POLICIES AND PROCEDURES
November 2008
For the majority of our clients, we have been delegated the authority to vote all proxies for securities held in the client’s account. As a fiduciary with respect to that responsibility, TCM will vote all proxies for portfolio securities in a manner considered to be in the best interests of TCM’s clients. These Proxy Voting Policies and Procedures describe the manner in which TCM handles, researches, votes and maintains reports on proxy voting. TCM has retained RiskMetrics Group (“RMG”) f/k/a Institutional Shareholder Services to provide legal oversight, in-depth analysis, and recommendations on all proxy matters. RMG is nationally recognized as one of the leading independent providers of corporate governance information.
TCM uses the voting guidelines set forth in RMG Policies and Procedures, a copy of which is incorporated by reference into this policy. As a general principle, TCM’s proxy voting policy is designed to ensure that TCM is voting in the best interests of the client in terms of the potential economic return on the client’s investment. In addition, this policy and the RMG guidelines are based on the premise that good corporate governance ultimately results in increased shareholder value. As a general practice, and subject to case by case considerations, proposals that are designed to either dissuade or preclude the acquisition or merger of a company, have the effect of diluting the value of the existing shares outstanding, or reduce the power of shareholders over company actions will be rejected. TCM will usually vote for proposals relating to the general election of directors or auditors (absent questions of independence or contested elections), committee responsibilities, debt limits, indemnification, meeting dates or times, company names, and other routine matters. TCM will also usually vote for management sponsored compensation plans if they are consistent with business practices. Proposals that dilute shareholders interests, provide excessive awards, establish poison pills, require supermajority voting or have other objectionable features will generally be rejected. TCM and RMG review, on a case by case basis, proposals relating to business transactions, such as mergers, acquisitions, reorganizations, etc.
When voting proxies, TCM must consider the interests of its clients and not its own interests. TCM recognizes that potential or actual material conflicts may arise between the interests of TCM and its clients that must be properly addressed and resolved before TCM votes. To address these concerns, TCM’s chief compliance officer (“CCO”) identifies conflicts of interest and resolves them in order to avoid any impropriety or the appearance of impropriety. The following situations may give rise to a conflict of interest:
- an employee has a relationship with the issuer;
- any matter involving a client that generates substantial revenue for TCM; or
- any other issue that the CCO determines is an actual or potential conflict.
A conflict of interest will be considered material to the extent it is determined that such conflict has the potential to influence TCM’s decision-making in voting the proxy. A conflict of interest shall be deemed material in the event that the issuer that is the subject of the proxy or any executive officer of that issuer has a client relationship with TCM of the type described above. All other materiality determinations will be based on an assessment of the particular facts and circumstances. If a conflict of interest is material, one or more of the following methods may be used to resolve the conflict, including:
- voting in accordance with the recommendation of RMG or another independent third party;
- if the client believes that its interests require a different vote, TCM may vote as the client instructs in writing for that ballot;
- disclosing the conflict to the client and obtaining its consent before voting;
- suggesting to the client that it engage another party to vote the proxy on its behalf;
- in the case of a conflict of interest resulting from a particular employee’s personal relationships, removing such employee from the decision-making process with respect to such proxy vote; or
- such other method as is deemed appropriate under the particular facts and circumstances, given the nature of the conflict.
The CCO shall document the method used to resolve material conflicts of interest.
TCM has adopted the following procedures to assist in the review of proxies, the voting of those proxies in accordance with firm policy and the maintenance of voting records.
TCM uses RMG to implement its proxy voting process. RMG has been retained to provide proxy voting analysis and record keeping services. TCM shall instruct each of the custodian banks for its client accounts to forward all proxy materials to RMG for processing. Proxies received by TCM, if any, shall be forwarded to the operations department for processing in a manner consistent with these procedures.
On a weekly basis, TCM sends to RMG a holdings file detailing each equity position held in an account advised by TCM. RMG shall receive proxy material information from the custodian bank for the account. RMG will reconcile the information it receives from TCM and the custodian banks; any discrepancies are noted and resolved by communications between RMG and TCM’s operations staff.
TCM has reviewed and approved the RMG guidelines on how RMG votes on particular proposals. A copy of the most recently approved RMG guidelines is attached as an exhibit to the TCM Compliance Manual. In addition, TCM investment personnel are generally aware of the proposals that are being submitted to shareholders of the companies invested in by TCM. RMG shall vote the received proxies in accordance with its guidelines, unless other instructions are given to RMG by TCM to vote a different way. A summary of the voting records of RMG shall be reviewed each month by TCM’s CCO and its Chief Investment Officer.
TCM maintains copies of all proxy voting records and, upon request, will provide clients with information on the voting of all proxies on their behalf. If you have any questions or would like additional information, including proxy voting records or a summary of the RMG guidelines, please call Jeff B. Curtis at 503-972-0131.