Homestead Advisers Corp. (the “Corporation”) has a fiduciary duty to act in the best interest of its clients and must not place its own interests ahead of its clients. The Corporation’s clients currently include Homestead Funds, Inc. and Homestead Funds Trust, (collectively the “Funds”), employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (“ERISA Clients”) and other advisory clients (collectively referred to as “Clients”). Each Client’s agreement with the Corporation describes the Corporation’s proxy voting responsibilities with respect to that Client, under which the Corporation generally votes proxies related to the investment portfolio securities in a Client’s account unless a Client has expressly reserved the authority to vote such proxies or if the Corporation determines that the cost of voting the proxy exceeds the expected benefit to the Client (e.g., casting a vote on a foreign security that could involve additional costs). Currently, the Corporation votes proxies for all Clients.
The best interest of Clients is the primary consideration in determining how proxies should be voted. Any material conflicts of interest between the Corporation and Clients with respect to proxy voting are resolved in the best interests of the Clients.
The Corporation has adopted and implemented these Proxy Voting Policies and Procedures that are reasonably designed to ensure that proxies are voted in the best interest of Clients in accordance with its fiduciary duties, Rule 206(4)-6 under the Investment Advisers Act of 1940 (the “Advisers Act”), and applicable law and regulatory guidance.
A. Clients for Which the Corporation Has Proxy Voting Responsibility
The Corporation exercises responsibility for voting proxies with respect to securities selected by the Corporation and held in Client accounts. The Corporation’s standard investment advisory agreement provides that the Corporation is responsible for proxy voting unless the Client has directed the Corporation to the contrary in writing.
In the case of ERISA Clients, where the authority to manage plan assets has been delegated to the Corporation, this delegation automatically includes the responsibility to vote proxies unless the named fiduciary that appointed the Corporation has expressly reserved to itself or another named fiduciary it’s proxy voting responsibility. To be effective, a reservation of proxy voting responsibility for a given ERISA Client will:
- be in writing;
- state that the Corporation is “precluded” from voting proxies because proxy voting responsibility is reserved to an identified named fiduciary; and
- be consistent with the plan’s documents (which should provide for procedures for allocating fiduciary responsibilities among named fiduciaries).
In the case of the Funds, the Board of Directors of the Funds (“Fund Directors”) has delegated proxy voting responsibility to the Corporation. In each case where a Fund has a subadvisor, the Corporation has delegated proxy voting responsibility to that subadvisor to the extent applicable.
B. Arrangement with Proxy Voting Service
To assist the Corporation in carrying out its responsibilities with respect to proxy voting, the Corporation has engaged an outside firm, Institutional Shareholder Services Inc. (“ISS”), which is a proxy research, advisory, voting, recordkeeping and vote-reporting service. Pursuant to a proxy voting agency service agreement, ISS is responsible for, among other things: ensuring the Corporation’s voting policy is maintained in the ISS proxy voting system; obtaining proxies based on companies owned in Client accounts; providing proxy materials, research and analysis; maintaining a proxy voting system that adequately tracks and records votes; and providing proxy voting records required to file Form N-PX on behalf of Clients that are registered investment companies.
When making proxy voting decisions, and except to the extent superseded by Client proxy voting policies, the Corporation generally adheres to its customized proxy voting policies (“Proxy Policies”), which set forth the Corporation’s positions on recurring issues. The Proxy Policies are periodically reviewed by Compliance and the Investment Team, which may seek input from ISS as needed, and are updated or revised as necessary. The Proxy Policies are not exhaustive and do not include all potential voting issues. Proposals not specifically covered by the Proxy Policies, contested situations, and other more sensitive matters as determined from time to time by Compliance and/or the Investment Team are evaluated by the Investment Team on a case-by-case basis, taking into consideration the relevant facts and circumstances at the time of the vote. The Corporation’s voting decisions are then communicated to ISS. All votes referred to a Client for instruction and votes against Proxy Policy require that the Corporation document its rationale for the vote cast. The Proxy Policies are part of these Proxy Voting Policies and Procedures.
Although the Corporation may consider ISS’s recommendations on proxy proposals, the Corporation bears ultimate responsibility for proxy voting decisions. For ERISA plans for which the Corporation votes proxies, the Corporation is not relieved of its fiduciary responsibility by following directions of ISS or the ERISA plans’ named fiduciaries or by delegating proxy voting responsibility to another person.
C. Adherence to Client Proxy Voting Policies
Although Clients do not always have proxy voting policies, if a Client has such a policy and instructs the Corporation to follow it, the Corporation is required to comply with the Client’s voting policy except in instances in which doing so would be imprudent or unlawful. In the case of ERISA plans, the Corporation, as a fiduciary, is required to discharge its duties in accordance with the documents governing the plan (insofar as they are consistent with ERISA). These documents include statements of proxy voting policy. In the case of the Funds, the Corporation is required to discharge its duties in accordance with the investment management agreement between the Corporation and the Funds, subject to the oversight of the Funds’ Board of Directors.
The Corporation must, to the extent possible, comply with each Client’s proxy voting policy. If such policies conflict, the Corporation may vote proxies to reflect each policy in proportion to the respective Client’s interest in any pooled account (unless in the particular situation voting in such a manner would be imprudent or otherwise inconsistent with applicable law).
D. Conflicts of Interest
From time to time, proxy voting proposals may create conflicts between the interests of Clients and the interests of the Corporation, its employees, or its affiliates. The Corporation shall take certain steps designed to ensure, and must be able to demonstrate that those steps resulted in, a decision to vote the proxies that were based on the Client’s best interest and were not the product of the conflict. For example, conflicts of interest may arise when:
- A proponent of a proxy proposal has a business relationship with the Corporation or its affiliates;
- The Corporation or its affiliates have business relationships with participants in proxy contests, corporate directors, or director candidates;
- The Corporation’s employee has a personal interest in the outcome of a particular matter;
- The Corporation’s employee has a business or personal relationship with participants in proxy contests, corporate directors or director candidates; or
- The Corporation’s portfolio managers or officers own securities that the Corporation purchases or recommends for Clients.
Anyone involved in the proxy voting decision-making process that has knowledge of a potential conflict of interest shall disclose such potential conflict to Compliance, which will determine whether a proxy voting proposal in fact presents a conflict of interest. If the Corporation receives a proxy that Compliance determines raises a conflict of interest, Compliance shall determine whether the conflict is “material” to any specific proposal included within the proxy. Compliance will determine whether a conflict is a material as follows:
- Routine Proxy Proposals – Proxy proposals that are “routine” shall be presumed not to involve a material conflict of interest for the Corporation, unless the Corporation has actual knowledge that a routine proposal should be treated differently or if the Corporation’s portfolio managers or officers own the issuer’s securities. For this purpose, “routine” proposals would typically include but not be limited to matters such as the uncontested election of directors, meeting formalities, approval of an annual report/financial statements, and compensation matters for management and employees (e.g., stock option plans, stock purchase plans, retirement plans, profit-sharing, or other special remuneration plans).
- Non-Routine Proxy Proposals – Proxy proposals that are “non-routine” will be presumed to involve a material conflict of interest unless Compliance determines that the Corporation does not have such a conflict of interest. For this purpose, “non-routine” proposals would typically include any contested matter, including a contested election of directors, a merger or sale of substantial assets, and a change in the articles of incorporation that materially affects the rights of shareholders. In determining on a case-by-case basis that a particular non-routine proposal does not involve a material conflict of interest, Compliance will consider whether the Corporation may have a business or personal relationship with a participant in a proxy contest, the issuer itself or the issuer’s pension plan, corporate directors, or candidates for directorships.
For any proposal where Compliance determines that the Corporation has a material conflict of interest, the Corporation may vote a proxy regarding that proposal in any of the following manners:
In the case of all Clients:
- Use Predetermined Voting Policy – The Corporation may vote according to its Proxy Policy or, if applicable, the proxy voting policies mandated by the Client, so long as the subject matter of the proposal is specifically addressed in the Proxy Policies such that the Corporation will not be exercising discretion on the specific proposal raising a conflict of interest.
- President Determination – The President or the President’s designee, if determined by Compliance to be individually unaffected by the Corporation’s or an individual portfolio manager’s conflict, may vote the proxy after consultation with the Corporation’s Chief Compliance Officer (“CCO”) based on consideration of the Corporation’s Proxy Policy, ISS’s analysis, and recommendations from the Investment Team.
- Use an Independent Third Party — Subject to any Client imposed proxy voting policies, the Corporation may use an independent third party (such as another proxy voting agency service) to recommend how to vote proxies for proposals that involve a conflict of interest.
In the case of Clients other than the Funds or ERISA Clients:
- Refer Proposal to the Client — The Corporation may refer the proposal to the Client and obtain instructions from the Client on how to vote the proxy relating to that proposal.
- Obtain Client Ratification — If the Corporation is in a position to disclose the conflict to the Client (i.e., such information is not confidential), the Corporation may determine how it proposes to vote the proposal on which it has a conflict, fully disclose the nature of the conflict to the Client, and obtain the Client’s consent to how the Corporation will vote on the proposal (or otherwise obtain instructions from the client on how the proxy on the proposal should be voted).
The method selected by the Corporation to resolve a conflict may vary from one instance to another depending upon the facts and circumstances of the situation, but in each case, will be resolved by the Corporation consistent with its fiduciary duty to Clients.
E. Operational Procedures
The Corporation is responsible for ensuring that ISS receives, processes, and votes proxies in accordance with the Proxy Policies or instructions. Once a Client account is established, the Corporation will arrange for the Client’s custodian to forward proxy materials to ISS. The Corporation will also confirm that the Client’s custodian provides ISS with a list of Client holdings on a regular basis to enable ISS to track meeting dates and notify the Corporation of upcoming meetings. The appropriate portfolio manager at the Corporation will review each proxy and determine how the vote should be cast before it is voted by ISS to ensure that proxies are voted in accordance with the Proxy Policies and in the best interest of our Clients. The Corporation’s CCO or the CCO’s designee will monitor the proxy voting process to ensure that all votes are cast, the proper number of shares are recorded and that the proxy proposals are voted in accordance with the Proxy Policies or, if there is a vote cast that deviates from such policies, that a rationale is documented.
F. Disclosure of Proxy Voting Intentions
The Corporation personnel may not discuss with members of the public how the Corporation intends to vote on any particular proxy proposal without the advance approval of the COO. This does not restrict communications in the ordinary course of business with named fiduciaries of ERISA plans or other Clients for which the Corporation votes proxies. Disclosure of the Corporation’s proxy voting intentions — especially when done with the purpose or effect of influencing the management or control of a company — could trigger various restrictions under the federal securities laws, including under the proxy solicitation, beneficial ownership and short-swing profit liability provisions of the Securities Exchange Act of 1934.
G. Fund Reporting
On a quarterly basis where proxy votes have been cast, the Corporation shall compile and present to the Fund Directors a proxy voting report that includes whether the vote was consistent with these Proxy Voting Policies and Procedures, and if inconsistent, an explanation of why the vote was cast in such a manner.
H. Fund Proxy Voting Record
The Corporation shall file with the Securities and Exchange Commission on Form N-PX, no later than August 31 of each year, the complete proxy voting record of the Funds for the twelve-month period ending June 30th of such year.Homestead Funds Trust – Annual Report of Fund Proxy Voting Homestead Funds Inc. – Annual Report of Fund Proxy Voting
I. Fund Subadvisor Monitoring
The Corporation has delegated proxy voting responsibility to subadvisors for certain series of the Funds (the “subadvisors”). On a quarterly basis, the CCO or the CCO’s designee reviews votes cast for adherence to the subadvisors’ respective proxy voting policies and procedures, and if inconsistent, an explanation of why the vote was cast in such a manner, and ensures all proxy votes are cast by the deadline. On an annual basis, as part of Rule 206(4)-6 under the Advisers Act, the CCO evaluates the subadvisors’ proxy voting policies and procedures to ensure that they are reasonably designed to prevent violations of the federal securities laws based on information received by the subadvisors.
J. Client Information
These Proxy Voting Policies and Procedures, including the Proxy Policies, are available to Clients upon request. To Clients for which the Corporation has proxy voting authority, the Corporation provides a summary of these Proxy Voting Policies and Procedures and discloses how those Clients may obtain information about how their proxies were voted. If requested, the Corporation will provide Clients with information on our proxy voting decisions and actions for securities in their accounts.
In the case of ERISA plans, the named fiduciary that appointed the Corporation is required to monitor periodically our activities, including our decisions and actions with regard to proxy voting. Accordingly, the Corporation provides these named fiduciaries on a quarterly basis with a report of any votes against Proxy Policy.
A Fund’s proxy voting record is available (i) on the SEC’s website at sec.gov, (ii) on the Fund’s website, and (iii) without charge, to shareholder of the Fund by calling the Fund’s toll-free number as listed in its current Prospectus. The Corporation shall respond to all shareholder requests for records within three business days of such request by first–class mail or other means designed to ensure prompt delivery.
K. Due Diligence
On an annual basis, the Corporation conducts an evaluation of the proxy voting service (currently, ISS) and documents such review in the Corporation’s annual monitoring program report. The evaluation includes, but is not limited to: methodologies in formulating voting recommendations, identifying and managing conflicts of interest, and adherence to contractual terms.
The Corporation, in conjunction with ISS, will compile and maintain for five (5) years the proxy voting records required by Rule 204-2(c)(2) under the Advisers Act, which includes (1) copies of these Proxy Voting Policies and Procedures, (2) a copy of each proxy statement received for client securities (this requirement may be satisfied by a third party who has agreed in writing to do so or by obtaining a copy of the proxy statement from the EDGAR database), (3) a record of each vote cast on behalf of a client (this requirement may be satisfied by a third party who has agreed in writing to do so), (4) a copy of any document created by the Corporation that was material to making the voting decision or that memorializes the basis for the decision, and (5) a copy of each written Client request for information on how the Corporation voted proxies on the client’s behalf, as well as a copy of any written response to a written or oral client request for such information.
At least annually, the Corporation shall review and where necessary amend these Proxy Voting Policies and Procedures.
Last Amended December 15, 2021