consider exceptions to these guidelines if we believe that the company is transitioning towards these goals or has provided clear and compelling reasons for why they have been unable to comply with these goals.
For other markets, we will engage on board diversity and may vote against the election of directors where we fail to see progress.
Board size
MFS believes that the size of the board can have an effect on the board's ability to function efficiently and effectively. While MFS may evaluate board size on a case-by-case basis, we will typically vote against the chair of the nominating and governance committee in instances where the size of the board is greater than sixteen (16) members. An exception to this is companies with requirements to have equal representation of employees on the board where we expect a maximum of twenty (20) members.
Other concerns related to director election:
MFS may also not support some or all nominees standing for election to a board if we determine:
● | There are concerns with a director or board regarding performance, governance or oversight, which may include: |
o | Clear failures in oversight or execution of duties, including the identification, management and reporting of material risks and information, at the company or any other at which the nominee has served. This may include climate-related risks; |
o | A failure by the director or board of the issuer to take action to eliminate shareholder unfriendly provisions in the issuer's charter documents; or |
o | Allowing the hedging and/or significant pledging of company shares by executives. |
● | A director attended less than 75% of the board and/or relevant committee meetings in the previous year without a valid reason stated in the proxy materials or other annual governance reporting; |
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● | The board or relevant committee has not adequately responded to an issue that received a significant vote against management from shareholders; |
● | The board has implemented a poison pill without shareholder approval since the last annual meeting and such poison pill is not on the subsequent shareholder meeting's agenda (including those related to net-operating loss carry-forwards); or |
● | In Japan, the company allocates a significant portion of its net assets to cross-shareholdings. |
Unless the concern is commonly accepted market practice, MFS may also not support some or all nominees standing for election to a nominating committee if we determine (in our sole discretion) that the chair of the board is not independent and there is no strong lead independent director role in place, or an executive director is a member of a key board committee.
Where individual directors are not presented for election in the year MFS may apply the same vote position to votes on the discharge of the director. Where the election of directors is bundled MFS may vote against the whole group if there is concern with an individual director and no other vote related to that director.
Proxy contests
From time to time, a shareholder may express alternative points of view in terms of a company's strategy, capital allocation, or other issues. Such a shareholder may also propose a slate of director nominees different than the slate of director nominees proposed by the company (a "Proxy Contest"). MFS will analyze Proxy Contests on a case-by-case basis, taking into consideration the track record and current recommended initiatives of both company management and the dissident shareholder(s). MFS will support the director nominee(s) that we believe is in the best, long-term economic interest of our clients.
Other items related to board accountability:
Majority voting for the election of directors: MFS generally supports reasonably crafted proposals calling for directors to be elected with an affirmative majority of votes cast and/or the elimination of the plurality standard for electing directors (including binding resolutions requesting that the board amend the company’s bylaws), provided the proposal includes a carve-out for a plurality voting standard when there are more director nominees than board seats (e.g., contested elections).
Declassified boards: MFS generally supports proposals to declassify a board (i.e., a board in which only a sub-set of board members is elected each year) for all issuers other than for certain closed-end investment companies. MFS generally opposes proposals to classify a board for issuers other than for certain closed-end investment companies.
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The right to call a special meeting or act by written consent:
MFS believes a threshold of 15-25% is an appropriate balance of shareholder and company interests, with thresholds of 15% for large and widely held companies.
MFS will generally support management proposals to establish these rights. MFS will generally support shareholder proposals to adjust existing rights to within the thresholds described above. MFS may also support shareholder proposals to establish the right at a threshold of 10% or above if no existing right exists and no right is presented for vote by management within the threshold range described above.
MFS will support shareholder proposals to establish the right to act by majority written consent if shareholders do not have the right to call a special meeting at the thresholds described above or lower.
Independent chairs: MFS believes boards should include some form of independent leadership responsible for amplifying the views of independent directors and setting meeting agendas, and this is often best positioned as an independent chair of the board or a lead independent director. We review the merits of a change in leadership structure on a case-by-case basis.
Proxy access: MFS believes that the ability of qualifying shareholders to nominate a certain number of directors on the company's proxy statement ("Proxy Access") may have corporate governance benefits. However, such potential benefits must be balanced by its potential misuse by shareholders. Therefore, MFS generally supports Proxy Access proposals at U.S. issuers that establish ownership criteria of 3% of the company held continuously for a period of 3 years. In our view, such qualifying shareholders should have the ability to nominate at least 2 directors. We also believe companies should be mindful of imposing any undue impediments within their bylaws that may render Proxy Access impractical, including re-submission thresholds for director nominees via Proxy Access.
Items related to shareholder rights:
Anti-takeover measures: In general, MFS votes against any measure that inhibits capital appreciation in a stock, including proposals that protect management from action by shareholders. These types of proposals take many forms, ranging from “poison pills” and “shark repellents” to super-majority requirements. While MFS may consider the adoption of a prospective “poison pill” or the continuation of an existing “poison pill" on a case-by-case basis, MFS generally votes against such anti-takeover devices.
MFS will consider any poison pills designed to protect a company’s net-operating loss carryforwards on a case-by-case basis, weighing the accounting and tax benefits of such a pill against the risk of deterring future acquisition candidates. MFS will also consider, on a case-by-case basis, proposals designed to prevent tenders which are disadvantageous to shareholders such as tenders at below market prices and tenders for substantially less than all shares of an issuer.
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MFS generally supports proposals that seek to remove governance structures that insulate management from shareholders. MFS generally votes for proposals to rescind existing “poison pills” and proposals that would require shareholder approval to adopt prospective “poison pills.”
Cumulative voting: MFS generally opposes proposals that seek to introduce cumulative voting and supports proposals that seek to eliminate cumulative voting. In either case, MFS will consider whether cumulative voting is likely to enhance the interests of MFS’ clients as minority shareholders.
One-share one-vote: As a general matter, MFS supports proportional alignment of voting rights with economic interest, and may not support a proposal that deviates from this approach. Where multiple share classes or other forms of disproportionate control are in place, we expect these to have sunset provisions of generally no longer than seven years after which the structure becomes single class one-share one-vote.
Reincorporation and reorganization proposals: When presented with a proposal to reincorporate a company under the laws of a different state, or to effect some other type of corporate reorganization, MFS considers the underlying purpose and ultimate effect of such a proposal in determining whether or not to support such a measure. MFS generally votes with management in regards to these types of proposals, however, if MFS believes the proposal is not in the best long-term economic interests of its clients, then MFS may vote against management (e.g., the intent or effect would be to create additional inappropriate impediments to possible acquisitions or takeovers).
Other business: MFS generally votes against "other business" proposals as the content of any such matter is not known at the time of our vote.
Items related to capitalization proposals, capital allocation and corporate actions:
Issuance of stock: There are many legitimate reasons for the issuance of stock. Nevertheless, as noted above under “Stock Plans,” when a stock option plan (either individually or when aggregated with other plans of the same company) would substantially dilute the existing equity (e.g., by more than approximately 10-15%), MFS generally votes against the plan.
MFS typically votes against proposals where management is asking for authorization to issue common or preferred stock with no reason stated (a “blank check”) because the unexplained authorization could work as a potential anti-takeover device. MFS may also vote against the authorization or issuance of common or preferred stock if MFS determines that the requested authorization is excessive or not warranted. MFS will consider the duration of the authority and the company’s history in using such authorities in making its decision.
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Repurchase programs: MFS generally supports proposals to institute share repurchase plans in which all shareholders have the opportunity to participate on an equal basis. Such plans may include a company acquiring its own shares on the open market, or a company making a tender offer to its own shareholders.
Mergers, acquisitions & other special transactions: MFS considers proposals with respect to mergers, acquisitions, sale of company assets, share and debt issuances and other transactions that have the potential to affect ownership interests on a case-by-case basis. When analyzing such proposals, we use a variety of materials and information, including our own internal research as well as the research of third-party service providers.
Independent Auditors
MFS generally supports the election of auditors but may determine to vote against the election of a statutory auditor and/or members of the audit committee in certain markets if MFS reasonably believes that the statutory auditor is not truly independent, sufficiently competent or there are concerns related to the auditor’s work or opinion. To inform this view, MFS may evaluate the use of non-audit services in voting decisions when the percentage of non-audit fees to total auditor fees exceeds 40%, in particular if recurring.
Executive Compensation
MFS believes that competitive compensation packages are necessary to attract, motivate and retain executives. We seek compensation plans that are geared towards durable long-term value creation and aligned with shareholder interests and experience, such as where we believe:
● | The plan is aligned with the company’s current strategic priorities with a focused set of clear, suitably ambitious and measurable performance conditions; |
o | Practices of concern may include an incentive plan without financial performance conditions, without a substantial majority weighting to quantitative metrics or that vests substantially below median performance. |
● | Meaningful portions of awards are paid in shares and based on long performance periods (e.g., at least three years); |
● | Awards and potential future awards, reflect the nature of the business, value created and the executive’s performance; |
o | Practices of concern may include large windfall gains or award increases without justification. |
● | Awards are fair, not detrimental to firm culture and reflect the policies approved by shareholders at previous meetings with appropriate use of discretion (positive and negative); and |
o | Practices of concern may include one-off awards without justification or robust performance conditions, equity awards repriced without shareholder approval, substantial executive or director share pledging, egregious perks or substantial internal pay imbalances. |
● | The calculation and justification for awards is sufficiently transparent for investors to appraise alignment with performance and future incentives. |
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MFS will analyze votes on executive compensation on a case-by-case basis. When analyzing compensation practices, MFS generally uses a two-step process. MFS first seeks to identify any compensation practices that are potentially of concern by using both internal research and the research of third-party service providers. Where such practices are identified, MFS will then analyze the compensation practices in light of relevant facts and circumstances. MFS will vote against an issuer's executive compensation practices if MFS determines that such practices are not geared towards durable long-term value creation and are misaligned with the best, long-term economic interest of our clients. When analyzing whether an issuer’s compensation practices are aligned with the best, long-term economic interest of our clients, MFS uses a variety of materials and information, including our own internal research and engagement with issuers as well as the research of third-party service providers.
MFS generally supports proposals to include an advisory shareholder vote on an issuer’s executive compensation practices on an annual basis.
MFS does not have formal voting guideline in regards to the inclusion of ESG incentives in a company’s compensation plan; however, where such incentives are included, we believe:
● | The incentives should be tied to issues that are financially material for the issuer in question. |
● | They should predominantly include quantitative or other externally verifiable outcomes rather than qualitative measures. |
● | The weighting of incentives should be appropriately balanced with other strategic priorities. |
We believe non-executive directors may be compensated in cash or stock but these should not be performance-based.
Stock Plans
MFS may oppose stock option programs and restricted stock plans if they:
● | Provide unduly generous compensation for officers, directors or employees, or could result in excessive dilution to other shareholders. As a general guideline, MFS votes against restricted stock, stock option, non-employee director, omnibus stock plans and any other stock plan if all such plans for a particular company involve potential excessive dilution (which we typically consider to be, in the aggregate, of more than 15%). MFS will generally vote against stock plans that involve potential dilution, in aggregate, of more than 10% at U.S. issuers that are listed in the Standard and Poor’s 100 index as of December 31 of the previous year. |
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● | Allow the board or the compensation committee to re-price underwater options or to automatically replenish shares without shareholder approval. |
● | Do not require an investment by the optionee, give “free rides” on the stock price, or permit grants of stock options with an exercise price below fair market value on the date the options are granted. |
In the cases where a stock plan amendment is seeking qualitative changes and not additional shares, MFS will vote on a case-by-case basis.
MFS will consider proposals to exchange existing options for newly issued options, restricted stock or cash on a case-by-case basis, taking into account certain factors, including, but not limited to, whether there is a reasonable value-for-value exchange and whether senior executives are excluded from participating in the exchange.
From time to time, MFS may evaluate a separate, advisory vote on severance packages or “golden parachutes” to certain executives at the same time as a vote on a proposed merger or acquisition. MFS will vote on a severance package on a case-by-case basis, and MFS may vote against the severance package regardless of whether MFS supports the proposed merger or acquisition.
MFS supports the use of a broad-based employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value and do not result in excessive dilution.
MFS may also not support some or all nominees standing for election to a compensation/remuneration committee if:
● | MFS votes against consecutive pay votes; |
● | MFS determines that a particularly egregious executive compensation practice has occurred. This may include use of discretion to award excessive payouts. MFS believes compensation committees should have flexibility to apply discretion to ensure final payments reflect long-term performance as long as this is used responsibly; |
● | MFS believes the committee is inadequately incentivizing or rewarding executives, or is overseeing pay practices that we believe are detrimental the long-term success of the company; or |
● | An advisory pay vote is not presented to shareholders, or the company has not implemented the advisory vote frequency supported by a plurality/majority of shareholders. |
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Shareholder Proposals on Executive Compensation
MFS generally opposes shareholder proposals that seek to set rigid restrictions on executive compensation as MFS believes that compensation committees should retain flexibility to determine the appropriate pay package for executives.
MFS may support reasonably crafted shareholder proposals that:
● | Require shareholder approval of any severance package for an executive officer that exceeds a certain multiple of such officer’s annual compensation that is not determined in MFS’ judgment to be excessive; |
● | Require the issuer to adopt a policy to recover the portion of performance-based bonuses and awards paid to senior executives that were not earned based upon a significant negative restatement of earnings, or other significant misconduct or corporate failure, unless the company already has adopted a satisfactory policy on the matter; |
● | Expressly prohibit the backdating of stock options; or, |
● | Prohibit the acceleration of vesting of equity awards upon a broad definition of a "change-in-control" (e.g., single or modified single-trigger). |
Environmental and Social Proposals
Where management presents climate action/transition plans to shareholder vote, we will evaluate the level of ambition over time, scope, credibility and transparency of the plan in determining our support. Where companies present climate action progress reports to shareholder vote we will evaluate evidence of implementation of and progress against the plan and level of transparency in determining our support.
Most vote items related to environmental and social topics are presented by shareholders. As these proposals, even on the same topic, can vary significantly in scope and action requested, these proposals are typically assessed on a case-by-case basis.
For example, MFS may support reasonably crafted proposals:
● | On climate change: that seek disclosure consistent with the recommendations of a generally accepted global framework (e.g., Task Force on Climate-related Financial Disclosures) that is appropriately audited and that is presented in a way that enables shareholders to assess and analyze the company's data; or request appropriately robust and ambitious plans or targets. |
● | Other environmental: that request the setting of targets for reduction of environmental impact or disclosure of key performance indicators or risks related to the impact, where materially relevant to the business. An example of such a proposal could be reporting on the impact of plastic use or waste stemming from company products or packaging. |
● | On diversity: that seek to amend a company’s equal employment opportunity policy to prohibit discrimination; that request good practice employee-related DEI disclosure; or that seek external input and reviews on specific related areas of performance. |
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● | On lobbying: that request good practice disclosure regarding a company’s political contributions and lobbying payments and policy (including trade organizations and lobbying activity). |
● | On tax: that request reporting in line with the GRI 207 Standard on Tax. |
● | On corporate culture and/or human/worker rights: that request additional disclosure on corporate culture factors like employee turnover and/or management of human and labor rights. |
MFS is unlikely to support a proposal if we believe that the proposal is unduly costly, restrictive, unclear, burdensome, has potential unintended consequences, is unlikely to lead to tangible outcomes or we don’t believe the issue is material or the action a priority for the business. MFS is also unlikely to support a proposal where the company already provides publicly available information that we believe is sufficient to enable shareholders to evaluate the potential opportunities and risks on the subject of the proposal, if the request of the proposal has already been substantially implemented, or if through engagement we gain assurances that it will be substantially implemented.
The laws of various states or countries may regulate how the interests of certain clients subject to those laws (e.g., state pension plans) are voted with respect to environmental, social and governance issues. Thus, it may be necessary to cast ballots differently for certain clients than MFS might normally do for other clients.
B. GOVERNANCE OF PROXY VOTING ACTIVITIES
From time to time, MFS may receive comments on the MFS Proxy Voting Policies and Procedures from its clients. These comments are carefully considered by MFS when it reviews these MFS Proxy Voting Policies and Procedures and revises them as appropriate, in MFS' sole judgment.
1. | MFS Proxy Voting Committee |
The administration of these MFS Proxy Voting Policies and Procedures is overseen by the MFS Proxy Voting Committee, which includes senior personnel from the MFS Legal and Global Investment and Client Support Departments as well as members of the investment team. The Proxy Voting Committee does not include individuals whose primary duties relate to client relationship management, marketing, or sales. The MFS Proxy Voting Committee:
a. | Reviews these MFS Proxy Voting Policies and Procedures at least annually and recommends any amendments considered to be necessary or advisable; |
b. | Determines whether any potential material conflict of interest exists with respect to instances in which MFS (i) seeks to override these MFS Proxy Voting Policies and Procedures; (ii) votes on ballot items not governed by these MFS Proxy Voting Policies and Procedures; (iii) evaluates an excessive executive compensation issue in relation to the election of directors; or (iv) requests a vote recommendation from an MFS portfolio manager or investment analyst (e.g., mergers and acquisitions); |
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c. | Considers special proxy issues as they may arise from time to time; and |
d. | Determines engagement priorities and strategies with respect to MFS' proxy voting activities |
The day-to-day application of the MFS Proxy Voting Policies and Procedures are conducted by the MFS stewardship team led by MFS’ Director of Global Stewardship. The stewardship team are members of MFS’ investment team.
2. | Potential Conflicts of Interest |
These policies and procedures are intended to address any potential material conflicts of interest on the part of MFS or its subsidiaries that are likely to arise in connection with the voting of proxies on behalf of MFS’ clients. If such potential material conflicts of interest do arise, MFS will analyze, document and report on such potential material conflicts of interest (see below) and shall ultimately vote the relevant ballot items in what MFS believes to be the best long-term economic interests of its clients. The MFS Proxy Voting Committee is responsible for monitoring and reporting with respect to such potential material conflicts of interest.
The MFS Proxy Voting Committee is responsible for monitoring potential material conflicts of interest on the part of MFS or its subsidiaries that could arise in connection with the voting of proxies on behalf of MFS’ clients. Due to the client focus of our investment management business, we believe that the potential for actual material conflict of interest issues is small. Nonetheless, we have developed precautions to assure that all votes are cast in the best long-term economic interest of its clients.2 Other MFS internal policies require all MFS employees to avoid actual and potential conflicts of interests between personal activities and MFS’ client activities. If an employee (including investment professionals) identifies an actual or potential conflict of interest with respect to any voting decision (including the ownership of securities in their individual portfolio), then that employee must recuse himself/herself from participating in the voting process. Any significant attempt by an employee of MFS or its subsidiaries to unduly influence MFS’ voting on a particular proxy matter should also be reported to the MFS Proxy Voting Committee.
2 For clarification purposes, note that MFS votes in what we believe to be the best, long-term economic interest of our clients entitled to vote at the shareholder meeting, regardless of whether other MFS clients hold “short” positions in the same issuer or whether other MFS clients hold an interest in the company that is not entitled to vote at the shareholder meeting (e.g., bond holder).
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In cases where ballots are voted in accordance with these MFS Proxy Voting Policies and Procedures, no material conflict of interest will be deemed to exist. In cases where (i) MFS is considering overriding these MFS Proxy Voting Policies and Procedures, (ii) matters presented for vote are not governed by these MFS Proxy Voting Policies and Procedures, (iii) MFS identifies and evaluates a potentially concerning executive compensation issue in relation to an advisory pay or severance package vote, or (iv) a vote recommendation is requested from an MFS portfolio manager or investment analyst for proposals relating to a merger, an acquisition, a sale of company assets or other similar transactions (collectively, “Non-Standard Votes”); the MFS Proxy Voting Committee will follow these procedures:
a. | Compare the name of the issuer of such ballot or the name of the shareholder (if identified in the proxy materials) making such proposal against a list of significant current (i) distributors of MFS Fund shares, and (ii) MFS institutional clients (the “MFS Significant Distributor and Client List”); |
b. | If the name of the issuer does not appear on the MFS Significant Distributor and Client List, then no material conflict of interest will be deemed to exist, and the proxy will be voted as otherwise determined by the MFS Proxy Voting Committee; |
c. | If the name of the issuer appears on the MFS Significant Distributor and Client List, then the MFS Proxy Voting Committee will be apprised of that fact and each member of the MFS Proxy Voting Committee (with the participation of MFS' Conflicts Officer) will carefully evaluate the proposed vote in order to ensure that the proxy ultimately is voted in what MFS believes to be the best long-term economic interests of MFS’ clients, and not in MFS' corporate interests; and |
d. | For all potential material conflicts of interest identified under clause (c) above, the MFS Proxy Voting Committee will document: the name of the issuer, the issuer’s relationship to MFS, the analysis of the matters submitted for proxy vote, the votes as to be cast and the reasons why the MFS Proxy Voting Committee determined that the votes were cast in the best long-term economic interests of MFS’ clients, and not in MFS' corporate interests. A copy of the foregoing documentation will be provided to MFS’ Conflicts Officer. |
The members of the MFS Proxy Voting Committee are responsible for creating and maintaining the MFS Significant Distributor and Client List, in consultation with MFS’ distribution and institutional business units. The MFS Significant Distributor and Client List will be reviewed and updated periodically, as appropriate.
For instances where MFS is evaluating a director nominee who also serves as a director/trustee of the MFS Funds, then the MFS Proxy Voting Committee will adhere to the procedures described in section (c) above regardless of whether the portfolio company appears on our Significant Distributor and Client List. In doing so, the MFS Proxy Voting Committee will adhere to such procedures for all Non-Standard Votes at the company’s shareholder meeting at which the director nominee is standing for election.
If an MFS client has the right to vote on a matter submitted to shareholders by Sun Life Financial, Inc. or any of its affiliates (collectively "Sun Life"), MFS will cast a vote on behalf of such MFS client as such client instructs or in the event that a client instruction is unavailable pursuant to the recommendations of Institutional Shareholder Services, Inc.'s ("ISS") benchmark policy, or as required by law. Likewise, if an MFS client has the right to vote on a matter submitted to shareholders by a public company for which an MFS Fund director/trustee serves as an executive officer, MFS will cast a vote on behalf of such MFS client as such client instructs or in the event that client instruction is unavailable pursuant to the recommendations of ISS or as required by law.
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Except as described in the MFS Fund's Prospectus, from time to time, certain MFS Funds (the “top tier fund”) may own shares of other MFS Funds (the “underlying fund”). If an underlying fund submits a matter to a shareholder vote, the top tier fund will generally vote its shares in the same proportion as the other shareholders of the underlying fund. If there are no other shareholders in the underlying fund, the top tier fund will vote in what MFS believes to be in the top tier fund’s best long-term economic interest. If an MFS client has the right to vote on a matter submitted to shareholders by a pooled investment vehicle advised by MFS (excluding those vehicles for which MFS' role is primarily portfolio management and is overseen by another investment adviser), MFS will cast a vote on behalf of such MFS client in the same proportion as the other shareholders of the pooled investment vehicle.
3. | Review of Policy |
The MFS Proxy Voting Policies and Procedures are available on www.mfs.com and may be accessed by both MFS’ clients and the companies in which MFS’ clients invest. The MFS Proxy Voting Policies and Procedures are reviewed by the Proxy Voting Committee annually. From time to time, MFS may receive comments on the MFS Proxy Voting Policies and Procedures from its clients. These comments are carefully considered by MFS when it reviews these MFS Proxy Voting Policies and Procedures and revises them as appropriate, in MFS' sole judgment.
C. OTHER ADMINISTRATIVE MATTERS & USE OF PROXY ADVISORY FIRMS
1. | Use of Proxy Advisory Firms |
MFS, on behalf of itself and certain of its clients (including the MFS Funds) has entered into an agreement with an independent proxy administration firm pursuant to which the proxy administration firm performs various proxy vote related administrative services such as vote processing and recordkeeping functions. Except as noted below, the proxy administration firm for MFS and its clients, including the MFS Funds, is ISS. The proxy administration firm for MFS Development Funds, LLC is Glass, Lewis & Co., Inc. (“Glass Lewis”; Glass Lewis and ISS are each hereinafter referred to as the “Proxy Administrator”).
The Proxy Administrator receives proxy statements and proxy ballots directly or indirectly from various custodians, logs these materials into its database and matches upcoming meetings with MFS Fund and client portfolio holdings, which are inputted into the Proxy Administrator’s system by an MFS holdings data-feed. The Proxy Administrator then reconciles a list of all MFS accounts that hold shares of a company’s stock and the number of shares held on the record date by these accounts with the Proxy Administrator’s list of any upcoming shareholder’s meeting of that company. If a proxy ballot has not been received, the Proxy Administrator and/or MFS may contact the client’s custodian requesting the reason as to why a ballot has not been received. Through the use of the Proxy Administrator system, ballots and proxy material summaries for all upcoming shareholders’ meetings are available on-line to certain MFS employees and members of the MFS Proxy Voting Committee.
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MFS also receives research reports and vote recommendations from proxy advisory firms. These reports are only one input among many in our voting analysis, which includes other sources of information such as proxy materials, company engagement discussions, other third-party research and data. MFS has due diligence procedures in place to help ensure that the research we receive from our proxy advisory firms is materially accurate and that we address any material conflicts of interest involving these proxy advisory firms. This due diligence includes an analysis of the adequacy and quality of the advisory firm staff, its conflict of interest policies and procedures and independent audit reports. We also review the proxy policies, methodologies and peer-group-composition methodology of our proxy advisory firms at least annually. Additionally, we also receive reports from our proxy advisory firms regarding any violations or changes to conflict of interest procedures.
2. | Analyzing and Voting Proxies |
Proxies are voted in accordance with these MFS Proxy Voting Policies and Procedures. The Proxy Administrator, at the prior direction of MFS, automatically votes all proxy matters that do not require the particular exercise of discretion or judgment with respect to these MFS Proxy Voting Policies and Procedures as determined by MFS. In these circumstances, if the Proxy Administrator, based on MFS' prior direction, expects to vote against management with respect to a proxy matter and MFS becomes aware that the issuer has filed or will file additional soliciting materials sufficiently in advance of the deadline for casting a vote at the meeting, MFS will consider such information when casting its vote. With respect to proxy matters that require the particular exercise of discretion or judgment, the MFS Proxy Voting Committee or its representatives considers and votes on those proxy matters. In analyzing all proxy matters, MFS uses a variety of materials and information, including, but not limited to, the issuer's proxy statement and other proxy solicitation materials (including supplemental materials), our own internal research and research and recommendations provided by other third parties (including research of the Proxy Administrator). As described herein, MFS may also determine that it is beneficial in analyzing a proxy voting matter for members of the Proxy Voting Committee or its representatives to engage with the company on such matter. MFS also uses its own internal research, the research of Proxy Administrators and/or other third party research tools and vendors to identify (i) circumstances in which a board may have approved an executive compensation plan that is excessive or poorly aligned with the portfolio company's business or its shareholders, (ii) environmental, social and governance proposals that warrant further consideration, or (iii) circumstances in which a company is not in compliance with local governance or compensation best practices. Representatives of the MFS Proxy Voting Committee review, as appropriate, votes cast to ensure conformity with these MFS Proxy Voting Policies and Procedures.
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For certain types of votes (e.g., mergers and acquisitions, proxy contests and capitalization matters), MFS’ stewardship team will seek a recommendation from the MFS investment analyst that is responsible for analyzing the company and/or portfolio managers that holds the security in their portfolio.3 For certain other votes that require a case-by-case analysis per these policies (e.g., potentially excessive executive compensation issues, or certain shareholder proposals), the stewardship team will likewise consult with MFS investment analysts and/or portfolio managers.3 However, the MFS Proxy Voting Committee will ultimately be responsible for the manner in which all ballots are voted.
As noted above, MFS reserves the right to override the guidelines when such an override is, in MFS’ best judgment, consistent with the overall principle of voting proxies in the best long-term economic interests of MFS’ clients. Any such override of the guidelines shall be analyzed, documented and reported in accordance with the procedures set forth in these policies.
In accordance with its contract with MFS, the Proxy Administrator also generates a variety of reports for the MFS Proxy Voting Committee and makes available on-line various other types of information so that the MFS Proxy Voting Committee or its representatives may review and monitor the votes cast by the Proxy Administrator on behalf of MFS’ clients.
For those markets that utilize a "record date" to determine which shareholders are eligible to vote, MFS generally will vote all eligible shares pursuant to these guidelines regardless of whether all (or a portion of) the shares held by our clients have been sold prior to the meeting date.
3. | Securities Lending |
From time to time, certain MFS Funds may participate in a securities lending program. In the event MFS or its agent receives timely notice of a shareholder meeting for a U.S. security, MFS and its agent will attempt to recall any securities on loan before the meeting’s record date so that MFS will be entitled to vote these shares. However, there may be instances in which MFS is unable to timely recall securities on loan for a U.S. security, in which cases MFS will not be able to vote these shares. MFS will report to the appropriate board of the MFS Funds those instances in which MFS is not able to timely recall the loaned securities. MFS generally does not recall non-U.S. securities on loan because there may be insufficient advance notice of proxy materials, record dates, or vote cut-off dates to allow MFS to timely recall the shares in certain markets on an automated basis. As a result, non-U.S. securities that are on loan will not generally be voted. If MFS receives timely notice of what MFS determines to be an unusual, significant vote for a non-U.S. security whereas MFS shares are on loan and determines that voting is in the best long-term economic interest of shareholders, then MFS will attempt to timely recall the loaned shares.
3 From time to time, due to travel schedules and other commitments, an appropriate portfolio manager or research analyst may not be available to provide a vote recommendation. If such a recommendation cannot be obtained within a reasonable time prior to the cut-off date of the shareholder meeting, the MFS Proxy Voting Committee may determine to abstain from voting.
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4. | Potential impediments to voting |
In accordance with local law or business practices, some companies or custodians prevent the sale of shares that have been voted for a certain period beginning prior to the shareholder meeting and ending on the day following the meeting (“share blocking”). Depending on the country in which a company is domiciled, the blocking period may begin a stated number of days prior or subsequent to the meeting (e.g., one, three or five days) or on a date established by the company. While practices vary, in many countries the block period can be continued for a longer period if the shareholder meeting is adjourned and postponed to a later date. Similarly, practices vary widely as to the ability of a shareholder to have the “block” restriction lifted early (e.g., in some countries shares generally can be “unblocked” up to two days prior to the meeting whereas in other countries the removal of the block appears to be discretionary with the issuer’s transfer agent). Due to these restrictions, MFS must balance the benefits to its clients of voting proxies against the potentially serious portfolio management consequences of a reduced flexibility to sell the underlying shares at the most advantageous time. For companies in countries with share blocking periods or in markets where some custodians may block shares, the disadvantage of being unable to sell the stock regardless of changing conditions generally outweighs the advantages of voting at the shareholder meeting for routine items. Accordingly, MFS will not vote those proxies in the absence of an unusual, significant vote that outweighs the disadvantage of being unable to sell the stock.
From time to time, governments may impose economic sanctions which may prohibit us from transacting business with certain companies or individuals. These sanctions may also prohibit the voting of proxies at certain companies or on certain individuals. In such instances, MFS will not vote at certain companies or on certain individuals if it determines that doing so is in violation of the sanctions.
In limited circumstances, other market specific impediments to voting shares may limit our ability to cast votes, including, but not limited to, late delivery of proxy materials, untimely vote cut-off dates, power of attorney and share re-registration requirements, or any other unusual voting requirements. In these limited instances, MFS votes securities on a best-efforts basis in the context of the guidelines described above.
D. ENGAGEMENT
As part of its approach to stewardship MFS engages with companies in which it invests on a range of priority issues. Where sufficient progress has not been made on a particular issue of engagement, MFS may determine a vote against management may be warranted to reflect our concerns and influence for change in the best long-term economic interests of our clients.
MFS may determine that it is appropriate and beneficial to engage in a dialogue or written communication with a company or other shareholders specifically regarding certain matters on the company’s proxy statement that are of concern to shareholders, including environmental, social and governance matters. This may be to discuss and build our understanding of a certain proposal, or to provide further context to the company on our vote decision.
A company or shareholder may also seek to engage with members of the MFS Proxy Voting Committee or Stewardship Team in advance of the company’s formal proxy solicitation to review issues more generally or gauge support for certain contemplated proposals. For further information on requesting engagement with MFS on proxy voting issues or information about MFS' engagement priorities, please contact [email protected].
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E. RECORDS RETENTION
MFS will retain copies of these MFS Proxy Voting Policies and Procedures in effect from time to time and will retain all proxy voting reports submitted to the Board of Trustees of the MFS Funds for the period required by applicable law. Proxy solicitation materials, including electronic versions of the proxy ballots completed by representatives of the MFS Proxy Voting Committee, together with their respective notes and comments, are maintained in an electronic format by the Proxy Administrator and are accessible on-line by the MFS Proxy Voting Committee and other MFS employees. All proxy voting materials and supporting documentation, including records generated by the Proxy Administrator’s system as to proxies processed, including the dates when proxy ballots were received and submitted, and the votes on each company’s proxy issues, are retained as required by applicable law.
F. REPORTS
U.S. Registered MFS Funds
MFS publicly discloses the proxy voting records of the U.S. registered MFS Funds on a quarterly basis. MFS will also report the results of its voting to the Board of Trustees of the U.S. registered MFS Funds. These reports will include: (i) a summary of how votes were cast (including advisory votes on pay and “golden parachutes”); (ii) a summary of votes against management’s recommendation; (iii) a review of situations where MFS did not vote in accordance with the guidelines and the rationale therefore; (iv) a review of the procedures used by MFS to identify material conflicts of interest and any matters identified as a material conflict of interest; (v) a review of these policies and the guidelines; (vi) a review of our proxy engagement activity; (vii) a report and impact assessment of instances in which the recall of loaned securities of a U.S. issuer was unsuccessful; and (viii) as necessary or appropriate, any proposed modifications thereto to reflect new developments in corporate governance and other issues. Based on these reviews, the Trustees of the U.S. registered MFS Funds will consider possible modifications to these policies to the extent necessary or advisable.
Other MFS Clients
MFS may publicly disclose the proxy voting records of certain other clients (including certain MFS Funds) or the votes it casts with respect to certain matters as required by law. A report can also be printed by MFS for each client who has requested that MFS furnish a record of votes cast. The report specifies the proxy issues which have been voted for the client during the year and the position taken with respect to each issue and, upon request, may identify situations where MFS did not vote in accordance with the MFS Proxy Voting Policies and Procedures.
Firm-wide Voting Records
MFS also publicly discloses its firm-wide proxy voting records on a quarterly basis.
Except as described above, MFS generally will not divulge actual voting practices to any party other than the client or its representatives because we consider that information to be confidential and proprietary to the client. However, as noted above, MFS may determine that it is appropriate and beneficial to engage in a dialogue with a company regarding certain matters. During such dialogue with the company, MFS may disclose the vote it intends to cast in order to potentially effect positive change at a company in regards to environmental, social or governance issues.
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Proxy Voting Policies and Procedures
March 2024
I. | Introduction and General Principles |
A. | Certain investment adviser subsidiaries of Neuberger Berman Group LLC ("NB") have been delegated the authority and responsibility to vote the proxies of their respective investment advisory clients and exercise such responsibility according to these policies and procedures. |
B. | NB understands that proxy voting is an integral aspect of investment management. Accordingly, proxy voting must be conducted with the same degree of prudence and loyalty accorded any fiduciary or other obligation of an investment manager. |
C. | NB believes that the following policies and procedures are reasonably expected to ensure that proxy matters are conducted in the best interest of clients, in accordance with NB's fiduciary duties, applicable rules under the Investment Advisers Act of 1940, fiduciary standards and responsibilities for ERISA clients set out in Department of Labor interpretations, the UK Stewardship Code, the Japan Stewardship Code and other applicable laws and regulations. |
D. | In instances where NB does not have authority to vote client proxies, it is the responsibility of the client to instruct the relevant custody bank or banks to mail proxy material directly to such client. |
E. | In all circumstances, NB will comply with specific client directions to vote proxies, whether or not such client directions specify voting proxies in a manner that is different from NB's proxy votes for other client accounts. |
F. | NB will seek to vote all shares under its authority so long as that action is not in conflict with client instructions. There may be circumstances under which NB may abstain from voting a client proxy, such as when NB believes voting would not be in clients' best interests (e.g., not voting in countries with share blocking or meetings in which voting would entail additional costs). NB understands that it must weigh the costs and benefits of voting proxy proposals relating to foreign securities and make an informed decision with respect to whether voting a given proxy proposal is prudent and solely in the interests of the clients and, in the case of an ERISA client and other accounts and clients subject to similar local laws, a plan's participants and beneficiaries. NB's decision in such circumstances will take into account the effect that the proxy vote, either by itself or together with other votes, is expected to have on the value of the client's investment and whether this expected effect would outweigh the cost of voting. |
II. | Responsibility and Oversight |
A. | NB has designated a Governance & Proxy Committee (“Proxy Committee”) with the responsibility for: |
(i) | developing, authorizing, implementing and updating NB’s policies and procedures; |
(ii) | administering and overseeing the governance and proxy voting processes; and |
(iii) | engaging and overseeing any third-party vendors as voting delegates to review, monitor and/or vote proxies. |
NB, at the recommendation of the Proxy Committee, has retained Glass, Lewis & Co., LLC (“Glass Lewis”) as its proxy voting service provider.
B. | The Proxy Committee will meet as frequently and in such manner as necessary or appropriate to fulfill its responsibilities. |
Proxy Voting Policies and Procedures
C. | The members of the Proxy Committee will be appointed from time to time and will include the Chief Investment Officer (Equities), the Director of Global Equity Research, the Head of ESG & Impact Investing, and certain portfolio managers. A senior member of the Legal and Compliance Department will advise the Proxy Committee and may vote as a full member of the Committee if a vote is needed to establish a quorum or in the event that a vote is needed to break a tie. The Director of Investment Stewardship serves in an advisory role to the Proxy Committee but may also vote as a full member of the Committee if a vote is needed to establish a quorum or in the event that a vote is needed to break a tie. The Proxy Committee may also appoint substitute or additional members if needed to establish quorum in the absence of one or more members. |
D. | In the event that one or more members of the Proxy Committee are not independent with respect to a particular matter, the remaining members of the Proxy Committee shall constitute an ad hoc independent subcommittee of the Proxy Committee, which will have full authority to act upon such matter. |
III. | Proxy Voting Guidelines |
A. | The Proxy Committee developed the Governance and Proxy Voting Guidelines (“Voting Guidelines”) based on our Governance and Engagement Principles. These Guidelines are updated as appropriate and generally at least on an annual basis. With input from certain of our investment professionals, the modifications are intended to reflect emerging corporate governance issues and themes. The Proxy Committee recognizes that in certain circumstances it may be in the interests of our clients to deviate from our Voting Guidelines. |
B. | Our views regarding corporate governance and engagement, and the related stewardship actions, are informed by our ESG Investing group, in consultation with professionals in the Legal & Compliance and Global Equity Research groups, among others. These insightful, experienced and dedicated groups enable us to think strategically about engagement and stewardship priorities. |
C. | We believe NB’s Voting Guidelines generally represent the voting positions most likely to support our clients’ best economic interests across a range of sectors and contexts. These guidelines are not intended to constrain our consideration of the specific issues facing a particular company on a particular vote, and so there will be times when we deviate from the Voting Guidelines. |
D. | In the event that a portfolio manager or other investment professional at Neuberger Berman believes that it is in the best interest of a client or clients to vote proxies other than as provided in NB’s Voting Guidelines, the portfolio manager or other investment professional will submit in writing to the Proxy Committee the basis for his or her recommendation. The Proxy Committee will review this recommendation in the context of the specific circumstances of the proxy vote being considered and with the intention of voting in the best interest of our clients. |
IV. | Proxy Voting Procedures |
A. | NB will vote client proxies in accordance with a client’s specific request even if it is in a manner inconsistent with NB’s proxy votes for other client accounts. Such specific requests should be made in writing by the individual client or by an authorized officer, representative or named fiduciary of a client. |
B. | NB has engaged Glass Lewis as its proxy voting service provider to: |
(i) | provide research on proxy matters; |
(ii) | in a timely manner, notify NB of and provide additional solicitation materials made available reasonably in advance of a vote deadline; |
(iii) | vote proxies in accordance with NB’s Voting Guidelines or as otherwise instructed and submit such proxies in a timely manner; |
(iv) | handle other administrative functions of proxy voting; |
Proxy Voting Policies and Procedures
(v) | maintain records of proxy statements and additional solicitation materials received in connection with proxy votes and provide copies of such proxy statements promptly upon request; and |
(vi) | maintain records of votes cast. |
C. | Except in instances where clients have retained voting authority, NB will instruct custodians of client accounts to forward all proxy statements and materials received in respect of client accounts to Glass Lewis. |
D. | NB retains final authority and fiduciary responsibility, consistent with applicable law, for proxy voting for clients that have delegated it authority and discretion to vote proxies. |
V. | Conflicts of Interest |
A. | NB shall direct Glass Lewis to vote proxies in accordance with the Voting Guidelines described in Section III or, in instances where a material conflict has been determined to exist, NB will generally instruct that such shares be voted in the same proportion as other shares are voted with respect to a proposal, subject to applicable legal, regulatory and operational requirements.. NB believes that this process is reasonably designed to address material conflicts of interest that may arise in conjunction with proxy voting decisions. Potential conflicts considered by the Proxy Committee when it is determining whether to deviate from NB’s Voting Guidelines include, among others: a material client relationship with the corporate issuer being considered; personal or business relationships between the portfolio managers and an executive officer; director, or director nominee of the issuer; joint business ventures; or a direct transactional relationship between the issuer and senior executives of NB. |
B. | In the event that an NB Investment Professional believes that it is in the best interest of a client or clients to vote proxies in a manner inconsistent with the Voting Guidelines described in Section III, such NB Investment Professional will contact a member of the Legal & Compliance Department advising the Proxy Committee and complete and sign a questionnaire in the form adopted from time to time. Such questionnaires will require specific information, including the reasons the NB Investment Professional believes a proxy vote in this manner is in the best interest of a client or clients and disclosure of specific ownership, business or personal relationship, or other matters that may raise a potential material conflict of interest with respect to the voting of the proxy. The Proxy Committee will meet with the NB Investment Professional to review the completed questionnaire and consider such other matters as it deems appropriate to determine that there is no material conflict of interest with respect to the voting of the proxy in the requested manner. The Proxy Committee shall document its consideration of such other matters. In the event that the Proxy Committee determines that such vote will not present a material conflict, the Proxy Committee will make a determination whether to vote such proxy as recommended by the NB Investment Professional. In the event of a determination to vote the proxy as recommended by the NB Investment Professional, an authorized member of the Proxy Committee will instruct Glass Lewis to vote in such manner with respect to the client or clients. In the event that the Proxy Committee determines that the voting of a proxy as recommended by the NB Investment Professional would not be appropriate, the Proxy Committee will: |
(i) | take no further action, in which case the Committee shall vote such proxy in accordance with the Voting Guidelines; |
(ii) | disclose such conflict to the client or clients and obtain written direction from the client with respect to voting the proxy; |
(iii) | suggest that the client or clients engage another party to determine how to vote the proxy; |
(iv) | instruct that such shares be voted in the same proportion as other shares are voted with respect to a proposal, subject to applicable legal, regulatory and operational requirements; or |
(v) | engage another independent third party to determine how to vote the proxy if voting in the manner described in |
(iv) | is not feasible. |
A record of the Proxy Committee’s determinations shall be prepared and maintained in accordance with applicable policies.
Proxy Voting Policies and Procedures
C. | In the event that the Voting Guidelines described in Section III do not address how a proxy should be voted the Proxy Committee will make a determination as to how the proxy should be voted. The Proxy Committee will consider such matters as it deems appropriate to determine how such proxy should be voted, including whether there is a material conflict of interest with respect to the voting of the proxy in accordance with its decision. The Proxy Committee shall document its consideration of such matters, and an authorized member of the Proxy Committee will instruct Glass Lewis to vote in such manner with respect to such client or clients. |
D. | Material conflicts cannot be resolved by simply abstaining from voting. |
VI. | Recordkeeping |
NB will maintain records relating to the implementation of the Voting Guidelines and these procedures, including:
(i) | a copy of the Voting Guidelines and these procedures, which shall be made available to clients upon request; |
(ii) | proxy statements received regarding client securities (which will be satisfied by relying on EDGAR or Glass Lewis); |
(iii) | a record of each vote cast (which Glass Lewis maintains on NB’s behalf); |
(iv) | a copy of each questionnaire completed by any NB Investment Professional under Section V above; and |
(v) | any other document created by NB that was material to a determination regarding the voting of proxies on behalf of clients or that memorializes the basis for that decision. |
Such proxy voting books and records shall be maintained in an easily accessible place, which may include electronic means, for a period of five years, the first two by the Legal & Compliance Department. Material conflicts cannot be resolved by simply abstaining from voting.
VII. | Engagement and Monitoring |
Consistent with the firm’s active management strategies, NB portfolio managers and members of the Global Equity Research team continuously monitor material investment factors at portfolio companies. NB professionals remain informed of trends and best practices related to the effective fiduciary administration of proxy voting. NB will make revisions to its Voting Guidelines and related procedures document when it determines it is appropriate or when we observe the opportunity to materially improve outcomes for our clients. Additionally, we will regularly undertake a review of selected voting and engagement cases to better learn how to improve the monitoring of our portfolio companies and the effectiveness of our stewardship activities.
VIII. | Securities Lending |
Some NB products or client accounts where NB has authority and responsibility to vote the proxies may participate in a securities lending program administered by NB. Where a security is currently on loan ahead of a shareholder meeting, NB will generally attempt to terminate the loan in time to vote those shares. Where a security that is potentially subject to being loaned is eligible to be voted in a stockholder meeting a portfolio manager may restrict the security from lending. NB maintains the list of securities restricted from lending and receives daily updates on upcoming proxy events from the custodian.
IX. | Disclosure |
Neuberger Berman will publicly disclose all voting records of its co-mingled funds (Undertakings for Collective Investment in Transferable Securities [UCITS] and mutual funds), which can be found at https://www.nb.com/en/global/esg/nb-votes -- Neuberger Berman cannot publicly disclose vote level records for separate accounts without express permission of the client. Neuberger Berman will publicly disclose aggregate reporting on at least an annual basis for all votes cast across co-mingled and separate accounts. Neuberger Berman welcomes the opportunity to discuss the rationale for a given vote with investee companies as part of our ongoing engagement activities. Neuberger Berman may also choose to provide broad explanations for certain voting positions on important or topical issues in advance of the vote. Additionally, our proxy voting guidelines can be found on our website: https://www.nb.com/en/global/esg/nb-votes.
Proxy Voting Policies and Procedures
Proxy Committee Membership as from January 2023:
● | Joseph Amato, President and Chief Investment Officer (Equities) |
● | Jonathan Bailey, Global Head of ESG & Impact Investing |
● | Elias Cohen, Portfolio Manager |
● | Timothy Creedon, Director of Global Equity Research |
● | Richard Glasebrook, Portfolio Manager |
● | Brett Reiner, Portfolio Manager |
● | Amit Solomon, Portfolio Manager |
● | Corey Issing*, Legal and Compliance |
● | Caitlin McSherry*, Head of Investment Stewardship |
*Corey Issing and Caitlin McSherry serve in advisory roles to the Committee. They are ex officio members of the Committee. They will only vote as full members of the Committee if their votes are needed to establish a quorum or in the event that a vote is needed to break a tie vote.
3/24 ©2024 Neuberger Berman Group LLC. All rights reserved.
Policy | Proxy Voting Policy | Last Reviewed | |
Name: | 10/31/2023 | ||
Related | Investment Advisers Act of 1940, Rules 206(4)-6 and 204-2 | ||
Regulations: | ERISA Rule 404a-1 | ||
Related | |||
Policies: | BNY Mellon Proxy Voting Conflicts of Interest Policy II-K-052 |
Newton Investment Group ("Newton") is comprised of Newton Investment Management North America, LLC ("NIMNA" or the “Firm”), Newton Investment Management Ltd. ("NIM"), and Newton Investment Management Japan Limited. ("NIMJ"). The Newton entities are each a subsidiary of The Bank of New York Mellon (“BNY Mellon”) and are therefore subject to its policies and procedures which may be mentioned throughout this policy. This policy is specific to NIMNA, however where Newton is referenced within the policy it should be viewed from the global perspective, unless otherwise noted.
Policy Statement
As a fiduciary and to meet its obligations as an SEC registered investment adviser, Newton owes its clients a duty of care and a duty of loyalty with respect to all services undertaken on the client’s behalf including (where applicable) the exercise of voting rights. Newton provides discretionary and non-discretionary investment advisory services to institutional investors in the form of, for example, separate accounts, model portfolios, and pooled investment vehicles that are offered or maintained by The Bank of New York Mellon and its affiliates, and to other investment advisers through sub-advisory agreements. In addition, we may also provide voting advice to accounts where Newton acts in an advisory capacity.
This Proxy Voting Policy (the “Policy”) describes Newton’s approach to exercising voting rights, where discretion over the voting decisions has been delegated to Newton by its clients and where Newton provides guidance on exercising voting rights in securities that Newton has recommended to clients on a non-discretionary basis, e.g. model accounts. Where applicable, Newton will use its best efforts to exercise voting rights as part of its authority to manage, acquire and dispose of account assets. With respect of funds, i.e. registered investment companies, UCITS or AIFs, which Newton manages and/or sub-advises, Newton will exercise voting rights under this Policy pursuant to an authority granted under the applicable client agreements.
Newton will exercise voting rights in a prudent and diligent manner and in the best interests of clients.
Policy Summary
Newton has adopted and implemented this Policy, which it believes is reasonably designed to:
● | Ensure that voting rights are exercised; |
● | Ensure voting decisions are taken in the best interests of clients; |
● | Address potential material conflicts of interest that may arise; and |
● | Meet disclosure requirements and expectations in connection with voting responsibilities and activities undertaken. |
Voting Guidelines
Newton has established overarching voting guidelines which inform our ultimate voting decision, based on guidance established by internationally recognized governance principles including the OECD Corporate Governance Principles, the ICGN Global Governance Principles, the UK Investment Association’s Principles of Remuneration, and the UK Corporate Governance Code, in addition to other local governance codes.
All voting decisions are based on Newton’s voting guidelines. We have used the services of an independent voting service provider to translate these guidelines into explicit voting actions forming a bespoke voting policy for Newton. This policy will be applied to all our votable holdings, enabling a universal approach to our voting while allowing us to deploy in-depth case-by-case analysis from Newton’s stewardship team for those issuers and/or proposals which merit greater focus due to the materiality of our investment or the importance of the issue at hand (e.g., shareholder resolution, corporate action, related-party transactions). In these instances, communication with or input from the wider investment team may be sought, as well as, if relevant, engagement with the company. The stewardship team retains the ultimate discretion to deviate the vote instruction from Newton’s bespoke policy’s recommendation.
Our active approach to voting means that our voting decisions reflect our investment rationale and take into consideration engagement activity and the company’s approach to relevant codes, market practices and regulations. These are applied to the company’s unique situation, while also taking into account any explanations offered for why the company has adopted a certain position or policy.
Newton seeks to make proxy voting decisions that are in the best long-term financial interests of its clients and which seek to support investor value creation by supportingproposals that are consistent with our corporate governance views and investment case.
In general, voting decisions are taken consistently across all Newton’s clients that are invested in the same underlying company. This is in line with Newton’s investment process that focuses on the long-term success of the investee company. Further, it is Newton’s intention to exercise voting rights in all circumstances where it retains voting authority.
Voting Procedures
All voting opportunities are communicated to Newton by way of an electronic voting platform.
The Responsible Investment team reviews all resolutions for matters of concern. Any such contentious issues identified may be referred to the appropriate global fundamental equity analyst or portfolio manager for comment. Where an issue remains contentious, Newton may also decide to confer or engage with the company or other relevant stakeholders.
An electronic voting service is employed to submit voting decisions. Each voting decision is submitted via the electronic voting service by a member of the Responsible Investment team but can only be executed by way of an alternate member of the team approving the vote within the same system.
Members of certain BNY Mellon operations teams are responsible for administrative elements surrounding the exercise of voting rights by ensuring the right to exercise clients’ votes is available and that these votes are exercised.
Acting Collectively
Subject to applicable law and reporting regulations, Newton will work collectively with other investors as well as trade associations, government bodies and non-governmental organizations to develop best practice, raise awareness of a concern or enhance the effectiveness of engagement activities. When considering action and also when acting collectively on a specific issue of concern with a company, we exercise caution in order to avoid situations of being unintentionally in receipt of material non-public information, breaching relevant anti-trust or anti-competitive rules and regulations, or being considered acting in concert with one or more other investors.
Voting Service Providers
Newton utilizes an independent voting service provider for the purposes of managing upcoming meetings and instructing voting decisions via its electronic platform, and for providing research. Its voting recommendations are not routinely followed; it is only in the event that we recognize a potential material conflict of interest (as described below) that the recommendation of our external voting service provider will be applied.
Newton’s external voting provider is subject to the requirements set by Newton’s Vendor Management Oversight Group. As such, regular due diligence meetings are held and minutes maintained with this provider, which includes reviewing its operational performance, service quality, and robustness of research and its internal controls, including management of its potential material conflicts of interest. In addition, and along with its other clients, Newton participates in consultations that seek specific feedback on proxy voting matters. This helps ensure alignment of interest between Newton’s expectations and the voting recommendations provided by the external provider.
Conflicts of Interest
Where Newton acts as a proxy for its clients, a conflict could arise between Newton (including BNY Mellon funds or affiliate funds), the investee company and/or a client when exercising voting rights. Newton has in place procedures for ensuring potential material conflicts of interests are mitigated, while its clients’ voting rights are exercised in their best interests. Newton seeks to avoid potential material conflicts of interest through:
1. | the establishment of these proxy voting guidelines; |
2. | the Responsible Investment team; |
3. | internal oversight groups; and |
4. | the application of the proxy voting guidelines in an objective and consistent manner across client accounts, based on, as applicable, internal, and external research and recommendations provided by third party proxy advisory services and without consideration of any Newton or BNY Mellon client relationship factors. |
Where a potential material conflict of interest exists between Newton, BNY Mellon, the underlying company and/or a client, the voting recommendations of an independent third-party proxy service provider will be applied.
A potential material conflict of interest could exist in the following situations, among others:
1. | Where a shareholder meeting is convened by Newton’s parent company, BNY Mellon; |
2. | Where a shareholder meeting is convened by a company for which the CEO of BNY Mellon serves as a Board member; |
3. | Where a shareholder meeting is convened by a company that is a current client of BNY Mellon and contributed more than 5% of BNY Mellon’s revenue as of the end of the last fiscal quarter; |
4. | Where a shareholder meeting involves an issue that is being publicly challenged or promoted (e.g., a proxy contest) by (i) a BNY Mellon Board member or (ii) a company for which a BNY Mellon Board member serves as Chairman of the Board of Directors, CEO, President, CFO or COO (or functional equivalent); |
5. | Where a shareholder meeting is convened by a pooled vehicle with agenda items relating to services provided by (or fees paid to) a BNY Mellon affiliate (e.g., Investment Management Agreement, Custody Agreement, etc.); |
6. | Where an employee, officer, or director of BNY Mellon or one of its affiliated companies has a personal interest in the outcome of a particular proxy proposal); and |
7. | Where the proxy relates to a security where Newton has invested in two or more companies that are subject to the same merger or acquisition. All instances where a potential material conflict of interest has been recognized and Newton engages its proxy voting service provider are reported separately in Newton’s publicly available Responsible Investment Quarterly Reports. |
Newton employees are required to identify any potential or actual conflicts of interest and take appropriate action to avoid or manage these and report them to Newton’s Conflicts of Interest Committee for review, further information can be found in Newton’s Conflicts of Interest Policy.
Disclosures and Reporting
Newton publishes publicly on its website its Responsible Investment Policies and Principles, which describes Newton’s approach to Responsible Investment including the exercise of voting rights. The Responsible Investment quarterly reports are also published publicly, which include the details of certain engagements undertaken during the period in addition to a list all voting decisions taken and the voting rationale for decisions not aligned with the recommendations of the underlying company’s management and for decisions on all shareholder-proposed resolutions.
Newton’s Proxy Voting Policy and procedures is also summarized in its Form ADV, which is filed with the SEC and furnished to clients. Upon request, Newton will provide clients with a copy of the policies noted above as well as information on how their proxies were voted by Newton.
Securities Lending
Newton does not engage in securities lending on behalf of its clients; this activity is at the discretion of individual clients. For certain funds that are managed by BNY Mellon, and where Newton is appointed as investment manager or sub-advisor, the fund boards have entered into securities-lending programs.
Controls, Record Keeping and Auditing
Newton has established a Sustainability Committee that oversees all aspects relating to sustainability at Newton, including Newton’s investments, direct impacts and engagement with communities and engagement with financial markets (advocacy) regarding sustainability issues. All internal procedure documents related to voting matters, including this policy document, are overseen by the Sustainability Committee at least annually.
Records are kept of all voting decisions, including evidence of the submission and approval process, which are subject to external audit. In addition, the Corporate Actions team reports monthly on critical risk indicators in relation to voting matters.
Roles and Responsibilities
Members of certain BNY Mellon Operations teams are responsible for administrative processes and actions that ensures Newton has the ability to and does exercise its individual clients’ voting rights:
● | Responsible Investment Team members are also responsible for ensuring voting rights are exercised and that voting decisions are in line with Newton’s voting guidelines. |
● | Fundamental Equity Analysts and Portfolio Managers provide specific company-level investment insight for consideration when arriving at voting decisions. |
● | The Sustainability Committee oversees Newton’s Responsible Investment Policies and Principles, which may include this Policy. |
PROXY VOTING POLICIES, PROCEDURES AND GUIDELINES |
Effective Date 12/15/2022 |
These policies and procedures (and the guidelines that follow) apply to the voting of proxies by Northern Trust Corporation affiliates (“Northern Trust”) for accounts over which Northern Trust has been granted proxy voting discretion.
Table of Contents
Northern Trust Proxy Voting Policies and Procedures | 1 | ||
SECTION 1. PROXY VOTING GUIDELINES | 1 | ||
SECTION 2. PROXY COMMITTEE | 1 | ||
SECTION 3. PROXY VOTING SERVICE | 2 | ||
SECTION 4. APPLICATION OF PROXY GUIDELINES | 2 | ||
SECTION 5. MATERIAL CONFLICTS OF INTEREST | 3 | ||
SECTION 6. PROXY VOTING RECORDS; CLIENT DISCLOSURES | 4 | ||
SECTION 7. ERISA ACCOUNTS | 4 | ||
SECTION 8. MUTUAL FUNDS | 5 | ||
SECTION 9. OTHER SPECIAL SITUATIONS | 5 | ||
Northern Trust Proxy Voting Guidelines | 6 | ||
I. | The Board of Directors | 6 | |
A. | Voting on Director Nominees in Uncontested Elections | 6 | |
B. | Director Independence | 6 | |
C. | Director Attendance | 7 | |
Northern Trust will vote case by case on individual directors who attend fewer than 75 percent of board and board-committee meetings for two consecutive years | 7 | ||
D. | Lead Independent Director | 7 | |
E. | Overboarding Issues | 7 | |
F. | Diversity | 7 | |
G. | Stock Ownership Requirements | 7 | |
H. | Board Evaluation and Refreshment | 8 | |
I. | Director and Officer Indemnification and Liability Protection | 8 | |
II. | Proxy Contests | 8 | |
A. | Voting for Director Nominees in Contested Elections | 8 | |
III. | Auditors | 9 | |
A. | Ratifying Auditors | 9 | |
IV. | Proxy Contest Defenses | 9 | |
A. | Board Structure: Staggered vs. Annual Elections | 9 | |
B. | Shareholder Ability to Remove Directors | 9 | |
C. | Cumulative Voting | 10 | |
D. | Majority Voting | 10 | |
E. | Shareholder Ability to Call Special Meetings | 11 | |
F. | Shareholder Ability to Act by Written Consent | 11 | |
G. | Shareholder Ability to Alter the Size of the Board | 11 | |
V. | Tender Offer Defenses | 11 | |
A. | Poison Pills | 11 | |
B. | Fair Price Provisions | 11 | |
C. | Greenmail | 11 | |
D. | Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws | 12 | |
VI. | Miscellaneous Governance Provisions | 12 | |
A. | Confidential Voting | 12 | |
B. | Bundled Proposals | 12 | |
C. | Shareholder Advisory Committees | 12 | |
D. | Board of Directors Failure to Respond to Certain Majority Approved Shareholder Proposals | 12 |
i
E. | Board of Directors Failure to Adequately Respond to Rejected Board Compensation Proposals | 13 | |
F. | Compensation Committee Failure to Adequately Address Pay for Performance | 13 | |
G. | ESG Failures | 13 | |
H. | Succession Policies | 13 | |
I. | Proxy Access | 13 | |
J. | Other Business | 13 | |
VII. | Capital Structure | 14 | |
A. | Common Stock Authorization | 14 | |
B. | Stock Distributions: Splits and Dividends | 14 | |
Northern Trust generally allows for management discretion on matters related to stock distributions, such as stock splits and stock dividends | 14 | ||
C. | Unequal Voting Rights | 14 | |
D. | Reverse Stock Splits | 14 | |
E. | Blank Check Preferred Authorization | 14 | |
F. | Shareholder Proposals Regarding Blank Check Preferred Stock | 14 | |
G. | Adjust Par Value of Common Stock | 14 | |
H. | Preemptive Rights | 15 | |
I. | Debt Restructurings | 15 | |
J. | Share Repurchase Programs | 15 | |
VIII. | Executive and Director Compensation | 15 | |
A. | Equity-Based and Other Incentive Plans | 15 | |
B. | OBRA-Related Compensation Proposals | 16 | |
C. | Proposals Concerning Executive and Director Pay | 16 | |
D. | Golden and Tin Parachutes | 16 | |
E. | Employee Stock Ownership Plans (ESOPs) and Other Broad-Based Employee Stock Plans | 16 | |
F. | 401(k) Employee Benefit Plans | 17 | |
IX. | State of Incorporation | 17 | |
A. | Voting on State Takeover Statutes | 17 | |
B. | Voting on Reincorporation Proposals | 17 | |
X. | Mergers and Corporate Restructurings | 17 | |
A. | Mergers and Acquisitions | 17 | |
B. | Corporate Restructuring | 17 | |
C. | Spin-offs | 17 | |
D. | Asset Sales | 18 | |
F. | Appraisal Rights | 18 | |
G. | Changing Corporate Name | 18 | |
H. | Adjourn Meeting | 18 | |
XI. | Mutual Funds | 18 | |
A. | Election of Trustees | 18 | |
B. | Investment Advisory Agreement | 18 | |
C. | Fundamental Investment Restrictions | 18 | |
D. | Distribution Agreements | 18 | |
XII. | Environmental and Social Issues | 19 | |
A. | Environment | 19 | |
B. | Diversity and Equal Employment Opportunity | 19 | |
C. | Consumer and Product Safety | 20 | |
D. | Supply Chain Management | 20 | |
E. | Animal Welfare | 20 | |
F. | Political and Charitable Contributions | 20 |
ii
Northern Trust
Proxy Voting
Policies and Procedures
These policies and procedures (and the guidelines that follow) apply to the voting of proxies by Northern Trust Corporation affiliates (“Northern Trust”) for accounts over which Northern Trust has been granted proxy voting discretion.
SECTION 1. PROXY VOTING GUIDELINES
The fundamental precept followed by Northern Trust in voting proxies is to ensure that the manner in which shares are voted is in the best interest of clients/beneficiaries and the value of the investment. As used in these policies and procedures the term “clients/beneficiaries” means any person or entity having the legal or beneficial ownership interest, as the case may be, in a trust, custody or investment management account over which Northern Trust has discretionary voting authority.
Absent special circumstances of the types described in these policies and procedures, Northern Trust will generally exercise its proxy voting discretion in accordance with the guidelines set forth below. In situations where the application of Northern Trust’s guidelines would be inappropriate for particular proxy issues of non-U.S. companies due to local market standards, customs and best practices, Northern Trust will instruct its Proxy Voting Service (defined below in Section 3) to provide a vote recommendation based on the Proxy Voting Service’s relevant global guidelines. Examples of such issues include “poison pill” defenses, which are allowed to be approved by a company’s board of directors without shareholder approval in a number of countries, and definitions of director independence, which vary significantly from country to country.
The foregoing domestic and global proxy voting guidelines are collectively referred to in these policies and procedures as the “Proxy Guidelines”.
SECTION 2. PROXY COMMITTEE
Northern Trust’s Proxy Committee has responsibility for the content, interpretation and application of the Proxy Guidelines. Membership of the Proxy Committee consists of a group of senior Northern Trust investment and compliance officers. Meetings of the Proxy Committee may be called by the Chairperson or, in his or her absence, by any two committee members. Meetings may be conducted in person or telephonically. A majority of committee members present (in person or by proxy) will constitute a quorum for the transacting of business at any meeting. The approval of proxy votes or changes to these policies and procedures or the Proxy Guidelines may be made by majority vote of those present (in person or by proxy) at a meeting called for that purpose. Alternatively, the Committee may approve proxy votes or changes to these policies and procedures or the Proxy Guidelines by a majority vote communicated telephonically (without a meeting) or electronically, provided that any action so approved is properly documented and reflected in minutes of the next meeting of the Committee.
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SECTION 3. PROXY VOTING SERVICE
Northern Trust has delegated to an independent third party proxy voting service (“Proxy Voting Service”), the responsibility to review proxy proposals and to make voting recommendations to the Proxy Committee in a manner consistent with the Proxy Guidelines. For proxy proposals that under the Proxy Guidelines are to be voted on a case by case basis, Northern Trust provides supplementary instructions to the Proxy Voting Service to guide it in making vote recommendations. Northern Trust has instructed the Proxy Voting Service not to exercise any discretion in making vote recommendations and to seek guidance whenever it encounters situations that are either not covered by the Proxy Guidelines or where application of the Proxy Guidelines is unclear. In the event that the Proxy Voting Service does not or will not provide recommendations with respect to proxy proposals for securities over which Northern Trust or its affiliates have voting discretion, the relevant proxy analyst at Northern Trust responsible for the issuer or its business sector shall be responsible for reviewing the proxy proposal and making a voting recommendation to the Proxy Committee consistent with the Proxy Guidelines.
The Proxy Committee will review the Proxy Voting Service on an annual basis. In connection with that review, it will assess: (1) the Proxy Voting Service’s capacity and competency in analyzing proxy issues; (2) the adequacy of the Proxy Voting Service’s staffing and personnel; (3) whether the Proxy Voting Service has robust policies and procedures that enable it to make proxy voting recommendations based on current and accurate information; and (4) the Proxy Voting Service’s ability to identify and address any real or potential conflicts of interests that exist or may have existed between the firm and its employees and the voting recommendations it made to Northern Trust. The Proxy Committee will also regularly monitor the Proxy Voting Service by requesting information from the Proxy Service to determine whether any real or potential conflicts of interest exist as a result of changes to the firm’s business or internal policies. The Proxy Voting Service will also be required to proactively communicate any (i) business changes or (ii) changes and updates to the firm’s policies and procedures that could impact the adequacy and quality of the proxy voting services or the firm’s ability to effectively manage conflicts.
SECTION 4. APPLICATION OF PROXY GUIDELINES
It is intended that the Proxy Guidelines will be applied with a measure of flexibility. Accordingly, except as otherwise provided in these policies and procedures, the Proxy Committee may vote proxies contrary to the recommendations of the Proxy Voting Service, or, in the circumstances described in Section 3 above, a Northern Trust proxy analyst, if it determines such action to be in the best interests of Northern Trust clients/beneficiaries. In the exercise of such discretion the Proxy Committee may take into account a wide array of factors relating to the matter under consideration, the nature of the proposal, and the company involved. As a result, a proxy may be voted in one manner in the case of one company and in a different manner in the case of another where, for example, the past history of the company, the character and integrity of its management, the role of outside directors, and the company’s record of producing performance for investors justifies a high degree of confidence in the company and the effect of the proposal on the value of the investment. Similarly, poor past performance, uncertainties about management and future directions, and other factors may lead to a conclusion that particular proposals present unacceptable investment risks and should not be supported. In addition, the proposals should be evaluated in context. For example, a particular proposal may be acceptable standing alone, but objectionable when part of an existing or proposed package, such as where the effect may be to entrench management. Special circumstances may also justify casting different votes for different clients/beneficiaries with respect to the same proxy vote.
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The Proxy Committee will document the rationale for any proxy voted contrary to the recommendation of the Proxy Voting Service or, in the circumstances described in Section 3 above, a Northern Trust proxy analyst.
SECTION 5. MATERIAL CONFLICTS OF INTEREST
Northern Trust has sought to address proxy related conflicts of interest in various ways, including the establishment, composition and authority of the Proxy Committee, and the delegation of primary responsibility for proxy review and vote recommendation functions to the Proxy Voting Service. For these reasons, the potential for conflicts of interest in the voting of proxies generally arises only where the Proxy Committee is considering the possibility of voting in a manner contrary to a vote recommendation received from the Proxy Voting Service or where the Proxy Voting Service has not provided a vote recommendation. In these situations, the Proxy Committee will need to determine whether a material conflict of interest exists. For example, a material conflict of interest could arise when a proxy relates to the following non-exclusive types of issues:
● | Securities issued by Northern Trust Corporation or its affiliates. |
● | Matters in which Northern Trust has a direct financial interest (such as shareholder approval of a change in mutual fund advisory fees where Northern Trust is the fund advisor). |
● | Instances where Northern Trust, its board members, executive officers, and/or others maintain relationships with the issuers of securities, proponents of shareholder proposals, participants in proxy contests, corporate directors or candidates for directorships. |
● | Instances where an attempt has been made to directly or indirectly influence the voting recommendation that is made. |
Where the Proxy Committee determines that it is subject to a material conflict of interest, it may resolve the conflict in any of the following ways, which may vary, consistent with its duty of loyalty and care, depending on the facts and circumstances of each situation and the requirements of applicable law:
● | Following the vote recommendation of an independent fiduciary appointed for that purpose; |
● | Voting pursuant to client direction; |
● | Abstaining; or |
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● | Voting pursuant to a “mirror voting” arrangement (under which shares are voted in the same manner and proportion as some or all of the other shares not voted by the Proxy Committee). |
SECTION 6. PROXY VOTING RECORDS; CLIENT DISCLOSURES
Northern Trust will maintain the following records relating to proxy votes cast under these policies and procedures:
A. | A copy of these policies and procedures. |
B. | A copy of each proxy statement Northern Trust receives regarding client securities. |
C. | A record of each vote cast by Northern Trust on behalf of a client. |
D. | A copy of any document created by the Proxy Committee that was material to making a decision how to vote proxies on behalf of a client or that memorialized the basis for that decision. |
E. | A copy of each written client request for information on how Northern Trust voted proxies on behalf of the client, and a copy of any written response by Northern Trust to any (written or oral) client request for information on how Northern Trust voted proxies on behalf of the requesting client. |
The foregoing records will be retained for such period of time as is required to comply with applicable laws and regulations. Northern Trust may rely on one or more third parties to make and retain the records referred to in items B. and C. above.
The Proxy Committee will cause copies of the foregoing records, as they relate to particular clients, to be provided to those clients upon request. It is generally the policy of Northern Trust not to disclose its proxy voting records to third parties, except as may be required by applicable laws and regulations.
SECTION 7. ERISA ACCOUNTS
Plans governed by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), are to be administered consistent with the terms of the governing plan documents and applicable provisions of ERISA. In cases where sole proxy voting discretion rests with Northern Trust, the foregoing policies and procedures will be followed, subject to the fiduciary responsibility standards of ERISA. These standards generally require fiduciaries to act prudently and to discharge their duties solely in the interests of participants and beneficiaries. The Department of Labor has indicated that the voting decisions of ERISA fiduciaries must generally focus on the course that would most likely increase the value of the stock being voted.
The documents governing ERISA individual account plans may set forth various procedures for voting “employer securities” held by the plan. Where authority over the investment of plan assets is granted to plan participants, many individual account plans provide that proxies for employer securities will be voted in accordance with directions received from plan participants as to shares allocated to their plan accounts. In some cases, the governing plan documents may further provide that unallocated shares and/or allocated shares for which no participant directions are received will be voted in accordance with a proportional voting method in which such shares are voted proportionately in the same manner as are allocated shares for which directions from participants have been received. Consistent with Labor Department positions, it is the policy of Northern Trust to follow the provisions of a plan’s governing documents in the voting of employer securities unless it determines that to do so would breach its fiduciary duties under ERISA.
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SECTION 8. MUTUAL FUNDS
Proxies of registered management investment companies will be voted subject to any applicable investment restrictions of the fund and, to the extent applicable, in accordance with any resolutions or other instructions approved by authorized persons of the fund.
SECTION 9. OTHER SPECIAL SITUATIONS
Proxies of funds or accounts that specify the use of proxy guidelines other than the Proxy Guidelines will be voted in accordance with these other guidelines. Northern Trust may choose not to vote proxies in certain situations or for certain accounts either where it deems the cost of doing so to be prohibitive or where the exercise of voting rights could restrict the ability of an account’s portfolio manager to freely trade the security in question. For example, in accordance with local law or business practices, many foreign companies prevent the sales of shares that have been voted for a certain period beginning prior to the shareholder meeting and ending on the day following the meeting (“share blocking”). Due to these restrictions, Northern Trust must balance the benefits to its clients of voting proxies against the potentially serious portfolio management consequences of a reduced flexibility to sell the underlying shares at the most advantageous time. For companies in countries with share blocking periods, the disadvantage of being unable to sell the stock regardless of changing conditions generally outweighs the advantages of voting at the shareholder meeting for routine items. Accordingly, Northern Trust will not vote those proxies in the absence of an unusual, significant vote. Various accounts over which Northern Trust has proxy voting discretion participate in securities lending programs administered by Northern Trust or a third party. Because title to loaned securities passes to the borrower, Northern Trust will be unable to vote any security that is out on loan to a borrower on a proxy record date. If Northern Trust has investment discretion, however, it reserves the right of the portfolio manager to instruct the lending agent to terminate a loan in situations where Northern Trust believes the benefits of voting the security outweigh the costs of terminating the loan, consistent with the terms and conditions of Northern Trust’s procedures for recall of securities out on loan. In such instances, Northern Trust shall recall the shares on loan on a best efforts basis.
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Northern Trust
Proxy Voting Guidelines
I. | The Board of Directors |
A. | Voting on Director Nominees in Uncontested Elections |
Northern Trust generally votes for director nominees in uncontested elections absent countervailing factors such as a lack of director independence (see below), chronic, unjustified absenteeism, concerns regarding the inattentiveness of the nominee, including the number of public company boards on which the nominee sits, and if the nominee sits on an audit, compensation or risk committee, concerns regarding the actions taken by such committees.
B. | Director Independence |
For any situations not already covered by a rule or regulation, Northern Trust will generally vote for shareholder proposals requesting that the board of a company be comprised of a majority of independent directors and will generally vote against shareholder proposals requesting that the board of a company be comprised of a supermajority of independent directors. Northern Trust generally votes for shareholder proposals that request that the board audit, compensation and/or nominating committees include independent directors exclusively and withholds votes for the election of non-independent directors serving on an audit, compensation or nominating committee or board.
Northern Trust generally leaves the choice of chairman to the board’s discretion as Northern Trust’s support for proposals that principal committees consist exclusively of independent directors and that the board be comprised of a majority of independent directors provides sufficient checks and balances. However, Northern Trust will vote case by case on whether to support shareholder resolutions seeking the separation of chairman and CEO in circumstances where shareholder interests may be better served by having an independent chair. Such circumstances may include, during periods of organizational re-structuring, during periods of sustained under performance relative to peers, during a period of leadership transition, or where concerns arise as to the sufficiency of independence the board has from management.
Northern Trust generally supports the listing standards or local market practice on non-executive director independence. Northern Trust may apply a stricter standard for director independence at companies that exhibit poor governance practices. A non-executive director in these instances would not be considered independent if he or she:
● | Has been an employee of the company within the last five years; |
● | Has, or has had within the last three years, a material business relationship with the company; |
● | Is a company founder; |
● | Represents a significant shareholder; or |
● | Has close family ties with any of the company’s advisers, directors, or senior employees. |
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C. | Director Attendance |
Northern Trust will vote case by case on individual directors who attend fewer than 75 percent of board and board-committee meetings for two consecutive years.
D. | Lead Independent Director |
Northern Trust generally votes for shareholder proposals in support of the appointment of a lead independent director.
Northern Trust expects the role of the lead independent director to be set out within the board’s governance charter, with clearly defined powers that should include at minimum the ability to:
● | serve as a liaison between the company’s independent directors and the CEO; |
● | lead the annual evaluation of the CEO’s performance and the annual evaluation of the independent board of directors; |
● | be available for consultation and direct communication with major stockholders, if they so request; |
● | approve meeting agendas for the board and the nature of information sent to the board; |
● | call a special meeting of the board or a special executive session of the independent directors; and |
● | add items to the agenda of any regular or special meeting of the board deemed necessary or advisable. |
E. | Overboarding Issues |
Northern Trust generally votes against a director nominee if it is a CEO who sits on more than two public boards or a non-CEO who sits on more than four public boards.
F. | Diversity |
Companies benefit from a wide diversity of perspectives and backgrounds on their boards. The board should reflect the diversity of the workforce and society, ensuring that a variety of viewpoints are represented in corporate decision-making. Northern Trust believes that an effective board should be comprised of directors with a mix of skills and experience to ensure the Board has the necessary tools to perform its oversight function effectively; this includes diversity of background, experience, age, race, gender, ethnicity, and culture. Northern Trust may vote against one or more directors where we have concerns relating to the composition and diversity of the board.
G. | Stock Ownership Requirements |
Northern Trust generally votes against shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director, or to remain on the board.
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H. | Board Evaluation and Refreshment |
The board needs to ensure that it is positioned to change and evolve with the needs of the company. Boards should, on at least an annual basis, formally evaluate the CEO, the board as a whole, and individual directors. Evaluation of the board as a whole should consider the balance of skills, experience, independence, and knowledge of the company on the board relative to the company’s long-term strategic plan. Evaluation of the board should also consider the board’s diversity, including gender, how the board works together as a unit, and other factors relevant to its effectiveness. Individual evaluation should aim to show whether each director continues to contribute effectively and to demonstrate commitment to the role.
We expect the board to disclose in its annual report or proxy statement how performance evaluation of the board, its committees and its individual directors has been conducted. Northern Trust may vote against the independent chair, lead independent director or presiding director in circumstances where the board appears to lack mechanisms to promote accountability and oversight, coupled with sustained poor performance relative to peers.
Northern Trust does not consider mandatory retirement age caps or term limits to be appropriate in circumstances where shareholder interests may be better served by a longer-serving non- executive director remaining on the board. For example during periods of organizational re- structuring or CEO/Chairman transition where constructive challenge from a longer serving non- executive director may be beneficial in the context of overall board composition and experience.
Northern Trust will generally vote against shareholder proposals to impose age and term limits unless the company is found to have poor board refreshment and director succession practices. Northern Trust will scrutinize boards that have a preponderance of non-executive directors with excessive long-tenures to ensure that new perspectives are being added to the board and that the board remains sufficiently independent from management.
I. | Director and Officer Indemnification and Liability Protection |
Proposals concerning director and officer indemnification and liability protection are evaluated on a case by case basis. Northern Trust generally votes for proposals providing indemnification protection to officers and directors, and for proposals limiting the liability of officers and directors for monetary damages, provided such proposals do not appear to conflict with applicable law and cover only future actions.
II. | Proxy Contests |
A. | Voting for Director Nominees in Contested Elections |
Votes in a contested election of directors are evaluated on a case by case basis, considering the following factors:
● | Long-term financial performance of the target company relative to its industry; |
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● | Management's track record; |
● | Background to the proxy contest; |
● | Qualifications of director nominees (both slates); |
● | Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; |
● | Stock ownership positions; and |
● | Environmental, Social and Governance (ESG) performance. |
B. | Reimburse Proxy Solicitation Expenses |
Decisions to provide full reimbursement for dissidents waging a proxy contest are made on a case by case basis. Northern Trust will generally support such proposals in cases where (i) Northern Trust votes in favor the dissidents, and (ii) the proposal is voted on the same proxy as the dissident slate and, as such, is specifically related to the contested proxy at issue.
Northern Trust generally votes for proposals allowing shareholders to elect replacements and fill vacancies.
III. | Auditors |
A. | Ratifying Auditors |
Northern Trust generally votes for proposals to ratify auditors, unless: an auditor has a financial interest in or association with the company, and is therefore not independent; or there is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position.
Northern Trust generally vote against auditor ratification and incumbent members of the Audit Committee if non-audit fees are excessive in relation to audit-related fees without adequate explanation.
Northern Trust generally votes against shareholder proposals that seek to restrict management’s ability to utilize selected auditors, subject to the qualifications set forth above.
IV. | Proxy Contest Defenses |
A. | Board Structure: Staggered vs. Annual Elections |
Northern Trust generally votes against proposals to classify the board and for proposals to repeal classified boards and to elect all directors annually.
B. | Shareholder Ability to Remove Directors |
Northern Trust generally votes for proposals that provide that directors may be removed only for cause.
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Northern Trust generally votes for proposals allowing shareholders to elect replacements and fill vacancies.
C. | Cumulative Voting |
Northern Trust generally votes against proposals to eliminate cumulative voting, unless such proposals are intended to effectuate a majority voting policy.
Northern Trust generally votes for proposals to institute cumulative voting, unless the company has previously adopted a majority voting policy, or a majority voting shareholder proposal, consistent with Northern Trust’s majority voting guidelines, is on the ballot at the same time as the cumulative voting proposal, in which case Northern Trust generally votes against such cumulative voting proposals.
D. | Majority Voting |
In analyzing shareholder proposals calling for directors in uncontested elections to be elected by an affirmative majority of votes cast, Northern Trust focuses on whether or not the company has adopted a written majority voting (or majority withhold) policy that provides for a meaningful alternative to affirmative majority voting.
In cases where companies have not adopted a written majority voting (or majority withhold) policy, Northern Trust generally votes for shareholder majority voting proposals.
In cases where companies have adopted a written majority voting (or majority withhold) policy, Northern Trust generally votes against shareholder majority voting proposals, provided that the policy is set forth in the company's annual proxy statement and either:
● | Requires nominees who receive majority withhold votes to tender their resignation to the board; |
● | Sets forth a clear and reasonable timetable for decision-making regarding the nominee's status; and |
● | Does not contain any specific infirmities that would render it an ineffective alternative to an affirmative majority voting standard or otherwise provides a meaningful alternative to affirmative majority voting. |
In determining the adequacy of a company's majority voting (or majority withhold) policy, Northern Trust may also consider, without limitation, any factors set forth in the policy that are to be taken into account by the board in considering a nominee's resignation and the range of actions open to the board in responding to the resignation (e.g., acceptance of the resignation, maintaining the director but curing the underlying causes of the withheld votes, etc.).
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E. | Shareholder Ability to Call Special Meetings |
Northern Trust generally votes for proposals to restrict or prohibit shareholder ability to call special meetings, but may vote against such proposals and in favor of shareholder proposals to allow shareholders to call special meetings, taking into consideration the minimum ownership requirement called for in the resolution, existing shareholder rights mechanisms (e.g., proxy access, right to act by written consent, dual-class stock provisions and voting rights, quorum requirements on certain provisions, ability to amend bylaw and charter agreements, etc.), and the company’s overall record of responsiveness to shareholder concerns.
F. | Shareholder Ability to Act by Written Consent |
Northern Trust generally votes against shareholder proposals allowing shareholders to take action by written consent. Northern Trust will review on a case by case basis management proposals allowing shareholders to take action by written consent.
G. | Shareholder Ability to Alter the Size of the Board |
Northern Trust generally votes against proposals limiting management’s ability to alter the size of the board.
V. | Tender Offer Defenses |
A. | Poison Pills |
Northern Trust generally votes for shareholder proposals that ask a company to submit its poison pill for shareholder ratification.
Northern Trust will review on a case by case basis management proposals to ratify a poison pill.
B. | Fair Price Provisions |
Northern Trust will review votes on a case by case on fair price proposals, taking into consideration whether the shareholder vote requirement embedded in the provision is no more than a majority of disinterested shares.
Northern Trust generally votes for shareholder proposals to lower the shareholder vote requirement in existing fair price provisions.
C. | Greenmail |
Northern Trust generally votes for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company's ability to make greenmail payments.
Northern Trust votes anti-greenmail proposals on a case by case basis when they are bundled with other charter or bylaw amendments.
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D. | Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws |
Northern Trust generally votes against management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments.
Northern Trust generally votes for shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments.
E. | Supermajority Shareholder Vote Requirement to Approve Mergers |
Northern Trust generally votes against management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations, while taking into account ownership structure, quorum requirements, and vote requirements.
Northern Trust generally votes for shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations, while taking into account ownership structure, quorum requirements, and vote requirements.
VI. | Miscellaneous Governance Provisions |
A. | Confidential Voting |
Northern Trust generally votes for proposals requiring confidential voting and independent vote tabulators.
B. | Bundled Proposals |
Northern Trust votes on a case by case basis bundled or "conditioned" proxy proposals. In the case of items that are conditioned upon each other, we examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests, we vote against the proposals. If the combined effect is positive, we support such proposals.
C. | Shareholder Advisory Committees |
Northern Trust votes on a case by case basis, proposals to establish a shareholder advisory committee.
D. | Board of Directors Failure to Respond to Certain Majority Approved Shareholder Proposals |
Northern Trust votes on a case by case basis on whether to withhold votes from certain directors in the event the board of directors has failed to adequately respond to a majority approved shareholder proposal. Northern Trust will generally not withhold votes from directors in cases where Northern Trust previously voted against the majority approved shareholder proposal. In cases where Northern Trust previously voted in favor of the majority approved shareholder proposal, it will first determine whether it is appropriate under the circumstances to withhold votes from any directors, and if it determines that such action is appropriate it will then determine the director or directors from which votes should be withheld. Factors that will be taken into consideration include the documented response of the board, if any, concerning its action or inaction relating to the relevant shareholder proposal, whether particular board members served on a committee that was responsible for determining a response to the shareholder proposal, the importance of retaining particular directors or groups of directors to protect shareholder value, and such other factors as Northern Trust may deem appropriate.
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E. | Board of Directors Failure to Adequately Respond to Rejected Board Compensation Proposals |
Northern Trust votes on a case by case basis on whether to withhold votes from certain directors in the event the board of directors has not adequately responded to situations in which board proposals for approval of executive compensation have failed to receive majority shareholder approval.
F. | Compensation Committee Failure to Adequately Address Pay for Performance |
Northern Trust votes on a case by case basis on whether to withhold votes from the certain directors of the compensation committee during a period in which executive compensation appears excessive relative to performance and peers.
G. | ESG Failures |
Northern Trust votes on a case by case basis on whether to withhold from certain directors due to material failures of governance, stewardship, risk oversight or fiduciary responsibilities at the company, including failure to adequately guard against or manage ESG risks.
H. | Succession Policies |
Northern Trust generally votes for proposals seeking disclosure on a CEO succession planning policy, considering the scope of the request and the company’s existing disclosure on its current CEO succession planning process.
I. | Proxy Access |
Northern Trust votes on a case by case basis on proxy access proposals. Northern Trust will consider a number of factors, including the company’s performance, the performance of the company’s board, the ownership thresholds and holding duration contained in the resolution and the proportion of directors that shareholders may nominate each year.
J. | Other Business |
Northern Trust opposes Other Business proposals where shareholders do not have the opportunity to review and understand the details of the proposal.
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VII. | Capital Structure |
A. | Common Stock Authorization |
Northern Trust votes on a case by case basis, proposals to increase the number of shares of common stock authorized for issue.
B. | Stock Distributions: Splits and Dividends |
Northern Trust generally allows for management discretion on matters related to stock distributions, such as stock splits and stock dividends.
C. | Unequal Voting Rights |
Northern Trust believes that voting rights should align with the shareholders’ economic interests in the company. As such, Northern Trust will generally vote against multi class exchange offers and multi class recapitalizations. If a company has a pre-existing multi class voting structure with superior voting rights, Northern Trust expects the company to develop and implement a sunset provision. If no sunset provision is disclosed, Northern Trust may vote against the relevant committee member.
D. | Reverse Stock Splits |
Northern Trust generally votes for management proposals to implement a reverse stock split, provided that the reverse split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the reverse split.
E. | Blank Check Preferred Authorization |
Absent special circumstances (e.g., actions taken in the context of a hostile takeover attempt) indicating an abusive purpose, Northern Trust generally votes against proposals that would authorize the creation of new classes of preferred stock with unspecified voting, conversion, dividend and distribution, and other rights, stock unless the voting, conversion, dividend and distribution, and other rights are specified and the voting rights are limited to one vote per share.
F. | Shareholder Proposals Regarding Blank Check Preferred Stock |
Northern Trust generally votes for shareholder proposals requiring blank check preferred stock placements to be submitted for shareholder ratification unless the shares are to be issued for the purpose of raising capital or making acquisitions.
G. | Adjust Par Value of Common Stock |
Northern Trust generally votes for management proposals to reduce the par value of common stock, while taking into account accompanying corporate governance concerns.
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H. | Preemptive Rights |
Northern Trust reviews on a case by case basis, proposals to create or abolish preemptive rights. In evaluating proposals on preemptive rights, we look at the size of a company and the characteristics of its shareholder base. We generally oppose preemptive rights for publicly-held companies with a broad stockholder base.
I. | Debt Restructurings |
Northern Trust reviews on a case by case basis, proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan. We consider the following issues:
● | Dilution -- How much will ownership interest of existing shareholders be reduced, and how extreme will dilution to any future earnings be? |
● | Change in Control -- Will the transaction result in a change in control of the company? |
● | Bankruptcy -- Is the threat of bankruptcy, which would result in severe losses in shareholder value, the main factor driving the debt restructuring? |
Generally, we approve proposals that facilitate debt restructurings unless there are clear signs of self-dealing or other abuses.
J. | Share Repurchase Programs |
Northern Trust generally votes for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.
VIII. | Executive and Director Compensation |
A. | Equity-Based and Other Incentive Plans |
Northern Trust believes that equity-based awards should align the economic interests of management, directors and employees with those of shareholders and votes case by case taking into account all relevant material facts and circumstances, including the total estimated cost of the company’s equity plan relative to its peers. Northern Trust will generally oppose new plans, or amendments to an existing plan, where:
● | The company’s three year average burn rate exceeds 2% and exceeds an amount that is one standard deviation in excess of its GICS industry mean (segmented by Russell 3000 and non-Russell 3000 companies). A company that exceeds both the foregoing three year average burn rates amounts can avoid a negative vote if it commits in a public filing to maintain a burn rate over the next three fiscal years that is no higher than one standard deviation in excess of its industry mean as calculated at the time of the proposal. |
● | The absolute change in ownership interest would be significantly reduced, and dilution would have a negative impact to future earnings; |
● | The company has repriced underwater stock options during the past three years; or |
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● | The exercise price is less than 100% of fair market value at the time of grant. |
B. | OBRA-Related Compensation Proposals |
Northern Trust generally votes for the approval and amendment of plans for the purposes of complying with the provisions of Section 162(m) of OBRA.
C. | Proposals Concerning Executive and Director Pay |
Northern Trust generally votes for shareholder proposals that request a company to adopt an annual advisory vote on executive compensation.
Northern Trust votes on a case by case basis on shareholder advisory votes concerning the compensation of named executive officers, taking into account pay structure in relation to firm performance, problematic governance practices, and the company’s overall transparency and level of responsiveness to shareholder concerns. Northern Trust may, where appropriate, utilize a proprietary compensation scorecard model, in addition to company disclosures and outside research to arrive at a final decision. The scorecard considers factors including, but not limited to, profitability measures, overall pay of the top executive, company size, and historic performance.
Northern Trust will generally vote for an annual frequency of advisory votes on executive compensation unless the company provides a compelling rationale or unique circumstances.
Northern Trust generally votes on a case by case basis all other shareholder proposals that seek additional disclosure of executive and director pay information.
Northern Trust votes on a case by case basis all other shareholder proposals that seek to limit executive and director pay.
D. | Golden and Tin Parachutes |
Northern Trust generally votes for shareholder proposals to have golden and tin parachutes submitted for shareholder ratification.
Northern Trust votes on a case by case basis on shareholder advisory votes concerning the severance packages of named executive officers, taking into account the features of the package and the accompanying restructuring proposal.
E. | Employee Stock Ownership Plans (ESOPs) and Other Broad-Based Employee Stock Plans |
Northern Trust generally votes for proposals to approve an ESOP or other broad-based employee stock purchase or ownership plan, or to increase authorized shares for such existing plans, except in cases when the number of shares allocated to such plans is “excessive” (i.e., generally greater than ten percent (10%) of outstanding shares).
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F. | 401(k) Employee Benefit Plans |
Northern Trust generally votes for proposals to implement a 401(k) savings plan for employees.
IX. | State of Incorporation |
A. | Voting on State Takeover Statutes |
Northern Trust votes on a case by case basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freezeout provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions).
B. | Voting on Reincorporation Proposals |
Proposals to change a company's state of incorporation are examined on a case by case basis.
X. | Mergers and Corporate Restructurings |
A. | Mergers and Acquisitions |
Votes on mergers and acquisitions are considered on a case by case basis, taking into account at least the following:
● | Anticipated financial and operating benefits; |
● | Offer price (cost vs. premium); |
● | Prospects of the combined companies; |
● | How the deal was negotiated; and |
● | ESG governance and their impact. |
Northern Trust generally votes on a case by case basis in cases where, in connection with a merger or acquisition seeking shareholder approval, a separate shareholder vote is required to approve any agreements or understandings regarding compensation disclosed pursuant to Item 402(t) of Regulation S-K (golden parachute arrangements).
B. | Corporate Restructuring |
Votes on corporate restructuring proposals, including minority squeezeouts, leveraged buyouts, spin-offs, liquidations, and asset sales are considered on a case by case basis.
C. | Spin-offs |
Votes on spin-offs are considered on a case by case basis depending on the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives.
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D. | Asset Sales |
Votes on asset sales are made on a case by case basis after considering the impact on the balance sheet/working capital, value received for the asset, and potential elimination of diseconomies.
E. | Liquidations |
Votes on liquidations are made on a case by case basis after reviewing management's efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation.
F. | Appraisal Rights |
Northern Trust generally votes for proposals to restore, or provide shareholders with, rights of appraisal.
G. | Changing Corporate Name |
Northern Trust generally votes for changing the corporate name.
H. | Adjourn Meeting |
Northern Trust generally supports adjournment proposals that accompany mergers proposals also being supported. Otherwise, Northern Trust will vote against such proposals.
XI. | Mutual Funds |
A. | Election of Trustees |
Votes on trustee nominees are evaluated on a case by case basis.
B. | Investment Advisory Agreement |
Votes on investment advisory agreements are evaluated on a case by case basis.
C. | Fundamental Investment Restrictions |
Votes on amendments to a fund’s fundamental investment restrictions are evaluated on a case by case basis.
D. | Distribution Agreements |
Votes on distribution agreements are evaluated on a case by case basis.
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XII. | Environmental and Social Issues |
A. | Environment |
Northern Trust upholds environmental stewardship and recognizes that we all are stakeholders in the future of our global environment. Environmental factors increasingly represent significant operational risks and costs to business. At Northern Trust, our primary objective as an asset manager is to create long-term value for our clients. As a major global investor, Northern Trust has interest in how shareholder value is affected by a company’s management and impact on the natural and social environment, and recognizes that a well-developed environmental and social management system can enhance shareholder value in the long-term. We generally encourage reporting that is not unduly costly or burdensome and which does not place the company at a competitive disadvantage, but which provides meaningful information to enable shareholders to evaluate the impact of the company’s environmental policies and practices on its financial performance.
Northern Trust generally votes for proposals requesting increased disclosure regarding the environmental impact of a company’s operations and products and initiatives to curtail these risks, unless sufficient information has been disclosed to shareholders or is otherwise publicly available.
Northern Trust generally votes for proposals requesting the issuance of corporate sustainability reports, as well as disclosure, where relevant, concerning the emission of greenhouse gasses and the use of fracturing in connection with the extraction of natural gasses.
Northern Trust votes case by case for proposals requesting the adoption of GHG reduction goals from products and operations.
Northern Trust generally votes for proposals requesting the issuance of reports by a company detailing its energy efficiency plans.
B. | Diversity and Equal Employment Opportunity |
Northern Trust generally votes for proposals advocating the elimination of workplace discrimination based on sexual orientation or gender identity.
Northern Trust generally votes for proposals requesting that a company take reasonable steps to ensure that women and minority candidates are in the pool from which board nominees are chosen or that request that women and minority candidates are routinely sought as part of every board search the company undertakes.
Northern Trust votes case by case on proposals requesting the issuance of a diversity report, including summary description of policies and programs to oriented toward increasing diversity or requests to disclose a comprehensive breakdown of workforce by race and gender.
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C. | Consumer and Product Safety |
Northern Trust generally votes for proposals that request a report or assessment of the safety of a company’s operations and a company’s products and services and efforts to promote their safe use.
Northern Trust generally votes for proposals requesting increased disclosure of a company’s policies and procedures for managing and mitigating risks related to cyber security and data privacy.
D. | Supply Chain Management |
Northern Trust votes case by case for proposals requesting increased disclosure on a company’s supply chain policies and processes and its management of related risks.
E. | Animal Welfare |
Northern Trust generally votes for proposals requesting increased disclosure or reporting regarding animal treatment issues that may impact a company’s operations and products, especially in relation to food production, unless sufficient information on that topic has already been disclosed to shareholders or is otherwise publicly available.
F. | Political and Charitable Contributions |
Northern Trust will generally vote for proposals to publish a company’s political or lobbying contributions, taking into consideration recent, significant controversies, fines or litigation regarding the company’s political contributions or trade association spending.
Northern Trust generally votes against shareholder proposals to eliminate, direct, or otherwise restrict charitable contributions.
In other social and environmental issues, Northern Trust generally supports the position of a company’s board of directors when voting on shareholder initiated social and environmental proposals. Although Northern Trust acknowledges that the economic and social considerations underlying such proposals are often closely intertwined, we believe that in most cases the management group and elected directors are best positioned to make corporate decisions on these proposals.
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Nuveen Proxy Voting Policy
Policy Purpose and Statement
Proxy voting is the primary means by which shareholders may influence a publicly traded company's governance and operations and thus create the potential for value and positive long-term investment performance. When an SEC registered investment adviser has proxy voting authority, the adviser has a fiduciary duty to vote proxies in the best interests of its clients and must not subrogate its clients’ interests to its own. In their capacity as fiduciaries and investment advisers, Nuveen Asset Management, LLC (“NAM”), Teachers Advisors, LLC (“TAL”) and TIAA-CREF Investment Management, LLC (“TCIM”), (each an “Adviser” and, collectively, the “Advisers”), vote proxies for the Portfolio Companies held by their respective clients, including investment companies and other pooled investment vehicles, institutional and retail separate accounts, and other clients as applicable. The Advisers have adopted this Policy, the Nuveen Proxy Voting Guidelines, and the Nuveen Proxy Voting Conflicts of Interest Policy for voting the proxies of the Portfolio Companies they manage. The Advisers leverage the expertise and services of an internal group referred to as Nuveen’s Stewardship Group to administer the Advisers’ proxy voting. The Stewardship Group adheres to the Advisers’ Proxy Voting Guidelines which are reasonably designed to ensure that the Advisers vote client securities in the best interests of the Advisers’ clients.
Applicability
This Policy applies to employees of Nuveen acting on behalf of Nuveen Asset Management, LLC, (“NAM”),Teachers Advisors, LLC, (“TAL”) and TIAA-CREF Investment Management, LLC (“TCIM”), each an “Adviser” and, collectively, referred to as the “Advisers”)
Policy Statement
Proxy voting is a key component of a Portfolio Company’s corporate governance program and is the primary method for exercising shareholder rights and influencing the Portfolio Company’s behavior. Nuveen makes informed voting decisions in compliance with Rule 206(4)-6 (the “Rule”) of the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and applicable laws and regulations, (e.g., the Employee Retirement Income Security Act of 1974, “ERISA”).
Enforcement
As provided in the TIAA Code of Business Conduct, all employees are expected to comply with applicable laws and regulations, as well as the relevant policies, procedures and compliance manuals that apply to Nuveen’s business activities. Violation of this Policy may result in disciplinary action up to and including termination of employment.
Terms and Definitions
Advisory Personnel includes the Adviser’s portfolio managers and research analysts.
Proxy Voting Guidelines (the ‘’Guidelines’’) are a set of pre-determined principles setting forth the manner in which the Advisers intend to vote on specific voting categories, and serve to assist clients, Portfolio Companies, and other interested parties in understanding how the Advisers intend to vote on proxy-related matters. The Guidelines are not exhaustive and do not necessarily dictate how the Advisers will ultimately vote with respect to any proposal or resolution. While the Guidelines are developed, maintained, and implemented by the Stewardship Group, and reviewed by the Nuveen Proxy Voting Committee, the portfolio managers of the Advisers maintain the ultimate decision-making authority with respect to how proxies will be voted.
Portfolio Company includes any publicly traded company held in an account that is managed by an Adviser.
Policy Requirements
Investment advisers, in accordance with the Rule, are required to (i) adopt and implement written policies and procedures that are reasonably designed to ensure that proxies are voted in the best interest of clients, and address resolution of material conflicts that may arise, (ii) describe their proxy voting procedures to their clients and provide copies on request, and (iii) disclose to clients how they may obtain information on how the Advisers voted their proxies.
The Nuveen Proxy Voting Committee (the “Committee”), the Advisers, the Stewardship Group and Nuveen Compliance are subject to the respective requirements outlined below under Roles and Responsibilities.
Although it is the general policy to vote all applicable proxies received in a timely fashion with respect to securities selected by an Adviser for current clients, the Adviser may refrain from voting in certain circumstances where such voting would be disadvantageous, materially burdensome or impractical, or otherwise inconsistent with the overall best interest of clients.
Roles and Responsibilities
Nuveen Proxy Voting Committee
The purpose of the Committee is to establish a governance framework to oversee the proxy voting activities of the Advisers in accordance with the Policy. The Committee’s voting members will be comprised from Research, the Advisers, and Nuveen’s Stewardship Group. Non-voting members will be comprised from Nuveen Legal, Nuveen Compliance, Nuveen Advisory Product, and Nuveen Investment Risk. The Committee may invite others on a standing, routine and/or or ad hoc basis to attend Committee meetings. The CCOs of CREF/TC Funds and the Nuveen Funds shall be standing, non-voting invitees. The Committee has delegated responsibility for the implementation and ongoing administration of the Policy to the Stewardship Group, subject to the Committee’s ultimate oversight and responsibility as outlined in the Committee’s Proxy Voting Charter.
Advisers
1. | Advisory Personnel maintain the ultimate decision-making authority with respect to how proxies will be voted, unless otherwise instructed by a client, and may determine to vote contrary to the Guidelines and/or a vote recommendation of the Stewardship Group if such Advisory Personnel determines it is in the best interest of the Adviser’s clients to do so. The rationale for all such contrary vote determinations will be documented and maintained. |
2. | When voting proxies for different groups of client accounts, Advisory Personnel may vote proxies held by the respective client accounts differently depending on the facts and circumstances specific to such client accounts. The rationale for all such vote determinations will be documented and maintained. |
3. | Advisory Personnel must comply with the Nuveen Proxy Voting Conflicts of Interest Policy with respect to potential material conflicts of interest. |
Nuveen Stewardship Group
1. | Performs day-to-day administration of the Advisers’ proxy voting processes. |
2. | Seeks to vote proxies in adherence to the Guidelines, which have been constructed in a manner intended to align with the best interests of clients. In applying the Guidelines, the Stewardship Group, on behalf of the Advisers, takes into account several factors, including, but not limited to: |
● | Input from Advisory Personnel |
● | Third party research |
● | Specific Portfolio Company context, including environmental, social and governance practices, and financial performance. |
3. | Assists in the development of securities lending recall protocols in cooperation with the Securities Lending Committee. |
4. | Performs Form N-PX filings in accordance with regulatory requirements. |
5. | Delivers copies of the Advisers’ Policy to clients and prospective clients upon request in a timely manner, as appropriate. |
6. | Assists with the disclosure of proxy votes as applicable on corporate websites and elsewhere as required by applicable regulations. |
7. | Prepares reports of proxies voted on behalf of the Advisers’ investment company clients to their Boards or committees thereof, as applicable. |
8. | Performs an annual vote reconciliation for review by the Committee. |
9. | Arranges the annual service provider due diligence, including a review of the service provider’s potential conflicts of interests, and presents the results to the Committee. |
10. | Facilitates quarterly Committee meetings, including agenda and meeting minute preparation. |
11. | Complies with the Nuveen Proxy Voting Conflicts of Interest Policy with respect to potential material conflicts of interest. |
12. | Creates and retains certain records in accordance with Nuveen’s Record Management program. |
13. | Oversees the proxy voting service provider with respect to its responsibilities, including making and retaining certain records as required under applicable regulation. |
Nuveen Compliance
1. | Seeks to ensure proper disclosure of Advisers’ Policy to clients as required by regulation or otherwise. |
2. | Seeks to ensure proper disclosure to clients of how they may obtain information on how the Advisers voted their proxies. |
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3. | Assists the Stewardship Group with arranging the annual service provider due diligence and presenting the results to the Committee. |
4. | Monitors for compliance with this Policy and retains records relating to its monitoring activities pursuant to Nuveen’s Records Management program. |
Nuveen Legal
1. Provide legal guidance as requested.
Governance
Review and Approval
This Policy will be reviewed at least annually and will be updated sooner if substantive changes are necessary. The Policy Owner, the Committee and the NEFI Compliance Committee are responsible for the review and approval of this Policy.
Implementation
Nuveen has established the Committee to provide centralized management and oversight of the proxy voting process administered by the Stewardship Group for the Advisers in accordance with its Proxy Voting Committee Charter and this Policy.
Exceptions
Any request for a proposed exception or variation to this Policy will be submitted to the Committee for approval and reported to the appropriate governance committee(s), where appropriate.
Related Documents
● | Nuveen Proxy Voting Committee Charter |
● | Nuveen Proxy Voting Guidelines |
● | Nuveen Proxy Voting Conflicts of Interest Policy and Procedures |
● | Nuveen Policy Statement on Responsible Investing |
Policy Adoption Date | February 3, 2020 |
Effective Date of Current | December 18, 2023 |
Policy/Last Date Reviewed | |
Governance | NEFI Compliance Committee |
Policy Owner | Nuveen Proxy Voting Committee |
Policy Leader | Nuveen Compliance |
G-3250864P-E1123W
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Proxy Voting Policy Summary
Version Date: 02/01/2024
Policy. River Road Asset Management, LLC’s (“River Road”) exercises discretionary voting authority over proxies issued on securities held in client accounts unless the client has explicitly reserved voting authority or has directed River Road to vote pursuant to the client’s voting policy. River Road, as a matter of policy and as a fiduciary to our clients, votes proxies for client securities consistent with the best economic interests of the clients. River Road maintains written policies and procedures as to the handling, research, voting and reporting of proxy voting. River Road has established the Proxy Voting Policy Committee for reviewing voting guidelines and special issues. River Road’s compliance department oversees the operational and procedural aspects of the proxy voting process. Additionally, to help discharge its duties, River Road uses Glass Lewis & Co. (“Glass Lewis”) as its voting agent. Glass Lewis performs the following services:
● | provides analysis of proxy proposals, |
● | tracks and receives proxies for which River Road clients are entitled to vote, |
● | votes the proxies as directed by River Road; and |
● | compiles and provides client voting records. |
Voting Process. River Road will generally instruct Glass Lewis to vote proxies pursuant to guidelines adopted by the Proxy Voting Policy Committee at the beginning of each year. If River Road policy recommendation (i.e., the Glass Lewis recommendation in most instances) and the management recommendation for all votes on a ballot are the same, the compliance department will typically vote accordingly. There are limited instances where River Road has (and may in the future) vote differently from the policy and management recommendation.
When the Glass Lewis recommended vote contradicts the recommendation of management, the primary analyst assigned to the stock consults with the relevant portfolio manager(s) and reviews the proposal. The analyst and portfolio manager(s) then recommend voting the issue in the way River Road believes is most beneficial to shareholder value. If this vote decision is different than policy recommendation, the rationale is documented and a member of River Road’s ESG investment group and the compliance department reviews and approves the rationale before submitting the final vote.
Conflicts of Interest. River Road has eliminated most conflicts of interest by using an independent third party (Glass Lewis) that votes pursuant to the guidelines adopted by the Proxy Voting Policy Committee or in accordance with River Road’s direction based on the above process. Additionally, River Road’s voting process of voting with policy recommendation and requiring compliance department signoff if voting differently addresses any potential conflict of River Road voting shares for a public company that is also a River Road client or an affiliate of a River Road client. In cases where River Road believes there is an actual or perceived conflict of interest, River Road requires additional steps that may include the following:
i. | documenting the potential conflict of interest; |
ii. | obtaining the prior approval of the Chief Investment Officer and the Chief Compliance Officer; |
iii. | obtaining Proxy Voting Policy Committee review or approval; |
iv. | deferring to the voting recommendation of a third party; |
v. | voting pursuant to client direction (following disclosure of the conflict); |
vi. | abstaining from voting; |
vii. | voting reflectively (in the same proportion and manner as other shareholders); or, |
viii. | taking such other action as necessary to protect the interests of clients. |
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IMPLEMENTATION DATE | REVISION DATE | |
POLICY | July 1, 2022 | |
Client Complaints |
1.12 | Proxy |
Seix Investment Advisors has a Proxy Committee (“Committee”) that is responsible for establishing policies and procedures reasonably designed to enable Seix Investment Advisors to ethically and effectively discharge its fiduciary obligation to vote all applicable proxies on behalf of all discretionary client accounts and funds, and ensure compliance with all of the requirements. Annually (or more often as needed), the Committee will review, reaffirm and/or amend guidelines, strategies and proxy policies for all domestic and international client accounts, funds and product lines.
Seix Investment Advisors utilizes Institutional Shareholder Services (“ISS”) to serve as Seix Investment Advisors’s agent in the provision of certain administrative, clerical, functional recordkeeping, and support services related to Seix Investment Advisors’s proxy voting processes/procedures, which include, but are not limited to:
1. | The collection of proxy material from our clients’ custodians. |
2. | The facilitation of proxy voting, reconciliation, and disclosure, in accordance with Seix Investment Advisors’s proxy policies and the Committee’s direction. |
3. | Recordkeeping and voting record retention. |
Seix Investment Advisors has engaged ISS to assist with physical proxy voting matters, while Seix Investment Advisors retains the obligation to vote its clients’ proxies, to review all issues, and to actively review all information prior to determining each vote placed on behalf of its clients. Seix Investment Advisors will continue to utilize all available resources to make well-informed and qualified proxy vote decisions.
As reflected in Seix Investment Advisors’s proxy guidelines, the Committee will vote proxies in a manner deemed to be in the best economic interest of its clients, as a whole, as shareholders and beneficiaries of those actions.
The Committee will consider client-specific preferences and/or develop and apply criteria unique to its client base and product lines, where appropriate. As needed, Seix Investment Advisors will communicate this information to ISS so those clients’ proxies will be voted accordingly. The Committee has reviewed ISS capabilities as agent for the administrative services above and is confident in its abilities to provide these services effectively. The Committee will monitor such capability on an ongoing basis.
FOR INTERNAL USE ONLY
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IMPLEMENTATION DATE | REVISION DATE | |
POLICY | July 1, 2022 | |
Client Complaints |
1.12.1 | An Independent, Objective Approach to Proxy Issues |
In the absence of express contractual provisions to the contrary, the Committee will vote proxies for all of Seix Investment Advisors’s discretionary investment management clients.
Seix Investment Advisors maintains its own proxy guidelines for U.S. domestic and global proxy voting issues, as well as guidelines applicable to “Taft Hartley” plans and relationships. ERISA accounts will be voted in accordance with Seix Investment Advisors’s U.S. Domestic Proxy Guidelines, as such guidelines include ERISA-specific guidelines and requirements.
Under Seix Investment Advisors’s Global/International Proxy Guidelines, the Committee generally votes in a manner similar to that recommended by ISS for an account’s international holdings including, to the extent permitted by law, ERISA accounts. In this regard, the Committee has reviewed and will monitor Glass Lewis’ capabilities and conflict policies with respect to international securities proxy vote recommendations.
1.12.2 | Exceptions to Policy |
Seix Investment Advisors’s proxy policies, as outlined herein generally will not be applied where Seix Investment Advisors has further delegated discretionary investment management and the authority to vote shares to a properly appointed subadvisor, such as may be the case in some managed separate accounts, wrap programs and funds.
In those situations, proxy votes cast by the subadvisor may be governed by the subadvisor’s proxy voting policies and procedures.
1.12.3 | Conflicts of Interest |
Due to Seix Investment Advisors’s diverse client base, numerous product lines and affiliations, the Committee may determine a potential conflict exists in connection with a proxy vote based on the SEC guidelines. The Committee has identified the following conflicts that it deems material for proxy purposes, and may identify other conflicts as material in the course of its review:
FOR INTERNAL USE ONLY
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IMPLEMENTATION DATE | REVISION DATE | |
POLICY | July 1, 2022 | |
Client Complaints |
1. | Common stock of other public corporate issuers with which Virtus Fund Advisers, LLC or its wholly owned subsidiaries (“Subsidiaries”) have a significant, ongoing, non-investment management relationship. |
2. | An issuer with a director, officer or employee who presently serves as an independent director on the board of VFA or Subsidiaries. |
3. | An issuer having substantial and numerous banking, investment, or other financial relationships with VFA or Subsidiaries. |
4. | A director or senior officer of VFA or Subsidiaries serving on the board of a publicly held company. |
5. | A direct common stock ownership position of five percent (5%) or greater, held by the VFA or Subsidiaries. |
For these situations, the Committee has determined that the most fair and reasonable procedure in order to properly address all conflict concerns is to retain an independent fiduciary to vote the ballot items coded within Seix Investment Advisors’s proxy guidelines as case by case.
Additional conflicts of interests will be evaluated by the Committee on an individual basis. Although Seix Investment Advisors does its best to alleviate or diffuse known conflicts, there is no guarantee that all situations have been or will be mitigated through proxy policy incorporation.
1.12.4 | Securities Lending Program |
Seix Investment Advisors manages assets for several clients (including proprietary mutual funds) which engage in “securities lending” programs. In a typical securities lending program, clients or funds lend securities from their accounts/portfolios to approved broker-dealers against cash collateral. On behalf of clients and the proprietary mutual funds, Seix Investment Advisors seeks to balance the economic benefits of continuing to participate in an open securities lending transaction against the inability to vote proxies. On behalf of clients and the proprietary mutual funds, Seix Investment Advisors will call loaned securities back to vote proxies, or to otherwise obtain rights to vote or consent with respect toa material event affecting securities on loan when the advisor believes it is necessary to vote.
FOR INTERNAL USE ONLY
1Effective March 25, 2024, for voting decisions as of March 26, 2024 Global Proxy Voting and Engagement Policy State Street Global Advisors is the investment management arm of State Street Corporation, a leading provider of financial services to institutional investors. As an asset manager, State Street Global Advisors votes its clients’ proxies where the client has delegated proxy voting authority to it, and State Street Global Advisors votes these proxies and engages with companies in the manner that we believe will most likely protect and promote the long-term economic value of client investments, as described in this document.1 1 This Policy is applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street Corporation. |
2 Table of Contents 04 Introduction 04 Our Asset Stewardship Program 05 The State Street Global Advisors Proxy Voting Program 05 Securities Not Voted Pursuant to the Policy 05 Regional Nuances 06 Our Proxy Voting and Engagement Principles 06 Effective Board Oversight 06 Disclosure 07 Shareholder Protection 07 Shareholder Proposals 07 Engagement 07 Section I. Effective Board Oversight 07 Board Independence 08 Board Composition 10 Board Accountability 14 Section II. Disclosure 14 Board Composition Disclosures 14 Reporting 16 Section III. Shareholder Protection 16 Capital 18 Shareholder Rights 19 Governance Documents & Miscellaneous Items 20 Section IV. Shareholder Proposals 21 Section V. Engagement 21 Equity Engagements 22 Fixed Income Engagements 22 The Use of R-Factor in Engagements 22 Engaging with Other Investors Soliciting State Street Global Advisors’ Votes in Connection with Vote-No Campaigns or Shareholder Proposals 23 Section VI. Other Matters 23 Securities On Loan 23 Reporting |
3 24 Appendix A: Assessment Criteria for Common Disclosure Topics 24 Climate Disclosure Criteria 25 Say-on-Climate Criteria 26 Climate Transition Plan Disclosure Criteria for Companies that Have Adopted a Climate Transition Plan 27 Methane Disclosure Criteria 28 Nature-Related Disclosure: Biodiversity, Deforestation, Water Management, Wastewater Management, Plastics and Packaging, Waste Management, Product Lifecycle 28 Human Capital Management Disclosure Criteria 28 Diversity, Equity & Inclusion Disclosure Criteria 29 Pay Equity Disclosure Criteria (United States and United Kingdom Only) 29 Civil Rights Disclosure Criteria (United States Only) 29 Human Rights Disclosure Criteria 29 Political Contributions Disclosure Criteria (United States Only) 30 Lobbying Disclosure Criteria (United States Only) 30 Trade Association Alignment Disclosure Criteria |
4 Introduction Our Asset Stewardship Program At State Street Global Advisors, we take our fiduciary duties as an asset manager very seriously. Our primary fiduciary obligation to our clients is to maximize the long-term value of their investments. State Street Global Advisors focuses on risks and opportunities that may impact long-term value creation for our clients. We rely on the elected representatives of the companies in which we invest — the board of directors — to oversee these firms’ strategies. We expect effective independent board oversight of the material risks and opportunities to its business and operations. We believe that appropriate consideration of these risks and opportunities is an essential component of a firm’s long-term business strategy, and expect boards to actively oversee the management of this strategy. State Street Global Advisors’ Asset Stewardship Team is responsible for developing and implementing this Global Proxy Voting and Engagement Policy (the “Policy”), the implementation of third-party proxy voting guidelines where applicable, case-by-case voting items, issuer engagement activities, and research and analysis of corporate governance issues and proxy voting items. The Asset Stewardship Team’s activities are overseen by our internal governance body, State Street Global Advisors’ ESG Committee (the “ESG Committee”). The ESG Committee is responsible for reviewing State Street Global Advisors’ stewardship strategy, engagement priorities, the Policy, and for monitoring the delivery of voting objectives. In order to facilitate our proxy voting process, we retain Institutional Shareholder Services Inc. (“ISS”), a firm with expertise in proxy voting and corporate governance. We utilize ISS to: (1) act as our proxy voting agent (providing State Street Global Advisors with vote execution and administration services), (2) assist in applying the Policy, and (3) provide research and analysis relating to general corporate governance issues and specific proxy items. All voting decisions and engagement activities for which State Street Global Advisors has been given voting discretion are undertaken in accordance with this Policy, ensuring that the interests of our clients remain the sole consideration when discharging our stewardship responsibilities. Exceptions to this policy is the use of an independent third party to vote on State Street Corporation (“State Street”) stock and the stock of other State Street affiliated entities, to mitigate a conflict of interest of voting on our parent company or affiliated entities, and other situations where we believe we may be conflicted from voting (for example, stock of a public company for which a State Street director also serves as a director, or due to an outside business interest). In such cases, delegated third parties exercise vote decisions based upon their independent voting policy. We aim to vote at all shareholder meetings where our clients have given us the authority to vote their shares and where it is feasible to do so. However, when we deem appropriate, we could refrain from voting at meetings in cases where: • Power of attorney documentation is required. • Voting will have a material impact on our ability to trade the security. • Voting is not permissible due to sanctions affecting a company or individual. • Issuer-specific special documentation is required or various market or issuer certifications are required. • Unless a client directs otherwise, in so-called “share blocking” markets (markets where proxy voters have their securities blocked from trading during the period of the annual meeting). |
5 Additionally, we are unable to vote proxies when certain custodians, used by our clients, do not offer proxy voting in a jurisdiction or when they charge a meeting-specific fee in excess of the typical custody service agreement. Voting authority attached to certain securities held by State Street Global Advisors pooled funds may be delegated to an independent third party as required by regulatory or other requirements. Under such arrangements, voting will be conducted by the independent third party pursuant to its proxy voting policy and not pursuant to this Policy. The State Street Global Advisors Proxy Voting Program Securities Not Voted Pursuant to the Policy Regional Nuances In addition to the option of delegating proxy voting authority to State Street Global Advisors pursuant to this Policy, clients may alternatively choose to participate in the State Street Global Advisors Proxy Voting Program (the “Proxy Voting Program”) which empowers clients to direct the proxy voting of shares held by the eligible fund or segregated account2 they own. Clients that participate in the Proxy Voting Program have the option of selecting a third-party proxy voting guideline from among policies included in the Proxy Voting Program to apply to the vote of the client’s pro rata share of the securities held by the eligible fund or segregated account they own. This Policy does not apply to shares voted under the Proxy Voting Program. Where State Street Global Advisors’ clients have asked it to vote their shares on the client’s behalf, including where a pooled fund fiduciary has delegated the responsibility to vote the fund’s securities to State Street Global Advisors, State Street Global Advisors votes those securities in a unified manner, consistent with the principles described in this Policy. Exceptions to this unified voting policy are: (1) where State Street Global Advisors has made its Proxy Voting Program available to its separately managed account clients and investors within a fund managed by State Street Global Advisors, in which case a pro rata portion of shares held by the fund or segregated account attributable to clients who choose to participate in the Proxy Voting Program will be voted consistent with the third-party proxy voting guidelines selected by the clients, (2) where a pooled investment vehicle managed by State Street Global Advisors utilizes a third party proxy voting guideline as set forth in that fund’s organizational and/or offering documents, and (3) where voting authority with respect to certain securities held by State Street Global Advisors pooled funds may be delegated to an independent third party as required by regulatory or other requirements. With respect to such funds and separately managed accounts utilizing third-party proxy voting guidelines, the terms of the applicable third-party proxy voting guidelines shall apply in place of the Policy described herein and the proxy votes implemented with respect to such a fund or account may differ from and be contrary to the votes implemented for other portfolios managed by State Street Global Advisors pursuant to this Policy. When voting and engaging with companies, we may consider market-specific nuances that may be relevant to that company. We expect companies to observe the relevant laws and regulations of their respective markets, as well as country specific best practice guidelines and corporate governance codes and to publicly disclose their level of compliance with the applicable provisions and requirements. Except where specified, this Policy applies globally. 2 “Eligible funds and segregated accounts” include all fund and client accounts managed by State Street Global Advisors that employ an equity index strategy and which have granted, or are able to grant, proxy voting authority to State Street Global Advisors. |
6 Our Proxy Voting and Engagement Principles Effective Board Oversight Disclosure We have organized our proxy voting and engagement program around three broad principles: We believe that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of an uncertain economic environment. As such, we seek to vote director elections in a way that we believe will maximize long-term value. Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. In order to carry out their primary responsibilities, directors undertake activities that include setting strategy and providing guidance on strategic matters, selecting the CEO and other senior executives, overseeing executive management, creating a succession plan for the board and management, and providing effective oversight of material risks and opportunities relevant to their business. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board. We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We believe independent directors are crucial to good corporate governance; they help management establish sound corporate governance policies and practices. We believe a sufficiently independent board is key to effectively monitoring management, maintaining appropriate governance practices, and performing oversight functions necessary to protect shareholder interests. We also believe the right mix of skills, independence, diversity, and qualifications among directors provides boards with the knowledge and direct experience to manage risks and operating structures that are often complex and industry-specific. We vote for the (re-)election of directors on a case-by-case basis after considering various factors set forth in this Policy, including, but not limited to, board quality, general market practice, and availability of information on director skills and expertise. When voting in director elections, we do so on behalf of and in the best interest of the funds and client accounts we manage and do not seek to change or influence control of the company. It is important for shareholders to receive timely and accurate reporting of a company’s financial performance and strategy so that they are able to assess both the value and risk of their investment. In addition to information related to strategy and performance, companies should also provide disclosure relating to their approach to corporate governance and shareholder rights. Such information allows investors to determine whether their economic interests have been protected by the board and provides insights into the quality of the board’s oversight of management. Ultimately, the board of directors is accountable for the oversight and disclosure of the material risks and opportunities faced by the company. |
7 Shareholder Protection Shareholder Proposals Engagement State Street Global Advisors believes it is in the best interest of shareholders for companies to have appropriate shareholder rights and accountability mechanisms in place. As a starting place for voting rights, it is necessary for ownership rights to reflect one vote for one share to ensure that economic interests and proxy voting power are aligned. This share structure best supports the shareholders’ right to exercise their proxy vote on matters that are important to the protection of their investment such as share issuances and other dilutive events, authorization of strategic transactions, approval of a shareholder rights plan, and changes to the corporate bylaws or charter, among others. In terms of accountability mechanisms, we believe there should be annual elections of the full board of directors. The ability to elect, remove and nominate directors on at least an annual basis provides the appropriate checks and balances to ensure that the board of directors are undertaking their responsibilities in the best interests of their shareholders. When voting our clients’ proxies, we may be presented with shareholder proposals at portfolio companies that must be evaluated on a case-by-case basis and in accordance with the principles set forth above. For proposals related to commonly requested disclosure topics, we have also developed the criteria found in Appendix A to assess the effectiveness of disclosure on such topics in connection with these types of proposals. State Street Global Advisors’ engagement activities provides a meaningful shareholder tool that we believe protects and enhances the long-term economic value of the holdings in our clients’ accounts. We conduct issuer-specific engagements with companies to discuss the principles set forth in this Policy, including sustainability-related risks and opportunities. In addition, we encourage issuers to increase the amount of direct communication board members have with shareholders. We believe direct communication with executive board members and independent non-executive directors is critical to helping companies understand shareholder concerns. Section I. Effective Board Oversight Board Independence We believe independent directors are crucial to good corporate governance; they help management establish sound corporate governance policies and practices. We believe a sufficiently independent board is key to effectively monitoring management, maintaining appropriate governance practices, and performing oversight functions necessary to protect shareholder interests. We have developed a set of criteria for determining board independence, which varies by region and/or local jurisdiction. These criteria generally follow relevant listing standards, local regulatory requirements and/or local market practice standards. Such criteria, may include, for example: • Participation in related-party transactions and other material business relations with the company • Employment history with company • Founder and member of founding family |
8 • Government representative • Excessive tenure and a preponderance of long-tenured directors • Relations with significant shareholders • Close family ties with any of the company’s advisers, directors or senior employees • Cross-directorships • Receipt of non-board related compensation from the issuer, its auditors or advisors • Company classification of a director as non-independent In some cases, State Street Global Advisors’ criteria may be more rigorous than applicable local or listing requirements. Separation of Chair/CEO Our primary focus is to ensure there is strong independent leadership of the board, in accordance with the principles discussed above. We generally support the board choosing the governance structure that is most appropriate for that company. We may take voting action against the chair or members of the nominating committee at companies in the following indexes that have combined the roles of chair and CEO and have not appointed a lead independent director: • S&P 500 • STOXX Europe 600 Board Committees We believe that board committees are crucial to robust corporate governance and should be composed of a sufficient number of independent directors. We use the same criteria for determining committee independence as we do for determining director independence, which varies by region and/or local jurisdiction. Although we recognize that board structures may vary by jurisdiction, where a board has established an audit committee and/or compensation/remuneration committee, we generally expect the committee to be primarily, and in some cases, fully independent. Board Composition State Street Global Advisors believes that a well-constituted board of directors, with a balance of skills, expertise, and independence, provides the foundation for a well-governed company. Refreshment and Tenure We may withhold votes from directors if overall average board tenure is excessive. In assessing excessive tenure, we consider factors such as the preponderance of long tenured directors, board refreshment practices, and classified board structures. Generally, we may vote against age and term limits unless the company is found to have poor board refreshment and director succession practices, and has a preponderance of non-executive directors with excessively long tenures serving on the board. |
9 Director Time Commitments We consider if a company publicly discloses its director time commitment policy (e.g., within corporate governance guidelines, proxy statement, company website). This policy or associated disclosure must include: • Description of the annual review process undertaken by the nominating committee to evaluate director time commitments • Numerical limit(s) on public company board seat(s) the company’s directors can serve on For companies in the S&P 500, we may vote against the nominating committee chair at companies that do not publicly disclose a policy compliant with the above criteria, or do not commit to doing so within a reasonable timeframe. For other companies in certain markets3 that do not publicly disclose a policy compliant with the above criteria, we will consider the number of outside board directorships that the company’s non-executive and executive directors may undertake. Thus, State Street Global Advisors may take voting action against a director who exceeds the number of board mandates listed below:4 • Named Executive Officers (NEOs) of a public company who sit on more than two public company boards • Non-executive board chairs or lead independent directors who sit on more than three public company boards • Non-executive directors who sit on more than four public company boards If a director is imminently leaving a board and this departure is disclosed in a written, time-bound and publicly-available manner, we may consider waiving our withhold vote when evaluating the director for excessive time commitments. Board Diversity We believe effective board oversight of a company’s long-term business strategy necessitates a diversity of perspectives, especially in terms of gender, race and ethnicity. a. Board Gender Diversity We expect boards of all listed companies to have at least one female board member. If a company does not meet the applicable expectation for three consecutive years, State Street Global Advisors may vote against all incumbent members of the nominating committee or those persons deemed responsible for the nomination process. 3. Such markets include the United States (ex-S&P 500), Australia, Canada, United Kingdom, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland. 4. Service on a mutual fund board, the board of a UK investment trust or a Special Purpose Acquisition Company (SPAC) board is not considered when evaluating directors for excessive commitments. However, we do expect these roles to be considered by nominating committees when evaluating director time commitments. |
10 In addition, we expect the boards of companies in the following indices to be composed of at least 30-percent female directors. • Russell 3000 • TSX • FTSE 350 • STOXX 600 • ASX 300 If a company does not meet the applicable expectation, State Street Global Advisors may vote against the chair of the board’s nominating committee or the board leader in the absence of a nominating committee. We may waive the 30-percent voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for reaching the 30-percent threshold. b. Board Racial & Ethnic Diversity (US & UK Only) We may withhold support from the chair of the nominating committee when a company in the S&P 500 or FTSE 100 does not have at least one director from an underrepresented racial/ethnic community on its board. We may waive this voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for reaching this threshold. Board Member Expertise We believe board members should have adequate skills to provide effective oversight of corporate strategy, operations, and risks, including sustainability-related issues. Boards should also have a regular evaluation process in place to assess the effectiveness of the board and the skills of board members to address issues, such as emerging risks, changes to corporate strategy, and diversification of operations and geographic footprint. We believe nominating committees are best positioned to evaluate the skillset and expertise of both existing and prospective board members. However, we may take such considerations into account in certain circumstances, such as contested elections. Board Accountability Oversight of Strategy and Risk We believe that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. We allow boards to have discretion regarding the ways in which they provide oversight in this area. However, we expect companies to disclose how the board provides oversight on its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with the changing political and economic landscape or as companies diversify or expand their operations into new areas. As responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively manage and assess the risk of our clients’ portfolios, we expect our portfolio companies to manage risks |
11 and opportunities that are material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders. Consistent with this perspective, we may seek to engage with our portfolio companies to better understand how their boards are overseeing risks and opportunities the company has deemed to be material to its business or operations. If we believe that a company has failed to implement and communicate effective oversight of these risks, we may consider voting against the responsible directors. We may withhold votes from directors who we determine have been remiss in their duties. We may vote against directors due to failure to demonstrate effective oversight in the following three areas for relevant companies: • Governance • Climate risk management at companies in carbon-intensive industries5 or companies receiving shareholder proposals that exhibit significant misalignment with our TCFD disclosure assessment criteria • Human capital management at our largest global holdings When evaluating a board’s oversight of risks and opportunities, we assess the following factors, based on disclosures by, and engagements with, portfolio companies: • Oversees Long-term Strategy ─ Articulates the material risks and opportunities and how those risks and opportunities fit into the firm’s long-term business strategy ─ Regularly assesses the effectiveness of the company’s long-term strategy, and management’s execution of this strategy • Demonstrates an Effective Oversight Process ─ Describes which committee(s) have oversight over specific risks and opportunities, as well as which topics are overseen and/or discussed at the full-board level ─ Includes risks and opportunities in board and/or committee agendas, and articulates how often specific topics are discussed at the committee and/or full-board level ─ Utilizes KPIs or metrics to assess the effectiveness of risk management processes ─ Engages with key stakeholders including employees and investors 5 State Street Global Advisors defines carbon-intensive industries as the following Global Industry Classification Standard (GICS) subindustries: Electric Utilities, Integrated Oil &Gas, Multi-Utilities, Steel, Construction Materials, Independent Power Producers & Energy Traders, Oil & Gas Refining & Marketing, Oil & Gas Exploration & Production, Diversified Metals & Mining, Airlines, Commodity Chemicals, Industrial Gases, Aluminum, Oil & Gas Storage & Transportation, Multi-Sector Holdings, Diversified Chemicals, Fertilizers & Agricultural Chemicals, Air Freight & Logistics, Agricultural Products, Environmental & Facilities Services, Coal & Consumable Fuels, Paper Packaging, Railroads, Marine, Automotive Retail, Oil & Gas Drilling, Food Retail, Paper Products, Hotels, Resorts & Cruise Lines, Internet & Direct Marketing Retail, Hypermarkets & Supercenters, Precious Metals & Minerals. |
12 • Ensures Effective Leadership ─ Holds management accountable for progress on relevant metrics and targets ─ Integrates necessary skills and perspectives into the board nominating and executive hiring processes, and provides training to directors and executives on topics material to the company’s business or operations ─ Conducts a periodic effectiveness review • Ensures Disclosures of Material Information ─ Ensures publication of relevant disclosures, including those regarding material topics ─ For example, we expect companies to disclose against the four pillars of the Task Force on Climate-related Financial Disclosures (TCFD) framework. Proxy Contests We believe nominating committees that are comprised of independent directors are best placed to assess which individuals can properly fulfill the duties of the board, and act as effective fiduciaries. As long-term shareholders, we vote proxies in director elections, including related to nominating committee members, who play a critical role in determining board composition. While our default position is to support the committees’ judgement, we consider the following factors when evaluating dissident nominees: • Strategy presented by dissident nominees versus that of current management, as overseen by the incumbent board • Effectiveness, quality, and experience of the management slate • Material governance failures and the level of responsiveness to shareholder concerns and market signals by the incumbent board • Quality of disclosure and engagement practices to support changes to shareholder rights, capital allocation and/or governance structure • Company performance and, if applicable, the merit of a recovery plan Board Oversight of Geopolitical Risk As stewards of our clients’ assets, we are aware of the financial risks associated with geopolitical risk, including risks arising from unexpected conflict between or among nations. We expect our portfolio companies that may be impacted by geopolitical risk to: • Manage and mitigate risks related to operating in impacted markets, which may include financial, sanctions-related, regulatory, and/or reputational risks, among others; • Strengthen board oversight of these efforts; and • Describe these efforts in public disclosures. |
13 Compensation and Remuneration We consider it the board’s responsibility to identify the appropriate level of executive compensation. Despite the differences among the possible types of plans and the awards, there is a simple underlying philosophy that guides our analysis of executive compensation: we believe that there should be a direct relationship between executive compensation and company performance over the long term. Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, we consider factors such as adequate disclosure of various remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests, as well as with corporate strategy and performance. We may oppose remuneration reports where pay seems misaligned with shareholders’ interests. We may also consider executive compensation practices when re-electing members of the compensation committee. For example, criteria we may consider include the following: • Overall quantum relative to company performance • Vesting periods and length of performance targets • Mix of performance, time and options-based stock units • Use of special grants and one-time awards • Retesting and repricing features • Disclosure and transparency Board Responsiveness to Advisory Votes a. Executive Pay We may vote against the re-election of members of the compensation committee if we have serious concerns about remuneration practices and if the company has not been responsive to shareholder feedback to review its approach. In addition, if the level of dissent against a management proposal on executive pay is consistently high, and we have determined that a vote against a pay-related proposal is warranted in the third consecutive year, we may vote against the Chair of the compensation committee. b. Shareholder Proposals with Significant Shareholder Support We may withhold votes from directors of companies that have not been responsive to a shareholder proposal that received a majority shareholder support at the last annual or special meeting. Attendance We may withhold votes from directors if they attend less than 75 percent of board meetings without providing appropriate explanation for their failure to meet the attendance threshold. |
14 Section II. Disclosure Board Composition Disclosures Reporting It is important for shareholders to receive timely and accurate reporting of a company’s financial performance and strategy so that they are able to assess both the value and risk of their investment. In addition to information related to strategy and performance, companies should provide disclosure relating to their approach to corporate governance and shareholder rights. Such information allows investors to determine whether their economic interests have been protected by the board and provides insights into the quality of the board’s oversight of management. Ultimately, the board of directors is accountable for the oversight and disclosure of the material risks and opportunities faced by the company. We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We also believe the right mix of skills, independence, diversity, and qualifications among directors provides boards with the knowledge and direct experience to manage risks and operating structures that are often complex and industry-specific. Board Demographics (US and UK) If a company in the Russell 1000 or FTSE 350 does not disclose the gender, racial and ethnic composition of its board, we may vote against the Chair of the nominating committee. Acceptable disclosures include: • Aggregate-level (e.g., “5% of our Directors are Black”, “Seven of our Directors are people of color”, “30% chose not to self-identify”); or • Individual-level (e.g., “Jane Doe is African-American, John Smith is Caucasian,” etc.) Financial Statements We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for investment analysis. We expect external auditors to provide assurance of a company’s financial condition. Hence, we may vote against the approval of financial statements if (i) they have not been disclosed or audited; (ii) the auditor opinion is qualified/adverse, or the auditor has issued a disclaimer of opinion; or (iii) the auditor opinion is not disclosed. Climate-Related Disclosures We believe that managing climate-related risks and opportunities is a key element in maximizing long-term risk-adjusted returns for our clients. As a result, we have a longstanding commitment to enhancing investor-useful disclosure around this topic. We find that the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) provide an effective framework for disclosure of climate-related risks and opportunities. We believe all companies should provide public disclosures in accordance with the following four pillars of the Taskforce for Climate-related Financial Disclosures (TCFD) framework: • Governance The TCFD recommends companies describe the board’s oversight of, and management’s role in, assessing and managing climate-related risks and opportunities. • Strategy The TCFD recommends companies describe identified climate-related risks and opportunities and the impact of these risks and opportunities on their businesses, strategy, and financial planning. |
15 • Risk Management The TCFD recommends companies describe processes for identifying, assessing, and managing climate-related risks and describe how these processes are integrated into overall risk management. • Metrics and Targets The TCFD recommends companies disclose metrics and targets used to assess and manage climate-related risks and opportunities. ─ State Street Global Advisors is not prescriptive on target setting. We expect companies that have adopted net zero ambitions to disclose interim climate targets.6 If a company chooses not to disclose any climate targets, we expect the company to provide an explanation on how the company measures and monitors progress on managing climate-related risks and opportunities in line with the recommendations of TCFD. ─ TCFD recommends the disclosure of Scope 1, Scope 2, and, if appropriate, Scope 3 emissions. We expect companies to identify and disclose the most relevant categories of Scope 3 emissions as defined by the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. However, we recognize that Scope 3 emissions estimates have a high degree of uncertainty; therefore, if the company determines that categories of Scope 3 are impracticable to estimate, we instead encourage companies to explain these limitations. We do not expect companies to set Scope 3 targets. We do encourage companies to explain any efforts to address Scope 3 emissions in line with TCFD, such as engagement with suppliers, customers, or other stakeholders across the value chain, where relevant. We may take voting action against directors serving at companies in the following indexes that fail to provide sufficient disclosure regarding: (i) board oversight of climate-related risks and opportunities; (ii) total direct and indirect GHG emissions (“Scope 1” and “Scope 2” emissions); (iii) climate-related targets, in accordance with the TCFD framework: • S&P 500 • S&P/TSX Composite • FTSE 350 • STOXX 600 • ASX 200 • TOPIX 100 • Hang Seng • Straits Times Index We may waive the guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for providing the expected disclosures. 6. “Net zero ambitions” are defined by State Street Global Advisors as a public statement/commitment to align the company’s emissions to third party frameworks or pathways for net zero. |
16 Say-on-Climate Proposals While we are generally supportive of effective climate-related disclosure, we currently do not endorse an annual advisory climate vote. We have reservations with the potential unintended consequences of such a vote, including insulating directors from accountability, distracting from existing disclosure frameworks, and straining investors’ limited proxy voting resources. Where management chooses to include a Say-on-Climate vote, we assess the company’s disclosure in accordance with the criteria listed in Appendix A. Workforce Disclosures (US Only) We may vote against the chair of the compensation committee at companies in the S&P 500 that do not disclose their EEO-1 reports. Acceptable disclosures include: • The original EEO-1 report response; or • The exact content of the report translated into custom graphics Section III. Shareholder Protection Capital Share Capital Structure The ability to raise capital is critical for companies to carry out strategy, to grow, and to achieve returns above their cost of capital. The approval of capital raising activities is fundamental to a shareholder’s ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. Altering the capital structure of a company is a critical decision for boards. When making such a decision, we believe the company should disclose a comprehensive business rationale that is consistent with corporate strategy and not overly dilutive to its shareholders. Our approach to share capital structure matters may vary by local market and jurisdiction, due to regional nuances. Such proposals may include: • Increase in Authorized Common Shares • Increase in Authorized Preferred Shares • Unequal Voting Rights • Share Repurchase Programs Dividend Payouts We generally support dividend payouts that constitute 30 percent or more of net income. We may vote against a dividend payout if the dividend payout ratio has been consistently below 30 percent without adequate explanation. We may also vote against if the payout is excessive given the company’s financial position. Particular attention will be warranted when the payment may damage the company’s long-term financial health. Reorganization, Mergers and Acquisitions The reorganization of the structure of a company or mergers often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation. |
17 Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the company’s operations, will generally be supported. We evaluate mergers and structural reorganizations on a case-by-case basis. We will generally support transactions that maximize shareholder value. Some of the considerations include the following: • Offer premium • Strategic rationale • Board oversight of the process for the recommended transaction, including, director and/ or management conflicts of interest • Offers made at a premium and where there are no other higher bidders • Offers in which the secondary market price is substantially lower than the net asset value We may vote against a transaction considering the following: • Offers with potentially damaging consequences for minority shareholders because of illiquid stock • Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders • The current market price of the security exceeds the bid price at the time of voting Related-Party Transactions Some companies have a controlled ownership structure and complex cross-shareholdings between subsidiaries and parent companies (“related companies”). Such structures may result in the prevalence of related-party transactions between the company and its various stakeholders, such as directors and management, subsidiaries and shareholders. In markets where shareholders are required to approve such transactions, we expect companies to disclose details of the transaction, such as the nature, the value and the purpose of such a transaction. We also encourage independent directors to ratify such transactions. Further, we encourage companies to describe the level of independent board oversight and the approval process, including details of any independent valuations provided by financial advisors on related-party transactions. Cross-Shareholdings (Japan Only) “Cross-shareholdings” are a long-standing feature of the balance sheets of many Japanese companies, but, in our view, can be detrimental for corporate governance practices and ultimately shareholder returns. Therefore, State Street Global Advisors may vote against the board leader at the TOPIX 500 companies where the “cross-shareholdings” (strategic listed shares) held by a company exceed 30 percent of the company’s net assets (as in the securities report disclosed for the previous fiscal year). |
18 We may waive the guideline if a company engages with State Street Global Advisors and provides a specific, timebound, and publicly available plan for reducing its exposure to “cross-shareholdings”: • To less than 30% by 2025; or • By 50% of current level by 2025 Shareholder Rights Proxy Access (North America Only) In general, we believe that proxy access is a fundamental right and an accountability mechanism for all long-term shareholders. We consider proposals relating to proxy access on a case-by-case basis. We generally support shareholder proposals that set parameters to empower long-term shareholders while providing management the flexibility to design a process that is appropriate for the company’s circumstances. Vote Standards a. Annual Elections We generally support the establishment of annual elections of the board of directors. Consideration is given to the overall level of board independence and the independence of the key committees, as well as the existence of a shareholder rights plan. b. Majority Voting We generally support a majority vote standard based on votes cast for the election of directors. We generally vote to support amendments to bylaws that would require simple majority of voting shares (i.e. shares cast) to pass or to repeal certain provisions. Shareholder Meetings a. Special Meetings and Written Consent In general, we support the ability for shareholders to call special meetings, as well as act by written consent. We believe an appropriate threshold for both calling a special meeting and acting by written consent can be 25% of outstanding shares or less. b. Notice Period to Convene a General Meeting We expect companies to give as much notice as is practicable when calling a general meeting. Generally, we are not supportive of authorizations seeking to reduce the notice period to less than 14 days. c. Virtual/Hybrid Shareholder Meetings We generally support proposals that grant boards the right to hold shareholder meetings in a virtual or hybrid format as long as companies uphold the following best practices: • Afford virtual attendee shareholders the same rights as would normally be granted to in-person attendee shareholders • Commit to time-bound renewal (five years or less) of meeting format authorization by shareholders • Provide a written record of all questions posed during the meeting, and |
19 • Comply with local market laws and regulations relating to virtual and hybrid shareholder meeting practices • If a company breaches any of the criteria above, we may vote against the chair of the nominating committee. • In evaluating these proposals we also consider the operating environment of the company, including local regulatory developments and specific market circumstances impacting virtual meeting practices. Governance Documents & Miscellaneous Items Article Amendments a. Unilateral Amendments We may withhold votes from directors of companies that have unilaterally adopted/amended company bylaws that negatively impact shareholder rights (such as fee-shifting, forum selection, and exclusion service bylaws) without putting such amendments to a shareholder vote. b. Super-Majority We generally vote against amendments to bylaws requiring super-majority shareholder votes to pass or repeal certain provisions. We generally vote for the reduction or elimination of super-majority vote requirements, unless management of the issuer was concurrently seeking to or had previously made such a reduction or elimination. c. Board Size We generally support proposals seeking to fix the board size or designate a range for the board size and vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval. Anti-Takeover Issues Occasionally, companies add anti-takeover provisions that reduce the chances of a potential acquirer to make an offer, or to reduce the likelihood of a successful offer. We generally do not support proposals that reduce shareholders’ rights, entrench management, or reduce the likelihood of shareholders’ right to vote on reasonable offers. Our approach to anti-takeover issues may vary by local market and jurisdiction, due to regional nuances. However, we will generally support mandates requiring shareholder approval of a shareholder rights plans (“poison pill”) and repeals of various anti-takeover related provisions. When appropriate, we may vote for an amendment to a shareholder rights plan where the terms of the new plans are more favorable to shareholders’ ability to accept unsolicited offers (i.e., if one of the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20 percent, (ii) maximum term of three years, (iii) no “dead hand,” “slow hand,” “no hand” nor similar feature that limits the ability of a future board to redeem the pill, and (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced). |
20 Accounting and Audit-Related Issues Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have independent non-executive directors designated as members. We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for investment analysis. As a result, board oversight of the internal controls and the independence of the audit process are essential if investors are to rely upon financial statements. It is important for the audit committee to appoint external auditors who are independent from management as we expect auditors to provide assurance of a company’s financial condition. State Street Global Advisors believes that a company’s external auditor is an essential feature of an effective and transparent system of external independent assurance. Shareholders should be given the opportunity to vote on their appointment or to re-appoint at the annual meeting. When appointing external auditors and approving audit fees, we will take into consideration the level of detail in company disclosures. We generally do not support resolutions if adequate breakdown is not provided and/or if non-audit fees are more than 50 percent of audit fees. In addition, we may vote against members of the audit committee if we have concerns with audit-related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, we may consider auditor tenure when evaluating the audit process. In circumstances where “other” fees include fees related to initial public offerings, bankruptcy emergence, and spin-offs, and the company makes public disclosure of the amount and nature of those fees which are determined to be an exception to the standard “non-audit fee” category, then such fees may be excluded from the non-audit fees considered in determining the ratio of non-audit to audit/audit-related fees/tax compliance and preparation for purposes of determining whether non-audit fees are excessive. We generally support the discharge of auditors in the absence of pending litigation, governmental investigation, charges or fraud or other indication of significant concern, as well as requirements that auditors attend the annual meeting of shareholders. Indemnification and Liability Generally, we support proposals to limit directors’7 liability and/ or expand indemnification and liability protection if he or she has not acted in bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. Section IV. Shareholder Proposals We believe that company boards do right by investors and are responsible for overseeing strategy and company management. Towards that end, we generally vote against a shareholder proposal if it appears to impose changes to business strategy or operations, such as increasing or decreasing investment in certain products or businesses or phasing out a product or business line or if it is not a topic that the company has deemed to be material in their public disclosure documents. 7. In Japan, this includes statutory auditors. |
21 When assessing shareholder proposals, we fundamentally consider whether the adoption of the resolution would promote long-term shareholder value in the context of our core governance principles: 1. Effective board oversight 2. Quality disclosure 3. Shareholder protection We will consider supporting a shareholder proposal if: • the request is focused on enhanced disclosure of the company’s governance and/or risk oversight • the adoption of the request would protect our clients’ interests as minority shareholders; or • for common proposal topics for which we have developed assessment criteria, the extent to which the request satisfies the criteria found in Appendix A Section V. Engagement Equity Engagements As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging with our portfolio companies. Our stewardship prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate risks in our portfolio. Through engagement, we aim to build long-term relationships with the issuers in which we invest on behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. In general, there are three types of engagements that State Street Global Advisors may hold on behalf of equity holders: 1. Engagements with Portfolio Companies in Connection with a Ballot Item or Other Topic In our Policy — Engagements held with portfolio companies to discuss a ballot item, event or other established topic found in our Policy. Such engagements generally, but not necessarily, occur during “proxy season.” They may be held at the request of State Street Global Advisors or the portfolio company. 2. Off-Season Engagement at the Request of a Portfolio Company — From time-to-time, portfolio companies may seek to engage with State Street Global Advisors in the ‘off-season’ to discuss a particular topic. 3. Off-Season Proactive Engagement Campaigns — Each year, State Street Global Advisors will identify thematic engagement campaigns on important topics for which we are seeking more information to potentially inform our future voting positions. |
22 Fixed Income Engagements The Use of R-Factor in Engagements Engaging with Other Investors Soliciting State Street Global Advisors’ Votes in Connection with Vote-No Campaigns or Shareholder Proposals From time-to-time, certain corporate action election events, reclassifications or other changes to the investment terms of debt holdings may occur or an issuer may seek to engage with State Street Global Advisors to discuss matters pertaining to the debt instruments that State Street Global Advisors holds on behalf of its clients. In such instances, State Street Global Advisors may engage with the issuer to obtain further information about the matter for purposes of its investment decision making. Such engagements are the responsibility of the Fixed Income portfolio management team, but may be supported by State Street Global Advisors’ Asset Stewardship Team. All election decisions are the responsibility of the relevant portfolio management team. In addition, State Street Global Advisors may also identify themes for engagement campaigns with issuers on topics that it believes may affect value of its clients’ debt investments. State Street Global Advisors may proactively engage with portfolio companies on these topics to help inform our views on the subject. Where such themes align with those relating to equities, such engagements may be carried out jointly on behalf of both equity and fixed income holdings where there is mutual benefit for both asset classes. Such engagements are led by the State Street Global Advisors Asset Stewardship Team, but could be attended by the relevant portfolio management teams. R-Factor™ is a scoring system created by State Street Global Advisors that leverages multiple data sources and aligns them to widely accepted, transparent Sustainability Accounting Standards Board (SASB) Materiality Framework for over 12,000 publicly listed companies. R-Factor™ scores are among the many inputs the Asset Stewardship Team may review when performing analysis on portfolio companies before engagements. State Street Global Advisors uses R-Factor as a consideration when prioritizing engagements. State Street Global Advisors may also engage with a company regarding its R-Factor score at the request of the company. We believe it is good practice for us to speak to other investors that are running proxy contests, putting forth vote-no campaigns, or proposing shareholder proposals at investee companies. However, we generally limit such discussions with investors to one engagement with the proponent unless we believe that it is necessary for us to have a follow-up discussion, and will seek to also engage with the company. We welcome the opportunity to review materials sent in advance of the proposed discussion. To the extent possible, we review all materials made publicly available by the investor or the company on a contested ballot item before making our own independent voting decision. Our primary purpose of engaging with investors is: • To gain a better understanding of their position or concerns at investee companies. • In proxy contest situations: ─ To assess possible director candidates where investors are seeking board representation in proxy contest situations ─ To understand the investor’s proposed strategy for the company and investment time horizon to assess their alignment with State Street Global Advisors’ views and interests as a long-term shareholder All requests for engagement should be sent to [email protected]. |
23 Section VI. Other Matters Securities On Loan Reporting As a responsible investor and fiduciary, we recognize the importance of balancing the benefits of voting shares and the incremental lending revenue for the pooled funds that participate in State Street Global Advisors’ securities lending program (the “Funds”). Our objective is to recall securities on loan and restrict future lending until after the record date for the respective vote in instances where we believe that a particular vote could have a material impact on the Funds’ long-term financial performance and the benefit of voting shares will outweigh the forgone lending income. Accordingly, we have set systematic recall and lending restriction criteria for shareholder meetings involving situations with the highest potential financial implications (such as proxy contests and strategic transactions including mergers and acquisitions, going dark transactions, change of corporate form, or bankruptcy and liquidation). Generally, these criteria for recall and restriction for lending only apply to certain large cap indices in developed markets. State Street Global Advisors monitors the forgone lending revenue associated with each recall to determine if the impact on the Funds’ long-term financial performance and the benefit of voting shares will outweigh the forgone lending income. Although our objective is to systematically recall securities based on the aforementioned criteria, we must receive notice of the vote in sufficient time to recall the shares on or before the record date. When we do not receive timely notice, we may be unable to recall the shares on or before the record date. We provide transparency for our stewardship activities through our regular client reports and relevant information reported online. We publish an annual stewardship report that provides details of our stewardship approach, engagement and voting policies, and activities during the year. The annual stewardship report is complemented by quarterly stewardship activity reports as well as the publication of thought leadership on governance and sustainability on our website. Our voting record information is available on Vote View, an interactive platform that provides relevant company details, proposal types, resolution descriptions, and records of our votes cast. |
24 Appendix A Assessment Criteria for Common Disclosure Topics Climate Disclosure Criteria As outlined above, the pillars of our Asset Stewardship Program rest on effective board oversight, quality disclosure and shareholder protection. We are frequently asked to evaluate shareholder proposals on various topics, including requests for enhanced disclosure. We have developed the below criteria, which we believe represents quality disclosure on commonly requested disclosure topics. We expect all companies to provide public disclosures in accordance with the following four pillars of the Taskforce for Climate-related Financial Disclosures (TCFD) framework: • Governance The TCFD recommends companies describe the board’s oversight of, and management’s role in, assessing and managing climate-related risks and opportunities. • Strategy The TCFD recommends companies describe identified climate-related risks and opportunities and the impact of these risks and opportunities on their businesses, strategy, and financial planning. • Risk Management The TCFD recommends companies describe processes for identifying, assessing, and managing climate-related risks and describe how these processes are integrated into overall risk management. • Metrics and Targets The TCFD recommends companies disclose metrics and targets used to assess and manage climate-related risks and opportunities. ─ State Street Global Advisors is not prescriptive on target setting. We expect companies that have adopted net zero ambitions to disclose interim climate targets. If a company chooses not to disclose any climate targets, we expect the company to provide an explanation on how the company measures and monitors progress on managing climate-related risks and opportunities in line with the recommendations of TCFD. ─ TCFD recommends the disclosure of Scope 1, Scope 2, and, if appropriate, Scope 3 emissions. We expect companies to identify and disclose the most relevant categories of Scope 3 emissions as defined by the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. However, we recognize that Scope 3 emissions estimates have a high degree of uncertainty; therefore, if the company determines that categories of Scope 3 are impracticable to estimate, we instead encourage companies to explain these limitations. We do not expect companies to set Scope 3 targets. We do encourage companies to explain any efforts to address Scope 3 emissions in line with TCFD, such as engagement with suppliers, customers, or other stakeholders across the value chain, where relevant. 8. “Net zero ambitions” are defined by State Street Global Advisors as a public statement/commitment to align the company’s emissions to third party frameworks or pathways for net zero. |
25 Additionally, we expect companies in carbon-intensive industries9 to disclose: • Public disclosure in accordance with all four pillars of Taskforce for Climate-related Financial Disclosures (TCFD) framework: (1) Governance, (2) Strategy, (3) Risk Management, (4) Metrics and Targets • Interim climate targets to accompany long-term climate ambitions • Discussion of scenario-planning on relevant risk assessment and strategic planning processes10 • Incorporation of relevant climate considerations in financial planning and/or capital allocation decisions, and • Scope 1, 2, and relevant categories of Scope 3 greenhouse gas emissions11 Say-on-Climate Criteria While we are generally supportive of the goals of “Say-on-Climate” proposals because we support effective climate-related disclosure, we currently do not endorse an annual advisory climate vote. We have reservations with the potential unintended consequences of such a vote, including insulating directors from accountability, distracting from existing disclosure frameworks, and straining investors’ limited proxy voting resources. Where management chooses to include a Say-on-Climate vote, we assess the company’s disclosure on a case-by-case basis consistent with our Assessment Criteria for Climate Transition Plan Disclosure outlined below. We would consider supporting a “Say-on-Climate” shareholder proposal if the company has not provided investors with meaningful climate-related disclosure in line with our expectations, nor signaled the intention to enhance disclosure in the future. 9. State Street Global Advisors defines carbon-intensive industries as the following Global Industry Classification Standard (GICS) subindustries: Electric Utilities, Integrated Oil &Gas, Multi-Utilities, Steel, Construction Materials, Independent Power Producers & Energy Traders, Oil & Gas Refining & Marketing, Oil & Gas Exploration & Production, Diversified Metals & Mining, Airlines, Commodity Chemicals, Industrial Gases, Aluminum, Oil & Gas Storage & Transportation, Multi-Sector Holdings, Diversified Chemicals, Fertilizers & Agricultural Chemicals, Air Freight & Logistics, Agricultural Products, Environmental & Facilities Services, Coal & Consumable Fuels, Paper Packaging, Railroads, Marine, Automotive Retail, Oil & Gas Drilling, Food Retail, Paper Products, Hotels, Resorts & Cruise Lines, Internet & Direct Marketing Retail, Hypermarkets & Supercenters, Precious Metals & Minerals. 10. As recommended by TCFD, we believe quality disclosure on scenario analysis includes the following: (i) the company has evaluated and disclosed the resilience of their strategy and business model to climate-related risks and opportunities using climate-related scenario analysis (ii) the company has described the implications of the scenario-planning exercise on the business including relevant risk assessment and strategic planning processes. We are not prescriptive on scenario selection. The company may choose to evaluate a range of scenarios aligned with relevant jurisdictional commitments, sectoral decarbonization approaches, or publicly available scenarios aligned with limiting global temperature rise as recommended by TCFD. 11. TCFD recommends the disclosure of Scope 1, Scope 2, and, if appropriate, Scope 3 emissions. We expect companies to identify and disclose the most relevant categories of Scope 3 emissions as defined by the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. However, we recognize that Scope 3 emissions estimates have a high degree of uncertainty and therefore if the company determines that categories of Scope of 3 are impracticable to estimate, we instead encourage companies to explain these limitations. 12. “Net zero ambitions” are defined by State Street Global Advisors as a public statement/commitment to align the company’s emissions to third party frameworks or pathways for net zero. |
26 Climate Transition Plan Disclosure Criteria for Companies that Have Adopted a Climate Transition Plan We do not require companies to adopt net zero ambitions12 or join relevant industry initiatives. For companies that have adopted a net zero ambition and/or climate transition plan, the disclosure criteria set out below serve to provide transparency on the criteria we assess.13 Given that climate-related risks present differently across industries, our assessment of the below criteria may vary to account for best practices in specific industries. • Ambition ─ Disclosure of long-term climate ambitions • Targets ─ Disclosure of short- and/or medium-term interim climate targets ─ Disclosure of alignment of climate targets with relevant jurisdictional commitments, specific temperature pathways, and/or sectoral decarbonization approaches • TCFD Disclosure ─ As recommended by TCFD: ○ Description of approach to identifying and assessing climate-related risks and opportunities ○ Disclosure of resilience of the company’s strategy, taking into consideration a range of climate-related scenarios ○ Disclosure of Scope 1, Scope 2, and relevant categories of Scope 3 emissions and any assurance • Decarbonization Strategy ○ Disclosure of plans and actions to support stated climate targets and ambitions ○ Disclosure of emissions management efforts within the company’s operations and, as applicable, across the value chain ○ Disclosure of carbon offsets utilization, if any ○ Disclosure of the role of climate solutions (e.g., carbon capture and storage) ○ Disclosure of potential social risks and opportunities14 related to climate transition plan, if any 13. State Street Global Advisors does not require companies to adopt a climate transition plan. 14. Social risks and opportunities refer to the potential impacts on stakeholders, such as a company’s workforce, customers, communities, or supply chains related to the company’s climate transition plan, which may give rise to risks or opportunities related to human capital management, human rights, and economic development, among others. |
27 • Capital Allocation ○ Disclosure of integration of relevant climate considerations in financial planning ○ Disclosure of total actual and planned capital deployed toward climate transition plan ○ Disclosure of approach to assessing and prioritizing investments toward climate transition plan (e.g., marginal abatement cost curves, internal carbon pricing, if any) • Climate Policy Engagement ○ Disclosure of position on climate-related topics relevant to the company’s decarbonization strategy ○ Disclosure of assessment of stated positions on relevant climate-related topics versus those of associations and other relevant policy-influencing entities, such as trade associations, industry bodies, or coalitions, to which the company belongs, and any efforts taken as a result of this review to address potential misalignment. • Climate Governance ○ Disclosure of the board’s role in overseeing climate transition plan ○ Disclosure of management’s role in overseeing climate transition plan • Physical Risk ○ Disclosure of assessment of climate-related physical risks ○ Disclosure of approach to managing identified climate-related physical risks • Stakeholder Engagement ○ Disclosure of engagement with relevant internal stakeholders related to climate transition plan (e.g., workforce training, cross-functional collaboration) ○ Disclosure of engagement with relevant external stakeholders related to climate transition plan (e.g., industry collaboration, customer engagement) Methane Disclosure Criteria For companies that own or operate oil and gas assets we believe quality disclosure includes the following: • Describe methane emissions detection and monitoring efforts • Explain efforts to enhance measurement, reporting, and verification • Describe the company’s strategy to manage methane emissions • Disclose any methane-related metrics and targets utilized |
28 Nature-Related Disclosure: Biodiversity, Deforestation, Water Management, Wastewater Management, Plastics and Packaging, Waste Management, Product Lifecycle Human Capital Management Disclosure Criteria Diversity, Equity & Inclusion Disclosure Criteria For companies that have determined Biodiversity, Deforestation, Water Management, Wastewater Management, Plastics and Packaging, Waste Management, or Product Lifecycle to present a long-term risk and/or opportunity to their business and/or operations we believe quality disclosure should include the following, which aligns with the pillars of the TCFD framework: • Governance • Strategy • Risk management • Metrics and targets (when relevant) In assessing these criteria, we may review the company’s disclosure against industry and market practice (e.g., peer disclosure, relevant frameworks, relevant industry guidance). We believe quality public disclosure includes the following: • Board oversight Methods outlining how the board oversees human capital-related risks and opportunities • Strategy Approaches to human capital management and how these advance the long-term business strategy • Compensation Strategies throughout the organization that aim to attract and retain employees, and incentivize contribution to an effective human capital strategy • Voice Channels to ensure the concerns and ideas from workers are solicited and acted upon, and how the workforce is engaged and empowered in the organization, and • Diversity, equity, and inclusion Efforts to advance diversity, equity, and inclusion We believe quality public disclosure includes the following: • Board Oversight Describe how the board executes its oversight role in risks and opportunities related to diversity and inclusion • Strategy Articulate the role that diversity (of race, ethnicity, and gender, at minimum) plays in the company’s broader human capital management practices and long-term strategy • Goals Describe what diversity, equity, and inclusion-related goals exist, how these goals contribute to the company’s overall strategy, and how they are managed and progressing |
29 • Metrics Provide measures of the diversity of the company’s global employee base and board, including: ○ Workforce Employee diversity by race, ethnicity, and gender (at minimum). We expect to see this information to be broken down by industry-relevant employment categories or levels of seniority, for all full-time employees. In the US, companies are expected to at least use the disclosure framework set forth by the United States Equal Employment Opportunity Commission’s EEO-1 Survey. Non-US companies are encouraged to disclose this information in alignment with SASB guidance and nationally appropriate frameworks; and, ○ Board Diversity characteristics, including racial, ethnic, and gender makeup (at minimum) of the board of directors; and ○ Board Diversity Articulate goals and strategy related to diverse representation at the board (including race, ethnicity, and gender, at minimum), including how the board reflects the diversity of the company’s workforce, community, customers, and other key stakeholders. Pay Equity Disclosure Criteria (United States and United Kingdom Only) Civil Rights Disclosure Criteria (United States Only) Human Rights Disclosure Criteria We believe quality disclosure for companies in the United States and the United Kingdom includes the following: • Adjusted pay gaps related to race and gender within the company (disclosure of the unadjusted pay gap is also encouraged, but not expected outside of the United Kingdom market at this time); • Strategy to achieve and maintain pay equity; and • Role of the board in overseeing pay strategies as well as diversity, equity and inclusion efforts We believe quality disclosure for companies in the United States includes the following: • Risks related to civil rights, including risks associated with products, practices, and services; • Plans to manage and mitigate these risks; and • Processes at the board for overseeing such risks (e.g., committee responsible, frequency of discussions, etc.). We expect portfolio companies to regularly identify whether there are risks related to human rights15 in their operations and manage any material risks that emerge, providing relevant disclosures to investors. 15. As defined in the Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work. |
30 We believe all companies should disclose whether they have established processes for identifying risks related to human rights. For companies where material human rights risks are identified, we believe quality disclosure includes the following: • Human rights-related risks the company considers most material • Plans to manage and mitigate these risks • Board oversight of these risks, and • Assessment of the effectiveness of the human rights risk management program Political Contributions Disclosure Criteria (United States Only) Lobbying Disclosure Criteria (United States Only) Trade Association Alignment Disclosure Criteria We believe quality disclosure companies in the United States includes the following information: • All contributions, no matter the dollar value, made by the company, its subsidiaries, and/ or affiliated Political Action Committees (PACs) to individual candidates, PACs, and other political organizations at the state and federal levels in the United States; and • The role of the board in oversight of political contributions. We believe quality disclosure for companies in the United States includes the following: • Membership in United States trade associations (to which payments are above $50,000 per year) and • The role of the board in overseeing lobbying activities. We believe quality disclosure for companies includes the following: • The board’s role in overseeing the company’s participation in the political process, including membership in trade associations or other policy-influencing entities; and • Whether the company regularly performs a gap analysis of its stated positions on relevant issues versus those of the trade associations or other policy-influencing organizations of which it is a member, and • Whether the company disclosed a list of its trade association memberships Note: We believe that management is best suited to take positions on the matters related to their company, and therefore we do not recommend any specific position. Our support of these types of shareholder proposals, if any, solely reflects our support for enhanced disclosure on assessing alignment between stated company positions and the positions of associations and other relevant policy-influencing entities to which the company belongs in line with market expectations and effective risk management. |
31 About State Street Global Advisors For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. As pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $4.13 trillion† under our care. * Pensions & Investments Research Center, as of December 31, 2022. † This figure is presented as of December 31, 2023 and includes approximately $64.44 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. |
32 ssga.com ID2025966 0224 Exp. Date: 02/28/2025 |
1 |
March 2024
Summary of Material
Changes to State Street
Global Advisors’ 2024
Proxy Voting and
Engagement Policy1
1 This Summary of Material Changes to the State Street Global Advisors’ 2024 Proxy Voting and Engagement Policy is applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street Corporation.
2 |
State Street Global Advisors amended its Global Proxy Voting and Engagement Policy (the “Policy”) in March 2024 as part of its annual update to voting guidelines. We have centralized our stewardship policies to make it easier for our clients and investee companies to readily find the information they seek within a single policy document. The voting guideline changes for 2024, which become effective March 25, 2024, for voting decisions as of March 26, 2024, are summarized below:
Director Time Commitments
Markets: US
We value the experience and knowledge that directors who have served on multiple public company boards bring to our portfolio companies. At the same time, the commitment associated with being a director on a public company board has increased, as the topics directors are expected to oversee have expanded in scope and complexity.
Investors would benefit from increased transparency over how nominating committees assess their directors’ time commitments and what factors are considered in these decisions.
Beginning in 2024, we consider if a company publicly discloses its director time commitment policy (e.g., within corporate governance guidelines, proxy statement, company website). This policy or associated disclosure must include:
● | Description of the annual review process undertaken by the nominating committee to evaluate director time commitments |
● | Numerical limit(s) on public company board seat(s) the company’s directors can serve on |
For companies in the S&P 500, we may vote against the nominating committee chair at companies that do not publicly disclose a policy compliant with the above criteria, or do not commit to doing so within a reasonable timeframe.
For other companies in certain markets2 that do not publicly disclose a policy compliant with the above criteria, we will consider the number of outside board directorships that the company’s non-executive and executive directors may undertake. Thus, State Street Global Advisors may take voting action against a director who exceeds the number of board mandates listed below3:
● | Named Executive Officers (NEOs) of a public company who sit on more than two public company boards |
● | Non-executive board chairs or lead independent directors who sit on more than three public company boards |
● | Non-executive directors who sit on more than four public company boards |
If a director is imminently leaving a board and this departure is disclosed in a written, time-bound and publicly-available manner, we may consider waiving our withhold vote when evaluating the director for excessive time commitments.
2 Such markets include the United States (ex-S&P 500), Australia, Canada, United Kingdom, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland.
3 Service on a mutual fund board, the board of a UK investment trust or a Special Purpose Acquisition Company (SPAC) board is not considered when evaluating directors for excessive commitments. However, we do expect these roles to be considered by nominating committees when evaluating director time commitments.
T. ROWE PRICE ASSOCIATES, INC. AND CERTAIN OF
ITS
INVESTMENT ADVISER AFFILIATES
PROXY VOTING POLICIES AND PROCEDURES
RESPONSIBILITY TO VOTE PROXIES
T. Rowe Price Associates, Inc. and certain of its investment adviser affiliates1 (collectively, “T. Rowe Price”) have adopted these Proxy Voting Policies and Procedures (“Policies and Procedures”) for the purpose of establishing formal policies and procedures for performing and documenting their fiduciary duty with regard to the voting of client proxies. This document is reviewed at least annually and updated as necessary.
T. Rowe Price recognizes and adheres to the principle that one of the privileges of owning stock in a company is the right to vote in the election of the company’s directors and on matters affecting certain important aspects of the company’s structure and operations that are submitted to shareholder vote. The U.S.-registered investment companies which T. Rowe Price sponsors and serves as investment adviser (the “Price Funds”) as well as other investment advisory clients have delegated to T. Rowe Price certain proxy voting powers. As an investment adviser, T. Rowe Price has a fiduciary responsibility to such clients when exercising its voting authority with respect to securities held in their portfolios. T. Rowe Price reserves the right to decline to vote proxies in accordance with client-specific voting guidelines.
Fiduciary Considerations. It is the policy of T. Rowe Price that decisions with respect to proxy issues will be made in light of the anticipated impact of the issue on the desirability of investing in the portfolio company from the viewpoint of the particular advisory client or Price Fund. Proxies are voted solely in the interests of the client, Price Fund shareholders or, where employee benefit plan assets are involved, in the interests of plan participants and beneficiaries. Our intent has always been to vote proxies, where possible to do so, in a manner consistent with our fiduciary obligations and responsibilities.
One of the primary factors T. Rowe Price considers when determining the desirability of investing in a particular company is the quality and depth of its management. We recognize that a company’s management is entrusted with the day-to-day operations of the company, as well as its long-term direction and strategic planning, subject to the oversight of the company’s board of directors. Accordingly, our proxy voting guidelines are not intended to substitute our judgment for management’s with respect to the company’s day-to-day operations. Rather, our proxy voting guidelines are designed to promote accountability of a company’s management and board of directors to its shareholders; to align the interests of management with those of shareholders; and to encourage companies to adopt best practices in terms of their corporate governance and disclosure. In addition to our proxy voting guidelines, we rely on a company’s public filings, its board recommendations, its track record, country-specific best practices codes, our research providers and – most importantly – our investment professionals’ views in making voting decisions. T. Rowe Price investment personnel do not coordinate with investment personnel of its affiliated investment adviser, TRPIM, with respect to proxy voting decisions.
1 This document is not applicable to T. Rowe Price Investment Management, Inc. (“TRPIM”). TRPIM votes proxies independently from the other T. Rowe Price-related investment advisers and has adopted its own proxy voting policy.
T. Rowe Price seeks to vote all of its clients’ proxies. In certain circumstances, T. Rowe Price may determine that refraining from voting a proxy is in a client’s best interest, such as when the cost of voting outweighs the expected benefit to the client. For example, the practicalities and costs involved with international investing may make it impossible at times, and at other times disadvantageous, to vote proxies in every instance.
ADMINISTRATION OF POLICIES AND PROCEDURES
Environmental, Social and Governance Investing Committee. T. Rowe Price’s Environmental, Social and Governance Investing Committee (“TRPA ESG Investing Committee” or the “Committee”) is responsible for establishing positions with respect to corporate governance and other proxy issues. Certain delegated members of the Committee also review questions and respond to inquiries from clients and mutual fund shareholders pertaining to proxy issues. While the Committee sets voting guidelines and serves as a resource for T. Rowe Price portfolio management, it does not have proxy voting authority for any Price Fund or advisory client. Rather, voting authority and responsibility is held by the Chairperson of the Price Fund’s Investment Advisory Committee or the advisory client’s portfolio manager. The Committee is also responsible for the oversight of third-party proxy services firms that T. Rowe Price engages to facilitate the proxy voting process.
Global Proxy Operations Team. The Global Proxy Operations team is responsible for administering the proxy voting process as set forth in the Policies and Procedures.
Governance Team. Our Governance team is responsible for reviewing the proxy agendas for all upcoming meetings and making company-specific recommendations to our global industry analysts and portfolio managers with regard to the voting decisions in their portfolios.
Responsible Investment Team. Our Responsible Investment team oversees the integration of environmental and social factors into our investment processes across asset classes. In formulating vote recommendations for matters of an environmental or social nature, the Governance team frequently consults with the appropriate sector analyst from the Responsible Investment team.
HOW PROXIES ARE REVIEWED, PROCESSED AND VOTED
In order to facilitate the proxy voting process, T. Rowe Price has retained Institutional Shareholder Services (“ISS”) as an expert in the proxy voting and corporate governance area. ISS specializes in providing a variety of fiduciary-level proxy advisory and voting services. These services include custom vote recommendations, research, vote execution, and reporting. Services provided by ISS do not include automated processing of votes on our behalf using the ISS Benchmark Policy recommendations. Instead, in order to reflect T. Rowe Price’s issue-by-issue voting guidelines as approved each year by the TRPA ESG Investing Committee, ISS maintains and implements custom voting policies for the Price Funds and other advisory client accounts.
Meeting Notification
T. Rowe Price utilizes ISS’ voting agent services to notify us of upcoming shareholder meetings for portfolio companies held in client accounts and to transmit votes to the various custodian banks of our clients. ISS tracks and reconciles our clients’ holdings against incoming proxy ballots. If ballots do not arrive on time, ISS procures them from the appropriate custodian or proxy distribution agent. Meeting and record date information is updated daily and transmitted to T. Rowe Price through ProxyExchange, an ISS application.
Vote Determination
Each day, ISS delivers into T. Rowe Price’s customized ProxyExchange environment a comprehensive summary of upcoming meetings, proxy proposals, publications discussing key proxy voting issues, and custom vote recommendations to assist us with proxy research and processing. For meetings with complex ballot items in certain international markets, research may be consulted from local domestic proxy research providers. The final authority and responsibility for proxy voting decisions remains with T. Rowe Price. Decisions with respect to proxy matters are made primarily in light of the anticipated impact of the issue on the desirability of investing in the company from the perspective of our clients.
Portfolio managers execute their responsibility to vote proxies in different ways. Some have decided to vote their proxies generally in line with the guidelines as set by the TRPA ESG Investing Committee. Others review the customized vote recommendations and approve them before the votes are cast. Portfolio managers have access to current reports summarizing all proxy votes in their client accounts. Portfolio managers who vote their proxies inconsistent with T. Rowe Price guidelines are required to document the rationale for their votes. The Global Proxy Operations team is responsible for maintaining this documentation and assuring that it adequately reflects the basis for any vote which is contrary to our proxy voting guidelines.
T. Rowe Price Voting Guidelines
Specific proxy voting guidelines have been adopted by the TRPA ESG Investing Committee for all regularly occurring categories of management and shareholder proposals. The guidelines include regional voting guidelines as well as the guidelines for investment strategies with objectives other than purely financial returns, such as Impact and Net Zero. A detailed set of proxy voting guidelines is available on the T. Rowe Price website, www.troweprice.com/esg.
Global Portfolio Companies
The TRPA ESG Investing Committee has developed custom international proxy voting guidelines based on our proxy advisor’s general global policies, regional codes of corporate governance, and our own views as investors in these markets. We apply a two-tier approach to determining and applying global proxy voting policies. The first tier establishes baseline policy guidelines for the most fundamental issues, which span the corporate governance spectrum without regard to a company’s domicile. The second tier takes into account various idiosyncrasies of different countries, making allowances for standard market practices, as long as they do not violate the fundamental goals of good corporate governance. The goal is to enhance shareholder value through effective use of the shareholder franchise, recognizing that application of a single set of policies is not appropriate for all markets.
Fixed Income and Passively Managed Strategies
Proxy voting for our fixed income and indexed portfolios is administered by the Global Proxy Operations team using T. Rowe Price’s guidelines as set by the TRPA ESG Investing Committee. Indexed strategies generally vote in line with the T. Rowe Price guidelines. Fixed income strategies generally follow the proxy vote determinations on security holdings held by our equity accounts unless the matter is specific to a particular fixed income security such as consents, restructurings, or reorganization proposals.
Shareblocking
Shareblocking is the practice in certain countries of “freezing” shares for trading purposes in order to vote proxies relating to those shares. In markets where shareblocking applies, the custodian or sub-custodian automatically freezes shares prior to a shareholder meeting once a proxy has been voted. T. Rowe Price’s policy is generally to refrain from voting shares in shareblocking countries unless the matter has compelling economic consequences that outweigh the temporary loss of liquidity in the blocked shares.
Securities on Loan
The Price Funds and our institutional clients may participate in securities lending programs to generate income for their portfolios. Generally, the voting rights pass with the securities on loan; however, lending agreements give the lender the right to terminate the loan and pull back the loaned shares provided sufficient notice is given to the custodian bank in advance of the applicable deadline. T. Rowe Price’s policy is generally not to vote securities on loan unless we determine there is a material voting event that could affect the value of the loaned securities. In this event, we have the discretion to pull back the loaned securities for the Price Funds in order to cast a vote at an upcoming shareholder meeting. A monthly monitoring process is in place to review securities on loan for the Price Funds and how they may affect proxy voting.
Monitoring and Resolving Conflicts of Interest
The TRPA ESG Investing Committee is also responsible for monitoring and resolving potential material conflicts between the interests of T. Rowe Price and those of its clients with respect to proxy voting. We have adopted safeguards to ensure that our proxy voting is not influenced by interests other than those of our fund shareholders and other investment advisory clients. While membership on the Committee is diverse, it does not include individuals whose primary duties relate to client relationship management, marketing, or sales. Since T. Rowe Price’s voting guidelines are predetermined by the Committee, application of the guidelines by portfolio managers to vote client proxies should in most instances adequately address any potential conflicts of interest. However, consistent with the terms of the Policies and Procedures, which allow portfolio managers to vote proxies opposite our general voting guidelines, the Committee regularly reviews all such proxy votes that are inconsistent with the proxy voting guidelines to determine whether the portfolio manager’s voting rationale appears reasonable. The Committee also assesses whether any business or other material relationships between T. Rowe Price and a portfolio company (unrelated to the ownership of the portfolio company’s securities) could have influenced an inconsistent vote on that company’s proxy. Issues raising potential conflicts of interest are referred to designated members of the Committee for immediate resolution prior to the time T. Rowe Price casts its vote.
With respect to personal conflicts of interest, T. Rowe Price’s Global Code of Conduct requires all employees to avoid placing themselves in a “compromising position” in which their interests may conflict with those of our clients and restrict their ability to engage in certain outside business activities. Portfolio managers or Committee members with a personal conflict of interest regarding a particular proxy vote must recuse themselves and not participate in the voting decisions with respect to that proxy.
Specific Conflict of Interest Situations
Voting of T. Rowe Price Group, Inc. common stock (sym: TROW) by certain T. Rowe Price Index Funds will be done in all instances in accordance with T. Rowe Price voting guidelines and votes inconsistent with the guidelines will not be permitted. In the event that there is no previously established guideline for a specific voting issue appearing on the T. Rowe Price Group proxy, the Price Funds will abstain on that voting item.
In addition, T. Rowe Price has voting authority for proxies of the holdings of certain Price Funds that invest in other Price Funds. Shares of the Price Funds that are held by other Price Funds will generally be voted in the same proportion as shares for which voting instructions from other shareholders are timely received. If voting instructions from other shareholders are not received, or if a T. Rowe Price Fund is only held by other T. Rowe Price Funds or other accounts for which T. Rowe Price has proxy voting authority, the fund will vote in accordance with its Board’s instruction.
For shares of the Price Funds that are series of T. Rowe Price Equity Series, Inc., T. Rowe Price Fixed Income Series, Inc., and T. Rowe Price International Series, Inc. (collectively, the “Variable Insurance Portfolios”) held by insurance company separate accounts for which the insurance company has not received timely voting instructions, as well as shares the insurance company owns, those shares shall be voted in the same proportion as shares for which voting instructions from contract holders are timely received.
Limitations on Voting Proxies of Banks
T. Rowe Price has obtained relief from the U.S. Federal Reserve Board (the “FRB Relief”) which permits, subject to a number of conditions, T. Rowe Price to acquire in the aggregate on behalf of its clients, 10% or more of the total voting stock of a bank, bank holding company, savings and loan holding company or savings association (each a “Bank”), not to exceed a 15% aggregate beneficial ownership maximum in such Bank. One such condition affects the manner in which T. Rowe Price will vote its clients’ shares of a Bank in excess of 10% of the Bank’s total voting stock (“Excess Shares”). The FRB Relief requires that T. Rowe Price use its best efforts to vote the Excess Shares in the same proportion as all other shares voted, a practice generally referred to as “mirror voting,” or in the event that such efforts to mirror vote are unsuccessful, Excess Shares will not be voted. With respect to a shareholder vote for a Bank of which T. Rowe Price has aggregate beneficial ownership of greater than 10% on behalf of its clients, T. Rowe Price will determine which of its clients’ shares are Excess Shares on a pro rata basis across all of its clients’ portfolios for which T. Rowe Price has the power to vote proxies.2
REPORTING, RECORD RETENTION AND OVERSIGHT
The TRPA ESG Investing Committee, and certain personnel under the direction of the Committee, perform the following oversight and assurance functions, among others, over T. Rowe Price’s proxy voting: (1) periodically samples proxy votes to ensure that they were cast in compliance with T. Rowe Price’s proxy voting guidelines; (2) reviews, no less frequently than annually, the adequacy of the Policies and Procedures to make sure that they have been implemented effectively, including whether they continue to be reasonably designed to ensure that proxies are voted in the best interests of our clients; (3) performs due diligence on whether a retained proxy advisory firm has the capacity and competency to adequately analyze proxy issues, including the adequacy and quality of the proxy advisory firm’s staffing and personnel and its policies; and (4) oversees any retained proxy advisory firms and their procedures regarding their capabilities to (i) produce proxy research that is based on current and accurate information and (ii) identify and address any conflicts of interest and any other considerations that we believe would be appropriate in considering the nature and quality of the services provided by the proxy advisory firm.
T. Rowe Price will furnish Vote Summary Reports, upon request, to its institutional clients that have delegated proxy voting authority. The report specifies the portfolio companies, meeting dates, proxy proposals, and votes which have been cast for the client during the period and the position taken with respect to each issue. Reports normally cover quarterly or annual periods and are provided to such clients upon request.
T. Rowe Price retains proxy solicitation materials, memoranda regarding votes cast in opposition to the position of a company’s management, and documentation on shares voted differently. In addition, any document which is material to a proxy voting decision such as the T. Rowe Price proxy voting guidelines, Committee meeting materials, and other internal research relating to voting decisions are maintained in accordance with applicable requirements.
2 The FRB Relief and the process for voting of Excess Shares described herein apply to the aggregate beneficial ownership of T. Rowe Price and TRPIM.
WASATCH GLOBAL INVESTORS
PROXY VOTING POLICY
Regulatory Background - Proxy Voting Provisions of the Investment Advisers Act
Rule 206(4)-6 of the Investment Advisers Act of 1940 requires that, for an investment adviser to exercise voting authority with respect to client securities, the adviser must:
● | Adopt and implement written policies and procedures that are reasonably designed to ensure that the adviser votes client securities in the best interest of clients, which procedures must include how the adviser addresses material conflicts that may arise between the adviser’s interests and those of the adviser’s clients; |
● | Disclose to clients how they may obtain information from the adviser about how the adviser voted with respect to their securities; and |
● | Describe to clients the adviser’s proxy voting policies and procedures and, upon request, furnish a copy of the policies and procedures to the requesting client. |
In accordance with our obligations under the Rule, Wasatch Global Investors (“Wasatch”) has adopted and implemented the following Proxy Voting Policy to ensure that client proxies are voted in the best interest of clients at all times.
I. POLICY OVERVIEW
At Wasatch, our goal is to maximize the economic value of the investments we make for our separate account clients and our mutual fund shareholders. In pursuit of this goal, we buy and hold securities we believe will appreciate in value. When the investment potential of a security becomes diminished, we sell it and attempt to reinvest the proceeds in more attractive opportunities. In short, the primary means by which we serve our shareholders and clients and protect their interests is the purchase and sale of securities. A secondary means by which we fulfill our fiduciary responsibility is the exercising of our proxy voting rights. Corporate governance, including but not limited to, compensation plans, corporate actions and the composition of a board of directors, can have a significant influence upon the behavior of a management team and the value of a corporation. The proxy voting process is the primary means by which investors are able to influence such activities. As such, Wasatch considers how we vote proxies to be an important activity.
One fundamental tenet of Wasatch’s investment philosophy is to invest in companies with high quality management teams. We spend a significant amount of time evaluating the performance, behavior, and actions of company executives in order to gain an understanding of how they think about protecting and increasing shareholder value. As a result of being invested with high quality management teams, Wasatch generally supports the recommendations of the boards of directors when voting proxies. However, we ultimately vote for or against recommendations based on the fundamental premise that at all times we are attempting to maximize the value of our investments for the benefit of our clients. Wasatch also has a long history of investing in companies with small market capitalizations, which often have a significant amount of common stock owned by existing and former members of management. While this high degree of inside ownership could cause some concerns regarding a lack of independence for the board of directors, certain board committees or other areas of corporate governance, we generally believe high inside ownership to be a positive characteristic as it helps to ensure that the interests of management and shareholders are closely aligned.
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Wasatch has developed the following proxy voting guidelines to assist us in making decisions about how to vote proposals concerning certain issues. We have attempted to address those issues that we believe are most relevant to creating shareholder value or that occur most frequently in the types of securities in which we invest. However, these guidelines are not exhaustive and do not purport to cover all of the potential issues, for the variety of issues on which shareholders may be asked to vote is unlimited. The disclosure of these guidelines is intended to provide clients and shareholders with a better understanding of how Wasatch attempts to maximize shareholder value via the proxy voting process.
II. GENERAL GUIDELINES
Board of Directors
Wasatch considers the board of directors to be an important component of strong corporate governance. The board is responsible for overseeing the management team of a company and helping to ensure that it acts in the best interest of shareholders. The primary means by which Wasatch can influence the board of directors is to vote for the election of directors who have relevant and valuable experience that will enhance the management of the company. Further, Wasatch prefers that a board of directors have a majority of independent directors because we believe that a board with such a composition is generally a strong advocate for shareholders.
However, while we endorse proposals that support the creation of boards with a majority of independent directors as well as proposals which call for the audit, compensation and nominating committees to be comprised solely of independent directors, the failure of the company to nominate only independent directors or to have only independent directors serve on key committees may not cause us to vote against the election of a director who lacks independence. Wasatch appreciates the importance of these standards but we do not believe it is always in the best interest of shareholders to blindly vote against all directors who may not be considered independent. For example, a large shareholder who serves as a director is not considered independent but may be a very important advocate for investors since his interests are closely aligned with those of shareholders.
Generally, Wasatch will vote for those nominees recommended by the board of directors. However, in each election we will review a wide variety of criteria including but not limited to:
● Long-term performance of the company.
● Composition of the board and key committees.
● Stock ownership by directors.
● Decisions regarding executive pay and director compensation.
● Corporate governance provisions and takeover activity.
● Attendance at board meetings.
● Interlocking directorships and related party transactions.
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In addition to evaluating nominees for the board of directors based on the aforementioned criteria, Wasatch generally will support proposals:
● | To declassify a board of directors. |
● | That allow cumulative voting and confidential voting. |
Wasatch generally will not support:
● | Nominees who are independent and receive compensation for services other than serving as a director. |
● | Nominees who attend less than 75% of board meetings without valid reasons for absences. |
● | Nominees who are party to an interlocking directorship. |
● | Efforts to adopt classified board structures. |
Wasatch supports diversity of board membership with respect to gender, race, and ethnicity. If a company’s board lacks at least one gender-diverse and one racially- or ethnically-diverse director, , then the vote for the nominee for the chair of the nominating committee will be referred to Wasatch to vote on a case-by-case basis.
Executive Compensation
Wasatch supports compensation plans which are designed to align the interests of management and shareholders as well as relate executive compensation to the performance of the company. To evaluate compensation plans, we use quantitative criteria that measure the total cost to shareholders if a plan is passed. Factors considered include:
● | The estimated dollar cost for every award type under the proposed plan and all continuing plans. |
● | The maximum shareholder wealth that would be transferred from the company to executives. |
● | Long-term corporate performance (on an absolute basis and relative to a standard industry peer group and an appropriate market index) pegged to market capitalization. |
● | Cash compensation pegged to market capitalization. |
● | Other features of proposed compensation plans such as administration, payment terms, plan duration, and whether the administering committee is permitted to reprice underwater stock options without shareholder approval. |
After the cost of the plan is estimated, it is compared to a company-specific dilution cap. The allowable cap is industry specific, market cap based, and pegged to the average amount paid by companies performing in the top quartile of their peer groupings. If the total plan cost exceeds the allowable cap, Wasatch will generally vote against the proposed plan. In addition, Wasatch generally will not support stock option plans that permit:
● | The repricing of stock options without shareholder approval. |
● | The options to be priced at less than 100% of the fair market value of the underlying security on the date of the grant. |
Capital Structure
Wasatch may be asked to vote on proposals pertaining to changes in the capital structure of a company. Such proposals include, but are not limited to, common stock authorizations, capital issuance requests, share repurchase programs, stock splits, and debt restructurings. We will vote for board-recommended capital structure changes so long as the proposals are well aligned with shareholder interests. Wasatch generally will support proposals:
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● Requesting the authorization of additional common stock.
● To institute share repurchase plans.
● To implement stock splits. Proposals to implement reverse stock splits will be reviewed on a case-by-case basis.
Wasatch will review, on a case-by-case basis, all other proposals to change the capital structure of a company, including the authorization of common stock with special voting rights, the authorization of stock relating to certain transactions, the issuance of preferred stock (including “blank check” preferred stock) and the restructuring of debt securities. These proposals typically address a set of company-specific circumstances and proposals recommended by the board of directors may or may not be in the best interest of shareholders.
Mergers, Acquisitions and Other Transactions
Companies may undertake a variety of strategic transactions aimed at enhancing shareholder value including mergers, acquisitions, recapitalizations, spin-offs, asset sales, and liquidations. In evaluating proposed transactions, we will consider the benefits and costs to shareholders over both the short and long term. Specific items we will consider include the financial impact of the transaction on future operating results, the increase or decrease in shareholder value, and any changes in corporate governance and their impact on shareholder rights. When shareholders are asked to vote on mergers, acquisitions and other similar proposals, they are considered to be material to the company and could require the analysis of a wide variety of factors in order to determine if the transaction is in the best interest of shareholders. As a result, Wasatch will review and vote each proposal on a case-by-case basis.
Anti-Takeover Provisions
In an attempt to prevent a company from being acquired without the approval of the board of directors, shareholders may be asked to vote on a variety of proposals such as shareholder rights plans (commonly referred to as “poison pills”), supermajority voting, blank check preferred stock, fair price provisions, and the creation of a separate class of stock with disparate voting rights. Wasatch recognizes that such proposals may enhance shareholder value in certain situations. However, Wasatch will review proposals pertaining to anti-takeover provisions on a case-by-case basis and vote against those proposals merely intended to entrench management and prevent the company from being acquired at a fair price.
Auditors
An audit of a company’s financial statements is an important part of the investment process, for while an audit cannot fully protect investors against fraud, it does verify that the financial statements accurately represent the position and performance of the company. Wasatch generally votes for proposals to ratify auditors unless the auditors do not appear to be independent. Auditor independence may be compromised if the auditor has a financial interest and/or association with the company or receives substantial compensation for non-audit related services. Wasatch also generally votes for proposals to authorize the board of directors to determine the remuneration of the auditors unless there is evidence of excessive compensation relative to the size and nature of the company.
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Environmental, Social and Governance Issues
Wasatch believes corporations which act responsibly towards all stakeholders will generally perform better over the long-term. Wasatch will consider Environmental, Social and Governance issues in proxy proposals, but will determine on a case-by-case basis whether the proposals are economically advantageous to shareholders and whether or not to support the issues.
Foreign Issuers
With respect to some non-U.S. issuers, the exercise of voting rights can cause an account to incur a cost or cause the underlying shares to be blocked from trading. Although we recognize the importance of the right to vote, Wasatch believes that clients may be better served by avoiding unnecessary costs and preserving the right to trade shares promptly should conditions warrant. Accordingly, there may be times when no vote is cast because Wasatch’s analysis of a particular proxy leads us to believe that the cost of voting the proxy exceeds the expected benefit to clients (e.g., when casting a vote on a foreign security requires that Wasatch engage a translator or travel to a foreign country to vote in person, or results in shares being blocked from trading). This position complies with the Department of Labor’s Interpretive Bulletin 94-2.
Certain foreign countries require additional documentation in order to permit voting of shares. For example, Wasatch clients are at times required to provide a power of attorney to the local sub-custodian to facilitate Wasatch voting the shares held in the client accounts. While Wasatch will attempt to assist clients in preparing and submitting this documentation, at times Wasatch is unable to vote shares held by some clients in certain foreign countries.
III. EXCLUSIONS AND EXCEPTIONS
Wasatch has developed the general guidelines to assist us in making decisions about how to vote proposals concerning anticipatable issues. However, we recognize that the general guidelines are not exhaustive and cannot anticipate all of the potential issues, or the facts and circumstances surrounding a particular vote. Although we have general guidelines, in the situations covered below Wasatch may supplement or deviate from them.
Case-by-case Issues
Several of the issues mentioned above in the general guidelines recognize that the proper vote to maximize shareholder value will be dependent upon the facts in the actual situation. These facts cannot be anticipated and will be reviewed on a case-by-case basis with the aim of maximizing shareholder value. In addition, any issues that are not addressed by the foregoing guidelines will be reviewed on a case-by-case basis.
Exceptions
From time to time Wasatch will review an issue that is addressed by the foregoing guidelines and determine that in the specific case it is appropriate to vote against the recommendation provided in the guidelines with the aim of maximizing shareholder value. At these times it is permissible for Wasatch to vote against the general guidelines, but it is required that the rationale behind the deviation from the guidelines is sufficiently documented.
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Conflicts of Interest
Wasatch will at all times make its best effort to vote proxies in the best interest of clients and avoid material conflicts of interest. A material conflict of interest refers to a situation in which Wasatch or affiliated persons of Wasatch have a financial interest in a matter presented by a proxy which could potentially compromise Wasatch’s independence of judgment and action with respect to the voting of the proxy. We will attempt to identify any material conflicts that may exist by, among other things, reviewing the identity of each issuer soliciting proxy votes to determine if the issuer or an affiliate of the issuer (i) is a client of Wasatch, (ii) has a relationship with Wasatch, (iii) there is a reasonable expectation that the issuer or an affiliate would become a client of Wasatch or develop a material relationship with Wasatch, or (iv) Wasatch holds a significant amount1 of the issuer’s shares outstanding. In addition, any Wasatch employee with knowledge of a personal conflict of interest (e.g., a familial relationship with company management) relating to an issuer soliciting proxy votes must disclose that conflict to the Proxy Manager and Compliance and remove himself or herself from the proxy voting process for that issuer. Any questions regarding whether a particular issue may present a material conflict of interest with respect to Wasatch’s voting of client proxies should be directed to Compliance.
In the event that Wasatch has a material conflict of interest in any proposal that is the subject of a proxy to be voted for a client account, Wasatch will instruct ISS to vote that proposal in accordance with ISS’ published recommendation. In such cases, any vote recommended by ISS is binding and may not be overridden by Wasatch. Proposals on the same proxy ballot for which Wasatch does not have a material conflict of interest will be voted in accordance with Wasatch’s Proxy Voting Policy.
Private Funds
In addition to its other clients, Wasatch provides investment management services to private investment funds. Every vote made in the private funds will be considered a case-by-case vote. All voting decisions made for the private funds will be made independent of the voting decisions made for other Wasatch clients. In order to ensure this independence, Wasatch will document that different individuals have made these voting decisions independent of one another.
Securities on Loan
Wasatch is not involved in lending shares for its clients’ or affiliated mutual funds, either directly or indirectly, and is not a party to any clients’ securities lending agreements. Wasatch is not involved in decisions to lend securities or recall loaned securities for accounts who have lending agreements with other service providers. Wasatch generally does not recall, exercise voting power, or report on loaned securities for accounts with such lending agreements, unless required by law.
IV. PROCEDURES
ISS’s Role
Wasatch has retained an independent service provider, Institutional Shareholder Services (“ISS”), to assist in reconciling and processing proxy ballots and providing record-keeping and vote disclosure services, as well as research on proxy issues. ISS tracks which securities are held by Wasatch and receives notice of the proxy votes that these companies send to shareholders. ISS then reviews the Wasatch Proxy Voting Policy and prepares recommendations on how the votes should be cast based on the policy (the “ISS Recommendations”). ISS then provides these recommendations to Wasatch. On matters not adequately covered by the Wasatch Proxy Voting Policy, ISS merely notes these as case-by-case indicating they require additional review by Wasatch. After the ISS Recommendations are provided to Wasatch, the matters are voted by ISS in accordance with the recommendations unless ISS receives instructions from Wasatch to vote otherwise.
1 Wasatch's relative level of ownership of certain issuer’s soliciting proxy votes, as a percent of the company’s shares outstanding, may give the appearance of control. Wasatch clients hold the issuer's stock solely for investment purposes, with no intent to control the business or affairs of the issuer. In such instances, Wasatch may instruct ISS to vote that meeting in accordance with ISS’ published recommendation.
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Proxy Manager’s Role
Wasatch has designated a member of our Operations team as Proxy Manager to assist in coordinating and voting securities. The Proxy Manager sends a proxy meeting calendar to research analysts detailing upcoming shareholder meetings, including an indication whether items are set to be voted per the ISS Recommendations or whether they need additional review and determination by Research. The Proxy Manager then is responsible for ensuring all votes are cast, documenting the basis for voting decisions on any contrary votes or case-by-case votes, and monitoring Wasatch’s proxy voting procedures.
Research Team’s Role
The members of Wasatch’s Research team are responsible for reviewing the proxies of the companies they follow and the ISS Recommendation for the proxies. The Research team needs to provide the Proxy Manager with vote recommendations in case-by-case votes and any time they wish to vote contrary to the ISS Recommendation.
Proxy Committee
Wasatch has established a Proxy Committee to oversee the implementation and monitoring of this Policy. The Proxy Committee provides a written report on a regular basis to the Wasatch’s Corporate Governance and Audit Committee as well as the Wasatch Funds Trust’s Board of Directors. No less than annually, the Proxy Committee shall:
● | Review a sample of the record of voting delegation, including ERISA accounts, maintained by the Proxy Manager to determine if Wasatch is exercising its authority to vote proxies on portfolio securities held in the selected accounts; |
● | Request and review voting data to determine if accurate and timely communication of proxy votes is reasonably accomplished during the period reviewed; |
● | Meet with the Proxy Manager to review the voting of proxies, communication of proxy votes, and the general functioning of this policy; and |
● | Prepare a written report to the Audit Committee with respect to the results of this review. |
Report of Proxy Voting Record
Wasatch must file an annual report on Form N-PX containing its proxy voting record for each shareholder vote with respect to how Wasatch voted (or determined not to vote) on say-on-pay votes over which it exercised voting power. Say-on-pay votes include the approval of executive compensation and on the frequency of such executive compensation approval votes, as well as votes to approve “golden parachute” compensation in connection with a merger or acquisition.
Form N-PX will be filed not later than August 31 of each year for the prior 12-month period ended June 30.
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V. Recordkeeping, Training and Maintenance
Recordkeeping
Under rule 204-2, Wasatch must retain the following:
a) | proxy voting policies; |
b) | proxy statements received regarding client securities – Wasatch has delegated the responsibility for maintaining these records to ISS; |
c) | records of votes they cast on behalf of clients – Wasatch has delegated the responsibility for maintaining these records to ISS; |
d) | any documents prepared by Wasatch that were material to making a decision how to vote, or that memorialized the basis for the decision – this will generally be the proxy policy and documentation regarding any votes cast contrary to the policy; |
e) | Record of the voting resolution of any conflict of interest; |
f) | Records of any client requests for information on how a client’s proxies were voted and records of Wasatch’s responses to client requests; |
g) | Training attendance records; and |
h) | All written reports arising from annual reviews of the policy. |
Wasatch has retained ISS to assist in providing record-keeping. Wasatch may also use the Securities and Exchange Commission’s EDGAR database for the items referred to in item b above. Records not maintained by ISS shall be maintained by Wasatch for a period of not less than five years from the end of the Wasatch’s fiscal year during which the last entry was made on the record.
Training
At least annually, appropriate personnel will be trained regarding the Proxy Voting Policy. Such training program will review applicable laws, regulations, procedures and recent trends in proxy voting and their relation to Wasatch’s business. Training may be conducted in person or online, and completion records will be retained for a five-year period.
Annual Certification
Each Wasatch employee who is involved in the proxy voting process is required to certify annually that he or she has read, understands and has complied with, to the best of his or her knowledge, Wasatch’s Proxy Voting Policy.
ERISA
Wasatch acknowledges our responsibility to vote proxies for ERISA clients in a manner that ensures the exclusive benefit for the underlying participants and beneficiaries. Wasatch casts such proxy votes for the sole purpose of extending benefits to participants and beneficiaries while using the care, skill and diligence that a prudent person acting in a like capacity and familiar with such matters would use under the circumstances then prevailing.
Undue Influence
Any attempts by any of Wasatch’s personnel to influence the voting of client proxies in a manner that is inconsistent with Wasatch’s Policy should be reported to Wasatch’s Compliance Officer. If the Compliance Officer is the person attempting to influence the voting, the report should be made to Wasatch’s President.
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VI. Disclosure to Clients
Interested Clients are encouraged to request information on how Wasatch has voted their proxies. In order to request this information, separate account clients should contact their Client Relations representative. Wasatch Funds’ proxy voting record is available on the Funds’ website at www.wasatchfunds.com and the SEC’s website at www.sec.gov no later than August 31 for the prior 12 months ending June 30.
Adopted as of September 30, 2004
Amended as of June 8, 2010; March 10, 2015; November 14, 2017; February 25, 2022, February 28, 2024 Last Reviewed: May 11, 2023.
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WELLINGTON MANAGEMENT COMPANY
Wellington Management Global Proxy Policy and Procedures |
INTRODUCTION
Wellington Management has adopted and implemented policies and procedures it believes are reasonably designed to ensure that proxies are voted in the best interests of clients for which it exercises proxy voting discretion.
The purpose of this document is to outline Wellington Management’s approach to executing proxy voting. Wellington Management’s Proxy Voting Guidelines (the “Guidelines”), which are contained in a separate document, set forth broad guidelines and positions on common issues that Wellington Management uses for voting proxies. The Guidelines set out our general expectations on how we vote rather than rigid rules that we apply without consideration of the particular facts and circumstances.
STATEMENT OF POLICY
Wellington Management:
1) Votes client proxies for clients that have affirmatively delegated proxy voting authority, in writing, unless we have arranged in advance with a particular client to limit the circumstances in which the client would exercise voting authority or we determine that it is in the best interest of one or more clients to refrain from voting a given proxy;
2) | Seeks to vote proxies in the best financial interests of the clients for which we are voting; |
3) Identifies and resolves all material proxy-related conflicts of interest between the firm and our clients in the best interests of the client.
RESPONSIBILITY AND OVERSIGHT
The Proxy Voting Team monitors regulatory requirements with respect to proxy voting and works with the firm’s Legal and Compliance Group and the Investment Stewardship Committee to develop practices that implement those requirements. The Proxy Voting Team also acts as a resource for portfolio managers and investment research analysts on proxy matters as needed. Day-to-day administration of the proxy voting process is the responsibility of the Proxy Voting Team. The Investment Stewardship Committee, a senior, cross-functional group of experienced professionals, is responsible for oversight of the implementation of the Global Proxy Policy and Procedures, review and approval of the Guidelines, and identification and resolution of conflicts of interest. The Investment Stewardship Committee reviews the Guidelines as well as the Global Proxy Policy and Procedures annually.
PROCEDURES
Use of third-party voting agent
Wellington Management uses the services of a third-party voting agent for research and to manage the administrative aspects of proxy voting. We view third-party research as an input to our process. Wellington Management complements the research provided by its primary voting agent with research from other firms.
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Global Proxy Policy and Procedures
Our primary voting agent processes proxies for client accounts and maintains records of proxies voted. For certain routine issues, as detailed below, votes may be instructed according to standing instructions given to our primary voting agent, which are based on the Guidelines.
We manually review instances where our primary voting agent discloses a material conflict of interest of its own, potentially impacting its research outputs. We perform oversight of our primary voting agent, which involves regular service calls and an annual due diligence exercise, as well as regular touchpoints in the normal course of business.
Receipt of proxy
If a client requests that Wellington Management vote proxies on its behalf, the client must instruct its custodian bank to deliver all relevant voting materials to Wellington Management or its designated voting agent in a timely manner.
Reconciliation
Proxies for public equity securities received by electronic means are matched to the securities eligible to be voted, and a reminder is sent to custodians/trustees who have not forwarded the proxies due. This reconciliation is performed at the ballot level. Although proxies received for private equity securities, as well as those received in nonelectronic format for any securities, are voted as received, Wellington Management is not able to reconcile these ballots and does not notify custodians of nonreceipt; Wellington Management is only able to reconcile ballots where clients have consented to providing holdings information to its provider for this purpose.
Proxy voting process
Our approach to voting is investment-led and serves as an influential component of our engagement and escalation strategy. The Investment Stewardship Committee, a cross-functional group of experienced professionals, oversees Wellington Management’s activities with regard to proxy voting practices.
Routine issues that can be addressed by the proxy voting guidance below are voted by means of standing instructions communicated to our primary voting agent. Some votes warrant analysis of specific facts and circumstances and therefore are reviewed individually. We examine such vote sources, including internal research notes, third-party voting research, and company engagement. While manual votes are often resolved by investment research teams, each portfolio manager is empowered to make a final decision for their relevant client portfolio(s), absent a material conflict of interest. Proactive portfolio manager input is sought under certain circumstances, which may include consideration of position size and proposal subject matter and nature. Where portfolio manager input is proactively sought, deliberation across the firm may occur. This collaboration does not prioritize consensus across the firm above all other interests but rather seeks to inform portfolio managers’ decisions by allowing them to consider multiple perspectives. Portfolio managers may occasionally arrive at different voting conclusions for their clients, resulting in different decisions for the same vote. Voting procedures and the deliberation that occurs before a vote decision are aligned with our role as active owners and fiduciaries for our clients.
Material conflict of interest identification and resolution processes
Further detail on our management of conflicts of interest can be found in our Stewardship Conflicts of Interest Policy, available on our website.
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Global Proxy Policy and Procedures
OTHER CONSIDERATIONS
In certain instances, Wellington Management may be unable to vote or may determine not to vote a proxy on behalf of one or more clients. While not exhaustive, the following are potential instances in which a proxy vote might not be entered.
Securities lending
Clients may elect to participate in securities lending. Such lending may impact their ability to have their shares voted. Under certain circumstances, and where practical considerations allow, Wellington Management may determine that the anticipated value of voting could outweigh the benefit to the client resulting from use of securities for lending and recommend that a client attempt to have its custodian recall the security to permit voting of related proxies. We do not borrow shares for the sole purpose of exercising voting rights.
Share blocking and reregistration
Certain countries impose trading restrictions or requirements regarding reregistration of securities held in omnibus accounts in order for shareholders to vote a proxy. The potential impact of such requirements is evaluated when determining whether to vote such proxies.
Lack of adequate information, untimely receipt of proxy materials, or excessive costs
Wellington Management may abstain from voting a proxy when the proxy statement or other available information is inadequate to allow for an informed vote; the proxy materials are not delivered in a timely fashion; or, in Wellington Management’s judgment, the costs of voting exceed the expected benefits to clients (included but not limited to instances such as when powers of attorney or consularization or the disclosure of client confidential information are required).
ADDITIONAL INFORMATION
Wellington Management maintains records related to proxies pursuant to Rule 204-2 of the Investment Advisers Act of 1940 (the “Advisers Act”), the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and other applicable laws. In addition, Wellington Management discloses voting decisions through its website, including the rationale for votes against management.
Wellington Management provides clients with a copy of its Global Proxy Policy and Procedures, as well as the Voting Guidelines and the Stewardship Conflicts of Interest Policy upon written request. In addition, Wellington Management will provide specific client information relating to proxy voting to a client upon written request.
Effective Date: 15 September 2023
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WELLINGTON MANAGEMENT COMPANY
Wellington Management 2024 Global Proxy Voting Guidelines |
WELLINGTON’S PHILOSOPHY
Wellington Management is a long-term steward of our clients’ assets and aims to vote proxies for which we have voting authority in the best financial interest of clients.
These guidelines are based on Wellington Management’s fiduciary obligation to act in the best financial interest of its clients as shareholders and while written to apply globally, we consider jurisdictional differences to make informed decisions. Enumerated below are issues specific to the Japanese market given we have formulated more detailed expectations of this region.
It should be noted that the following are guidelines, not rigid rules, and Wellington Management reserves the right in all cases to deviate from the general direction set out below where doing so is in the best interest of its clients.
OUR APPROACH TO STEWARDSHIP
The goal of our stewardship activities is to support decisions that we believe will maximize investment returns for our clients over the long term.
The mechanisms we use to implement our stewardship activities vary by asset class. Engagement applies to all our investments across equity and credit, in both private and public markets. Proxy voting applies mostly to public equities.
Stewardship extends to any area that may affect the long-term sustainable financial return of an investment. Stewardship can be accomplished through research and constructive dialogue with company management and boards, by monitoring company behavior through informed active ownership, and by emphasizing management accountability for important issues via our proxy votes, which have long been part of Wellington’s investment ethos. Please refer to our Engagement Policy for more information on how engagement is conducted at Wellington.
OUR APPROACH TO VOTING
We vote proxies in what we consider to be the best financial interests of our clients. Our approach to voting is investment-led and serves as an influential component of our engagement and escalation strategy. The Investment Stewardship Committee, a cross-functional group of experienced professionals, oversees Wellington Management’s stewardship activities with regard to proxy voting and engagement practices.
Generally, routine issues that can be addressed by the proxy voting guidance below are voted by means of standing instructions communicated to our primary voting agent. Some votes warrant analysis of specific facts and circumstances and therefore are reviewed individually. We examine such proposals on their merits and take voting action in a manner that best serves the financial interests of our clients. When forming our voting decisions, we may leverage sources including internal research notes, third-party voting research, and company engagement. While manual votes are often resolved by investment research teams, each portfolio manager is empowered to make a final decision for their relevant client portfolio(s), absent a material conflict of interest. Proactive portfolio manager input is sought under certain circumstances, which may include consideration of position size and proposal subject matter and nature. Where portfolio manager input is proactively sought, deliberation across the firm may occur. This collaboration does not prioritize consensus across the firm above all other interests but rather seeks to inform portfolio managers’ decisions by allowing them to consider multiple perspectives. Consistent with our community-of- boutiques model, portfolio managers may occasionally arrive at different voting conclusions for their clients, resulting in different decisions for the same vote. Robust voting procedures and the deliberation that occurs before a vote decision are aligned with our role as active owners and fiduciaries for our clients.
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2024 Global Proxy Voting Guidelines
We generally support shareholder proposals if we determine that their adoption would promote long-term shareholder value. In making this determination, we consider numerous factors, including but not limited to the anticipated benefits of the proposal to the company; whether the proposal addresses the general interests of the company’s shareholders and not just those of the shareholder proponents; whether the company is currently addressing the issue motivating the proposal or has engaged with the shareholder proponents; whether the company can implement the proposal effectively; and whether the proposal’s adoption would impose material costs on the company or result in unintended consequences.
In addition, because proxy voting provides only limited means (i.e., voting ‘‘for’’ or ‘‘against’’) to express our views on a particular issue, we may support shareholder proposals in cases where we do not support every recommended action or where the proposal is accompanied by a supporting statement that we do not support so long as we are directionally aligned with the issue motivating the proposal. In these cases, we aim to engage directly with the company to clarify the nuanced view our vote represents.
Please refer to our Global Proxy Policy and Procedures for further background on the process and governance of our voting approach.
Detailed below are the principles that we consider when deciding how to vote.
VOTING GUIDELINES
BOARD COMPOSITION AND ROLE OF DIRECTORS
Effective boards should act in shareholders’ best economic interests and possess the relevant skills to implement the company’s strategy.
We consider shareholders’ ability to elect directors annually an important right and, accordingly, generally support proposals to enable annual director elections and declassify boards.
We may withhold votes from directors for being unresponsive to shareholders or for failing to make progress on issues material to maximizing investment returns. We may also withhold votes from directors who fail to implement shareholder proposals that if adopted would promote long-term shareholder value and have received majority support or have implemented poison pills without shareholder approval.
Time commitments
We expect directors to have the time and energy to fully commit to their board-related responsibilities and not be overstretched with an excessive number of external directorships. We may vote against directors when serving on five or more public company boards, and public company executives when serving on three or more public company boards, including their own.
We consider the roles of board chair and chair of the audit committee as equivalent to an additional board seat when evaluating the overboarding matrix for nonexecutives. We may take into consideration that certain directorships, such as Special Purpose Acquisition Companies (SPACs) and investment companies, are usually less demanding.
Directors should also attend at least 75% of scheduled board meetings. If they fail to do so, we may vote against their reelection.
Succession planning and board refreshment
We do not have specific voting policies relating to director age or tenure. We prefer to take a holistic view, evaluating whether the company is balancing the perspectives of new directors with the institutional knowledge of longer-serving board members. Succession planning is a key topic during many of our board engagements.
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2024 Global Proxy Voting Guidelines
We expect companies to refresh their board membership every five years and may vote against the chair of the nominating committee for failure to implement. We believe a degree of director turnover allows companies to strengthen board diversity and add new skill sets to the board to enhance their oversight and adapt to evolving strategies.
Boards should offer transparency around their process to evaluate director performance and independence, conducting a rigorous regular evaluation of the board --- key committees as well as individual directors --- which is responsive to shareholder input. We believe externally facilitated board evaluations may contribute to companies retaining an appropriate mix of skills, experience, and diversity on their boards over time.
In certain markets companies are governed by multi-tiered boards, with each tier having different responsibilities. We hold supervisory board members to similar standards, subject to prevailing local governance best practices.
Board independence
In our view, boards perform best when composed of an appropriate combination of executive and nonexecutive (in particular, independent nonexecutive) directors to challenge and counsel management.
To determine appropriate minimum levels of board independence, we look to prevailing market best practices: two- thirds in the US, for example, and a majority in the UK and France. In addition to the overall independence at the board level, we also consider the independence of audit, compensation, and nominating committees. Where independence falls short of our expectations, we may withhold approval for non-independent directors or those responsible for the board composition. We typically vote in support of shareholder proposals calling for improved independence.
We believe that having an independent chair is the preferred structure for board leadership. Having an independent chair avoids the inherent conflict of self-oversight and helps ensure robust debate and diversity of thought in the boardroom. We will generally support proposals to separate the chair and CEO or establish a lead director but may support the involvement of an outgoing CEO as executive chair for a limited period to ensure a smooth transition to new management.
Board diversity
We believe boards that reflect a wide range of perspectives are best positioned to create shareholder value. Appointing boards that thoughtfully debate company strategy and direction is not possible unless boards elect highly qualified and diverse directors. By setting a leadership example, boardrooms with a wide range of experiences, expertise, and perspectives encourage an organizational culture that promotes diverse thinkers, enabling better strategic decisions and the navigation of increasingly complex issues facing companies today.
We think it is not in shareholders’ best interests for the full board to be comprised of directors who all share the same background, experience, and personal characteristics (e.g., gender, race, ethnicity, and age). We expect our portfolio companies to be thoughtful and intentional in considering the widest possible pool of skilled candidates who bring diverse perspectives into the boardroom. We encourage companies to disclose the composition and qualifications of their board and to communicate their ambitions and strategies for creating and fostering a diverse board.
We reserve the right to vote against the reelection of the Nominating/Governance Committee Chair when the board is not meeting local market standards from a diversity perspective. We expect a minimum of 20% gender diversity at major indices such as the S&P 500 and encourage boards to strive for 30% gender diversity. From 2025, we may vote against the reelection of the Nominating/Governance Committee Chair at major indices not meeting this 30% goal.
Outside of the above major indices and absent a market-defined standard, we may vote against the reelection of the Nominating/Governance Committee Chair where no gender-diverse directors are represented on a board.
We reserve the right to vote against the reelection of the Nominating/Governance Committee Chair at US large-cap and FTSE 100 companies that failed to appoint at least one director from a minority ethnic group and fail to provide a clear and compelling reason for being unable to do so. We will continue to engage on diversity of the board in other markets and may vote against the reelection of directors where we fail to see improvements.
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2024 Global Proxy Voting Guidelines
Majority vote on election of directors
Because we believe the election of directors by a majority of votes cast is the appropriate standard, we will generally support proposals that seek to adopt such a standard. Our support will typically extend to situations where the relevant company has an existing resignation policy for directors that receive a majority of ‘‘withhold’’ votes. We believe majority voting should be defined in the company’s charter and not simply in its corporate governance policy.
Generally, we oppose proposals that fail to provide for the exceptional use of a plurality standard in the case of contested elections. Further, we will not support proposals that seek to adopt a standard of majority of votes outstanding (total votes eligible as opposed to votes cast). We likely will support shareholder and management proposals to remove existing supermajority vote requirements.
Contested director elections
We approach contested director elections on a case-by-case basis, considering the specific circumstances of each situation to determine what we believe to be in the best financial interest of our clients. In each case, we welcome the opportunity to engage with both the company and the proponent to ensure that we understand both perspectives and are making an informed decision on our clients’ behalf.
COMPENSATION
Executive compensation plans establish the incentive structure that plays a role in strategy-setting, decision making, and risk management. While design and structure vary widely, we believe the most effective compensation plans attract and retain high-caliber executives, foster a culture of performance and accountability, and align management’s interests with those of long-term shareholders.
Due to each company’s unique circumstances and wide range of plan structures, Wellington determines support for a compensation plan on a case-by-case basis. We support plans that we believe lead to long-term value creation for our clients and the right to vote on compensation plans annually.
In evaluating compensation plans, we consider the following attributes in the context of the company’s business, size, industry, and geographic location:
Alignment — We believe in pay-for-performance and encourage plan structures that align executive compensation with shareholder experience. We compare total compensation to performance metrics on an absolute and relative basis over various time frames, and we look for a strong positive correlation. To ensure shareholder alignment, executives should maintain meaningful equity ownership in the company while they are employed, and for a period thereafter.
Transparency — We expect compensation committees to articulate the decision-making process and rationale behind the plan structure, and to provide adequate disclosure so shareholders can evaluate actual compensation relative to the committee’s intentions. Disclosure should include how metrics, targets, and time frames are chosen, and detail desired outcomes. We also seek to understand how the compensation committee determines the target level of compensation and constructs the peer group for benchmarking purposes.
Structure — The plan should be clear and comprehensible. We look for a mix of cash versus equity, fixed versus variable, and short- versus long-term pay that incentivizes appropriate risk-taking and aligns with industry practice. Performance targets should be achievable but rigorous, and equity awards should be subject to performance and/or vesting periods of at least three years, to discourage executives from managing the business with a near-term focus.
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2024 Global Proxy Voting Guidelines
Unless otherwise specified by local market regulators, performance-based compensation should be based on metrics that are objective, rigorous, and tied to shareholder value creation. Qualitative goals, including material environmental and social considerations material to financial performance, may be acceptable if a compensation committee has demonstrated a fair and consistent approach to evaluating qualitative performance and applying discretion over time.
Accountability — Compensation committees should be able to use discretion, positive and negative, to ensure compensation aligns with performance and provide a cogent explanation to shareholders. We generally oppose one- time awards aimed at retention or achieving a predetermined goal. Barring an extenuating circumstance, we view retesting provisions unfavorably.
Approving equity incentive plans
A well-designed equity incentive plan facilitates the alignment of interests of long-term shareholders, management, employees, and directors. We evaluate equity-based compensation plans on a case-by-case basis, considering projected plan costs, plan features, and grant practices. We will reconsider our support for a plan if we believe these factors, on balance, are not in the best financial interest of shareholders. Specific items of concern may include excessive cost or dilution, unfavorable change-in-control features, insufficient performance conditions, holding/vesting periods, or stock ownership requirements, repricing stock options/stock appreciation rights (SARs) without prior shareholder approval, or automatic share replenishment (an ‘‘evergreen’’ feature).
Employee stock purchase plans
We generally support employee stock purchase plans, as they may align employees’ interests with those of shareholders. That said, we typically vote against plans that do not offer shares to a broad group of employees (e.g., if only executives can participate) or plans that offer shares at a significant discount.
Nonexecutive director compensation
We expect companies to disclose nonexecutive director compensation and we prefer the use of an annual retainer or fee, delivered as cash, equity, or a combination. We do not believe nonexecutive directors should receive performance- based compensation, as this creates a potential conflict of interest. Nonexecutive directors oversee executive compensation plans; their objectivity is compromised if they design a plan that they also participate in.
Severance arrangements
We are mindful of the board’s need for flexibility in recruitment and retention but will oppose excessively generous arrangements unless agreements encourage management to negotiate in shareholders’ best financial interest. We generally support proposals calling for shareholder ratification of severance arrangements.
Retirement bonuses (Japan)
Misaligned compensation that is based on tenure and seniority may compromise director independence. We generally vote against directors and statutory auditors if retirement bonuses are given to outgoing directors.
Clawback policies
We believe companies should be able to recoup incentive compensation from members of management who received awards based on fraudulent activities, accounting misstatements, or breaches in standards of conduct that lead to corporate reputational damage. We generally support shareholder proposals requesting that a company establish a robust clawback provision if existing policies do not cover these circumstances. We also support proposals seeking greater transparency about the application of clawback policies.
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2024 Global Proxy Voting Guidelines
Audit quality and oversight
Scrutiny of auditors, particularly audit quality and oversight, has been increasing. When we assess financial statement reporting and audit quality, we will generally support management’s choice of auditors, unless the auditors have demonstrated failure to act in shareholders’ best economic interests. We also pay close attention to the nonaudit services provided by auditors and consider the potential for the revenue from those services to create conflicts of interest that could compromise the integrity of financial statement audits.
SHAREHOLDER RIGHTS
Shareholder rights plans
Also known as poison pills, these plans can enable boards of directors to negotiate higher takeover prices on behalf of shareholders. Such plans also may be misused, however, as a means of entrenching management. Consequently, we may support plans that include a shareholder approval requirement, a sunset provision, or a permitted bid feature (e.g., bids that are made for all shares and demonstrate evidence of financing must be submitted to a shareholder vote).
Because boards generally have the authority to adopt shareholder rights plans without shareholder approval, we are equally vigilant in our assessment of requests for authorization of blank-check preferred shares.
Multiple voting rights
We generally support one share, one vote structures. The growing practice of going public with a dual-class share structure can raise governance and performance concerns. In our view, dual-class shares can create misalignment between shareholders’ economic stake and their voting power and can grant control to a small number of insiders who may make decisions that are not in the interests of all shareholders.
We generally prefer that companies dispense with dual-class share structures but we recognize that newly listed companies may benefit from a premium by building in some protection for founders for a limited time after their IPO. The Council of Institutional Investors, a nonprofit association of pension funds, endowments, and foundations, recommends that newly public companies that adopt structures with unequal voting rights do away with the structure within seven years of going public. We believe such sunset clauses are a reasonable compromise between founders seeking to defend against takeover attempts in pivotal early years, and shareholders demanding a mechanism for holding management accountable, especially in the event of leadership changes.
Similarly, we generally do not support the introduction of loyalty shares, which grant increased voting rights to investors who hold shares over multiple years.
Proxy access
We believe shareholders should have the right to nominate director candidates on the management’s proxy card. We will generally support shareholder proposals seeking proxy access unless the existing policy is already in line with market norms.
Special meeting rights
We believe the right to call a special meeting is an important shareholder right, and we will generally support such proposals to establish this right at companies that lack this facility. We will generally support a proposal lowering thresholds where the current level exceeds 15% and the proposal calls for a 10%+ threshold, taking into consideration the makeup of the existing shareholder base and the company’s general responsiveness to shareholders. If shareholders are granted the right to call special meetings, we generally do not support written consent.
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2024 Global Proxy Voting Guidelines
Virtual meetings
Many companies established virtual-only shareholder meetings over the course of the recent COVID-19 pandemic. Virtual attendance allows investors to participate in more meetings and reduces the need for travel. We generally prefer shareholder meetings to take place in a hybrid format (virtual and in-person) where possible, allowing all shareholders, whether they attend in person or virtually, to ask questions. We expect companies hosting virtual-only shareholder meetings to provide a clear rationale underpinning their decision to do so, provide a live video stream of proceedings, and offer transparency on how questions may be submitted and are selected for discussion.
We may oppose amendments to articles of association permitting virtual-only meetings where we perceive shareholder rights to be at risk. We may also support relevant shareholder proposals requesting companies to facilitate the ability to attend in person.
CAPITAL STRUCTURE AND CAPITAL ALLOCATION
Mergers and acquisitions
We approach votes to approve mergers and acquisitions on a case-by-case basis, considering the specific circumstances of each proposal to determine what we believe to be in the best financial interests of our clients.
Increases in authorized common stock
We generally support requests for increases up to 100% of the shares with preemption rights. Exceptions will be made when the company has clearly articulated a reasonable need for a greater increase. Conversely, at companies trading in less-liquid markets, we may impose a lower threshold. When companies seek to issue shares without preemptive rights, we consider potential dilution and generally support requests when dilution is below 20%. For issuance with preemptive rights, we review on a case-by-case basis, considering the size of issuance relative to peers.
ENVIRONMENTAL TOPICS
We assess portfolio companies’ performance on environmental issues we deem to be material to long-term financial performance and communicate our expectations for best practice.
Climate change
As an asset manager entrusted with investing on our clients’ behalf, we aim to assess, monitor, and manage the potential effects of climate change on our investment processes and financial returns of client portfolios. Proxy voting is a key tool we use for managing climate-related investment risks as part of our stewardship escalation process.
We expect companies facing material climate risks to have credible transition plans communicated using the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Appropriate reporting on climate readiness will help stakeholders understand those companies’ willingness and ability to adapt to or mitigate material climate-related risks. In addition to the voting policies specifically mentioned, we may also vote against directors at companies facing material climate risks where climate plans and disclosures meaningfully lag our expectations for those companies.
Emissions disclosure
We generally encourage all companies to disclose Scope 1, 2, and 3 emissions. While we recognize the challenges associated with collecting Scope 3 emissions data, this disclosure is necessary for us to fully understand the transition risks applicable to an issuer. Disclosure of both overall categories of Scope 3 emissions upstream and downstream with context and granularity from companies about the most significant Scope 3 sources enhances our ability to evaluate investment risks and opportunities. We generally encourage companies to adopt emerging global standards for measurement and disclosure of emissions such as those being developed by the International Sustainability Standards Board (ISSB) and believe companies will benefit from acting now and consequently evolving their approach in line with emerging global standards.
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2024 Global Proxy Voting Guidelines
We view disclosure of Scope 1 and 2 emissions as a minimum expectation where measurement practices are well- defined and attainable. We will generally vote against the reelection of the chair of MSCI World companies and large- cap companies in emerging markets that do not disclose Scope 1 and 2 emissions, have not made a commitment to do so in the next year, and where emissions intensity is material to financial performance.
Net-zero targets
As an outcome of enterprise risk management and strategic planning to reduce the potential negative financial impacts of climate change on shareholder value, we encourage companies to set a credible, science-based decarbonization glidepath, with an interim and long-term target, that comprises all categories of material emissions and is consistent with the ambition to achieve net-zero emissions by 2050 or sooner. For certain high-emitting companies, we reserve the right to vote against the company chair where quantitative emission reduction targets have not been defined. We consider it to be best practice for companies to pursue validation from the Science Based Targets initiative (SBTi).
We generally support shareholder proposals asking companies facing material climate risks for improved disclosure on climate risk management and we generally support those that request alignment of business strategies with the Paris Agreement or similar language.
Biodiversity
Many companies are dependent on natural capital and biodiversity as key inputs either through direct resource extraction or their supply chain. Business activities may also impact the capacity of nature to provide social and economic functions. We recognize that biodiversity impact and loss can be challenging to quantify and measure, but we believe companies should assess environmental inputs and outputs. We encourage companies to report on financially material impacts and dependencies on natural capital relevant to their business.
Other environmental shareholder proposals
For other environmental proposals covering themes including biodiversity, natural capital, deforestation, water usage, (plastic) packaging, as well as palm oil, we take a case-by-case approach and will generally support proposals calling for companies to provide disclosure where this is additive to the company’s existing efforts, the proposed information pertains to a material financial impact, and in our view is of economic benefit to investors.
SOCIAL TOPICS
Corporate culture, human capital, and diversity, equity, and inclusion
Through engagement we emphasize to management the importance of how they invest in and cultivate their human capital to perpetuate a strong culture. We assess culture holistically from an alignment of management incentives, responsiveness to employee feedback, evidence of an equitable and sound talent management strategy and commitment to diversity, equity, and inclusion (DEI) practices that promote shareholder value. We value transparency and use of key performance indicators.
A well-articulated culture statement and talent attraction, retention, and development strategy suggest that a company appreciates culture and talent as competitive advantages that can drive long-term value creation. It also sends a strong message when management compensation is linked, when appropriate, to employee satisfaction. If the company conducts regular employee engagement surveys, we look for leadership to disclose the results both positive and negative so we can monitor patterns and assess whether they are implementing changes based on the feedback they receive. We consider workplace locations and how a company balances attracting talent with the costs of operating in desirable cities.
We maintain that a deliberate human capital management strategy should foster a collaborative, productive workplace in which all talent can thrive. One ongoing engagement issue that pertains to human capital management is DEI. We see DEI practices as a material input to long-term financial performance, so as our clients’ fiduciaries, we seek to better understand how and to what extent a company’s approach to diversity is integrated with talent management at all levels. This is significantly aided when there is consistent, robust disclosure in place. A sound long-term plan holds more weight than a company’s current demographics, so we look for a demonstrable DEI strategy that seeks to improve shareholder value over time and align management incentives accordingly. To that end, we expect companies in the US to publicly disclose their EEO-1 reporting and all companies to disclose their DEI strategy.
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2024 Global Proxy Voting Guidelines
Gender and racial pay equity are important parts of our assessment of a company’s diversity efforts. Pay inequity can impact shareholder value by exposing a company to challenges with recruiting and retaining talent, job dissatisfaction, workforce turnover, and costly lawsuits. Consequently, we may support proposals asking for improved transparency on a company’s gender and/or racial pay gap if existing disclosures are lagging best practice and if the company has not articulated its efforts to promote equal opportunities to advance to senior roles.
We believe diversity among directors, leaders, and employees contributes positively to shareholder value by imbuing a company with myriad perspectives that help it better navigate complex challenges. A strong culture of diversity and inclusion begins in the boardroom. See the Board Diversity section above for more on our approach.
Stakeholders and risk management
In recent years, discourse on opioids, firearms, and sexual harassment has brought the potential for social externalities — the negative effects that companies can have on society through their products, cultures, or policies — into sharp focus. These nuanced, often misunderstood issues can affect the value of corporate securities.
We encourage companies facing these risks to disclose related risk-management strategies. When a company faces litigation or negative press, we inquire about lessons learned and request evidence of substantive changes that aim to prevent recurrence and mitigate downside risk. In these cases, we may also support proposals requesting enhanced disclosure on actions taken by management.
Human rights
Following the 2015 passage of the UK’s Modern Slavery Act, a handful of countries have passed laws requiring companies to report on how they are addressing risks related to human rights abuses in their global supply chains. While human rights have been a part of our research and engagement in this context, we seek to assess companies’ exposures to these risks, determine the sectors for which this risk is most material (highest possibility of supply chain exposure), enhance our own engagement questions, and potentially work with external data providers to gain insights on specific companies or industries. To help us assess company practices and drive more substantive engagement with companies on this issue, we will generally support proposals requesting enhanced disclosure on companies’ approach to mitigating the risk of human rights violations in their business.
Cybersecurity
Robust cybersecurity practices are imperative for maintaining customer trust, preserving brand strength, and mitigating regulatory risk. Companies that fail to strengthen their cybersecurity platforms may end up bearing large costs. Through engagement, we aim to compare companies’ approaches to cyber threats, regardless of region or sector, to distinguish businesses that lag from those that are better prepared.
Political contributions and lobbying
We generally support shareholder proposals asking for enhanced disclosure and board oversight of a company’s political and lobbying activities where existing disclosure and board oversight are inadequate. This is because sufficient disclosure and board oversight are necessary to evaluate whether, and ensure that, these activities align with the company’s stated strategy and promote shareholder value.
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2024 Global Proxy Voting Guidelines
JAPAN-SPECIFIC TOPICS
Capital allocation
We hold board chairs accountable for persistently low returns on equity (ROE) in Japan, using a five-year average ROE of below 5% as a guide. Our assessment of a company’s capital stewardship complements our assessment of board effectiveness without dictating specific capital allocation decisions. We may make exceptions where ROE is improving, where a long-cycle business warrants a different standard, or where new management is in place, and we feel they should not be punished for the past CEO/chair’s record.
Cross-shareholdings
Cross-shareholdings reduce management accountability by creating a cushion of crossover investor support. We may vote against the highest-ranking director up for reelection for companies where management has allocated a significant portion (20% or more) of net assets to cross-shareholdings. When considering this issue, we will take into account a company’s trajectory in reducing cross-shareholdings over time, as well as legitimate business reasons given to retain specific shareholdings.
Board diversity
We look for boards on the Japanese Prime Market to have a minimum 10% gender diversity, not inclusive of statutory auditors. For companies on the Non-Prime Market, we will also look for boards to have a minimum 10% gender diversity, inclusive of statutory auditors as applicable. We may vote against the chair of the board (or CEO in the absence of a board chair) where the board fails to meet this level. We expect to be able to support directors where a credible plan has been adopted to increase gender diversity ahead of the next meeting.
Board independence
We reserve the right to vote against the chair of the board or the most senior executive up for election at Japanese companies if the board of directors fails to meet the following independence expectations:
● | For companies on the Prime Market without a controlling shareholder, we expect the board to be comprised of at least one-third independent directors. |
● | For companies on the Prime Market with a controlling shareholder, we expect the board to be majority independent. |
● | For companies on the Non-Prime Market with a controlling shareholder, we expect the board to be comprised of at least one-third independent directors. |
● | For companies on the Non-Prime Market without a controlling shareholder and a two-tiered board, we expect combined one-third independence of the board of directors and the board of statutory auditors, and at least two independent outside directors. |
- For companies on the Non-Prime Market without a controlling shareholder and a one-tiered board (with either one or three committees), we expect one-third independence. |
We continue to require a majority of the board of statutory auditors to be independent, regardless of the market segments. We further encourage Japanese companies to establish nomination/compensation committees, and to clearly describe the role of the board chair in terms of setting the board agenda and driving accountability.
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2024 Global Proxy Voting Guidelines
Important Information
Wellington Management Company LLP (WMC) is an independently owned investment adviser registered with the US Securities and Exchange Commission (SEC). WMC is also registered with the US Commodity Futures Trading Commission (CFTC) as a commodity trading advisor (CTA) and serves as a CTA to certain clients including commodity pools operated by registered commodity pool operators. WMC provides commodity trading advice to all other clients in reliance on exemptions from CTA registration. WMC, along with its affiliates (collectively, Wellington Management), provides investment management and investment advisory services to institutions around the world. Wellington Management Group LLP (WMG), a Massachusetts limited liability partnership, serves as the ultimate parent holding company of the Wellington Management global organization. All of the partners are full-time professional members of Wellington Management. Located in Boston, Massachusetts, Wellington Management also has offices in Chicago, Illinois; New York, New York; Radnor, Pennsylvania; San Francisco, California; DIFC, Dubai; Frankfurt; Hong Kong; London; Luxembourg; Madrid; Milan; Shanghai; Singapore; Sydney; Tokyo; Toronto; and Zurich.
This material is prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by Wellington Management. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients.
©2024 Wellington Management Company LLP. All rights reserved.
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October 25, 2023
William Blair Investment Management, LLC
Proxy Voting Policy Statement and Procedures
Under rule 206(4)-6, it is a fraudulent, deceptive, or manipulative act, practice or course of business within the meaning of section 206(4) of the Act for an investment adviser to exercise voting authority with respect to client securities, unless:
● | the adviser has adopted and implemented written policies and procedures that are reasonably designed to ensure that the adviser votes proxies in the best interest of its clients |
● | the adviser describes its proxy voting procedures to its clients and provides copies on request, and |
● | the adviser discloses to clients how they may obtain information on how the adviser voted their proxies. |
This statement sets forth the proxy voting policy and procedures of William Blair Investment Management, LLC (“WBIM”). It is provided to all covered clients as described below even if WBIM currently does not have authority to vote proxies for their account.
The Department of Labor (“DOL”) has stated that the fiduciary act of managing plan assets by an investment adviser generally includes the authority to vote proxies for shares held by a plan unless the plan documents reserve this authority to some other entity. ERISA section 3(38) defines an investment manager as any fiduciary who is registered as an investment adviser under the Investment Advisers Act of 1940. WBIM is a registered investment adviser under the Investment Advisers Act of 1940. The Securities and Exchange Commission (“SEC”) requires registered investment advisers to implement a proxy voting policy and procedures with respect to the voting of proxies for its advisory clients. Registered investment advisers are required to identify potential conflicts involved in the voting of proxies and meet specific recordkeeping and disclosure requirements. On June 30, 2014, the staff of the SEC Divisions of Investment Management and Corporation Finance issued Staff Legal Bulletin No. 20, which provides guidance on investment advisers’ responsibilities in voting client proxies and retaining proxy advisory firms. On August 21, 2019, the staff of the SEC Division of Investment Management issued Release Nos. IA-5325 and IC-33605, Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers. This policy is intended to comply with the applicable rules and guidance of the DOL and the SEC.
General Policy
WBIM shall vote the proxies of its clients solely in the best interest of their participants and beneficiaries and for the exclusive purpose of providing benefits to them and shall not place WBIM’s own interests ahead of the interests of its clients. WBIM shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. WBIM is not responsible for voting proxies it does not receive in a timely manner. However, WBIM will make reasonable efforts to obtain missing proxies. For clients participating in a securities lending program via their custodian, WBIM will not be eligible to vote proxies for the portion of shares on loan.
1 WBIM has engaged Institutional Shareholder Services Inc. (ISS) to assist in the administration and voting of proxies. The complete Voting Guidelines (proxy voting policies) across all markets are available on ISS’s website at: https://www.issgovernance.com/file/policy/active/specialty/Sustainability-US-Voting-Guidelines.pdf and https://www.issgovernance.com/file/policy/active/specialty/Sustainability-International-Voting-Guidelines.pdf
2 | Proxy Voting Policy Statement and Procedures |
WBIM has adopted the Voting Guidelines of an independent proxy advisory firm (the “Proxy Administrator”)1. All proxies are reviewed by the Proxy Administrator, subject to the requirement that all votes shall be cast solely in the best interest of the clients in their capacity as shareholders of a company. The Proxy Administrator votes the proxies according to the Voting Guidelines, which are designed to address matters typically arising in proxy votes. In instances where WBIM has implemented a client provided proxy voting policy, WBIM will vote in accordance with the client’s policy at all times even if the client’s policy is inconsistent with WBIM’s vote. In addition, if a client expressly directs in writing how an issue should be voted, William Blair will cast the vote with respect to such issue in the manner directed by the client. In the case when nominee voting is not allowed it may be impractical for WBIM to participate in those particular votes.
WBIM does not intend the Voting Guidelines to be exhaustive; hundreds of issues appear on proxy ballots and it is neither practical nor productive to fashion a guideline for each. Rather, the Voting Guidelines are intended to cover the most significant and frequent proxy issues that arise. For issues not covered or to be voted on a “Case-by-Case” basis by the Voting Guidelines, the Proxy Administrator will consult the Proxy Committee. In addition, portfolio managers and analysts covering specific companies are responsible for monitoring significant corporate developments, including proxy proposals submitted to shareholders and notifying the Proxy Committee of circumstances where the interests of WBIM’s clients may warrant a vote contrary to the Voting Guidelines. In such instances, the portfolio manager or analyst will submit a written rationale to the Proxy Committee. In each case, the Proxy Committee will review the issues and will vote each proxy based on information from the company, our internal analysts and third party research sources, in the best interests of the clients in their capacity as shareholders of a company. The Proxy Committee consists of certain representatives from the Investment Management Department, including management, portfolio manager(s), analyst(s), operations, as well as a representative from the Compliance Department. The Proxy Committee reviews the Proxy Voting Policy and procedures annually and shall revise its guidelines as events warrant.
Conflicts of Interest Policy
WBIM is sensitive to conflicts of interest that may arise in the proxy decision-making process and has identified the following potential conflicts of interest:
● | An affiliate of WBIM has received investment banking compensation from the company in the preceding 12 months or anticipates receiving investment banking compensation in the next three months |
● | A principal or employee of WBIM or an affiliate currently serves on the company’s Board of Directors |
● | WBIM, its principals, employees and affiliates, in the aggregate, own 1% or more of the company’s outstanding shares |
● | The Company is a client of WBIM |
3 | Proxy Voting Policy Statement and Procedures |
In the event that any of the above potential conflicts of interest arise, or the Proxy Committee otherwise determines that a potential conflict of interest exists, the Proxy Committee will vote all proxies for that company in the following manner:
● | If our Voting Guidelines indicate a vote “For” or “Against” a specific issue WBIM will continue to vote according to the Voting Guidelines |
● | If our Voting Guidelines have no recommendation or indicate a vote on a “Case-by-Case” basis, WBIM will vote consistent with the voting recommendation provided by the Proxy Administrator |
Oversight of Proxy Administrator
WBIM believes that contracting with the Proxy Administrator to provide services including:
● | Providing research and analysis regarding the matters subject to a vote |
● | Promulgating general voting guidelines |
● | Making voting recommendations on specific matters subject to vote |
can reduce burdens for WBIM and potentially reduce costs for WBIM clients as compared to conducting them in-house.
The Proxy Administrator assists WBIM with voting execution, including through an electronic vote management system that allows the Proxy Administrator to:
● | populate WBIM’s votes shown on the Proxy Administrator’s electronic voting platform with the Proxy Administrator’s recommendations based on WBIM’s voting instructions to the firm (“pre-population”), and |
● | automatically submit WBIM’s votes to be counted (“automated voting”). |
4 | Proxy Voting Policy Statement and Procedures |
WBIM shall provide reasonable oversight of the Proxy Administrator. In providing oversight, WBIM will seek to ascertain whether the Proxy Administrator has the capacity and competency to adequately analyze proxy issues. Specific oversight responsibilities will include the following:
● | On at least an annual basis, the Proxy Committee will assess: |
o | Whether the Proxy Administrator has the competency and capacity to adequately analyze the matters for which WBIM is responsible for voting, including the adequacy and quality of the Proxy Administrator’s staffing, personnel and technology |
o | Assess whether the Proxy Administrator has adequate policies and procedures to: |
◾ | Enable it to make proxy voting recommendations based on current and accurate information, including whether it has an effective process for seeking timely input from issuers and its clients with respect to, for example, its proxy voting policies, methodologies, and peer group constructions, including for “say-on-pay” votes |
◾ | If peer group constructions are a component of the evaluation does the Proxy Administrator incorporate appropriate input in formulating its methodologies for construction of peer groups, including taking into account unique characteristics of the issuer including, to the extent available, |
● | The issuer’s size |
● | Its governance structure |
● | Its industry and any particular practices unique to that industry |
● | Its history |
● | Its financial performance |
◾ | Identify and address conflicts of interest relating to its voting recommendations, including: |
● | Conflicts relating to the provision of proxy voting recommendations and proxy voting services generally |
● | Conflicts relating to activities other than proxy voting recommendations and proxy voting services generally |
● | Conflicts presented by certain affiliations, including whether a third party with significant influence over the Proxy Administrator has taken a position on a particular voting issue or voting issues more generally |
◾ | Are the Proxy Administrator’s methodologies used in formulating recommendations adequately disclosed such that WBIM can understand the factors underlying the recommendation |
◾ | Identify the nature of any third-party information sources the Proxy Administrator uses as a basis for its recommendations and when and how it engages with issuers and third parties |
◾ | Provide adequate disclosure of the Proxy Administrator’s actual and potential conflicts of interest with respect to the services it provides to WBIM, including whether the Proxy Administrator has provided consulting services to an issuer, and, if so, any compensation paid or whether a proponent of a shareholder proposal or an affiliate of the proponent is or has been a client of the Proxy Administrator |
5 | Proxy Voting Policy Statement and Procedures |
● | WBIM personnel responsible for the administration of proxy voting shall periodically review a sample of votes recommended by the Proxy Administrator for consistency with the Voting Guidelines and report any inconsistencies to the Proxy Committee. The sample should include proxy votes that relate to proposals that may require more issuer-specific analysis (e.g. mergers and acquisitions, dissolutions, conversions or consolidations), to assist in evaluating whether WBIM’s voting determinations are consistent with its voting policies and procedures and in its clients’ best interest. |
● | WBIM personnel shall periodically review a sample of votes before the votes are cast for consistency with these procedures and client best interest which may include: |
o | A sample of “pre-populated” votes |
o | A sample of “automated votes” |
o | Consideration of additional information that becomes available regarding a particular proposal after or around the same time that WBIM’s votes have been pre-populated but before the submission deadline for proxies to be voted at the shareholder meeting, which may include an issuer or shareholder proponent’s additional definitive proxy materials or other information conveyed to WBIM that could reasonably be expected to affect WBIM’s voting determination |
o | Matters where WBIM’s policies do not address how it should vote a particular matter, or whether the matter is highly contested or controversial |
● | WBIM personnel responsible for proxy voting shall periodically assess the extent to which potential factual errors, potential incompleteness, or potential methodological weaknesses in the Proxy Administrator’s analysis (that the investment adviser becomes aware of and deems credible and relevant to its voting determinations) materially affected the Proxy Administrator’s research or recommendations that the investment adviser utilized. |
● | WBIM personnel responsible for proxy voting shall periodically inquire whether the Proxy Administrator has learned that any recommendation was based on a factual errors, potential incompleteness, or potential methodological weaknesses in the Proxy Administrator’s analysis, and, if so, WBIM shall investigate the factual errors, potential incompleteness, or potential methodological weaknesses and evaluate whether the Proxy Administrator is taking steps to mitigate making such errors in the future and report any such errors, as well as their resolution to the Proxy committee |
● | WBIM personnel responsible for proxy voting shall consider the effectiveness of the Proxy Administrator’s policies and procedures for obtaining current and accurate information relevant to matters included in its research and on which it makes voting recommendations. As part of this assessment, WBIM should consider the following: |
o | The Proxy Administrator’s engagement with issuers, including the firm’s process for ensuring that it has complete and accurate information about the issuer and each particular matter, and the firm’s process, if any, for investment advisers to access the issuer’s views about the firm’s voting recommendations in a timely and efficient manner |
o | The Proxy Administrator’s efforts to correct any identified material deficiencies in the proxy advisory firm’s analysis |
o | The Proxy Administrator’s disclosure regarding the sources of information and methodologies used in formulating voting recommendations or executing voting instructions |
o | The Proxy Administrator’s consideration of factors unique to a specific issuer or proposal when evaluating a matter subject to a shareholder vote |
● | WBIM personnel responsible for proxy voting shall require the Proxy Administrator to update on business changes that may impact the Proxy Administrator’s capacity and competency to provide proxy voting advice or conflict of interest policies and procedures |
6 | Proxy Voting Policy Statement and Procedures |
International Markets and Share Blocking Policy
In some cases, proxy votes cast by WBIM for clients may be rejected in certain markets. Some non-US markets have additional requirements for custodians in order to process votes in those markets. Two specific cases include Power of Attorney documentation and Split Voting. Power of Attorney documentation authorizes a local agent to facilitate the voting instruction on behalf of the client in the local market. If the appropriate documentation is not available for use, a vote instruction may be rejected. Split Voting occurs when a custodian utilizes an omnibus account to aggregate multiple customer accounts for voting into a single voting record. If one portion of the holdings would like to vote in one manner (“FOR”) and another portion would like to vote in another manner (“AGAINST”), the custodian needs to ensure they are authorized to split the vote for an agenda item in certain markets.
In international markets where share blocking applies, WBIM typically will not, but reserve the right to, vote proxies due to liquidity constraints. Share blocking is the “freezing” of shares for trading purposes at the custodian/sub-custodian bank level in order to vote proxies. Share blocking typically takes place between 1 and 20 days before an upcoming shareholder meeting, depending on the market. While shares are frozen, they may not be traded. Therefore, the potential exists for a pending trade to fail if trade settlement falls on a date during the blocking period. WBIM shall not subordinate the interests of participants and beneficiaries to unrelated objectives.
Recordkeeping and Disclosure
Pursuant to this policy, WBIM will retain: 1) the Proxy Voting Policy Statement and Procedures; 2) all proxy statements received regarding client securities 3) records of all votes cast on behalf of clients; 4) records of client requests for proxy voting information, and 5) any documents prepared by WBIM that are material to making a decision how to vote, or that memorialize the basis for the decision.
Upon a client’s request to the Proxy Administrator, WBIM will make available to its clients a report on proxy votes cast on their behalf. These proxy-voting reports will demonstrate WBIM’s compliance with its responsibilities and will facilitate clients’ monitoring of how their securities were voted.
The Proxy Voting Policy Statement and Procedures will be provided with each advisory contract and will also be described and provided with WBIM’s Form ADV, Part 2A. With respect to the William Blair Funds, the policies and procedures used to determine how to vote proxies relating to securities held in their portfolios will be reflected in the Statement of Additional Information.
7 | Proxy Voting Policy Statement and Procedures |