Advisers Act Rule 206(4)-6 was adopted by the SEC in 2003 and requires, among other things, that an investment adviser that exercises voting authority over clients’ proxy voting adopt policies and procedures reasonably designed to ensure that the adviser votes proxies in the best interests of clients, discloses to its clients information about those policies and procedures and also discloses to clients how they may obtain information on how the adviser has voted their proxies.
I.Scope of Committee Responsibilities
The Committee shall have the responsibility for determining how to address proxy votes made on behalf of all BlackRock clients, except for clients who have retained the right to vote their own proxies, either generally or on any specific matter. In so doing, the Committee shall seek to ensure that proxy votes are made in the best interests of clients, and that proxy votes are determined in a manner free from unwarranted or inappropriate influences. The Committee shall also oversee the overall administration of proxy voting for BlackRock accounts.7
The Committee shall establish BlackRock’s proxy voting guidelines, with such advice, participation and research as the Committee deems appropriate from portfolio managers, proxy voting services or other knowledgeable interested parties. As it is anticipated that there will not necessarily be a “right” way to vote proxies on any given issue applicable to all facts and circumstances, the Committee shall also be responsible for determining how the proxy voting guidelines will be applied to specific proxy votes, in light of each issuer’s unique structure, management, strategic options and, in certain circumstances, probable economic and other anticipated consequences of alternative actions. In so doing, the Committee may determine to vote a particular proxy in a manner contrary to its generally stated guidelines.
The Committee may determine that the subject matter of certain proxy issues are not suitable for general voting guidelines and requires a case-by-case determination, in which case the Committee may elect not to adopt a specific voting guideline applicable to such issues. BlackRock believes that certain proxy voting issues – such as approval of mergers and other significant corporate transactions – require investment analysis akin to investment decisions, and are therefore not suitable for general guidelines. The Committee may elect to adopt a common BlackRock position on certain proxy votes that are akin to investment decisions, or determine to permit portfolio managers to make individual decisions on how best to maximize economic value for the accounts for which they are responsible (similar to normal buy/sell investment decisions made by such portfolio managers).8
While it is expected that BlackRock, as a fiduciary, will generally seek to vote proxies over which BlackRock exercises voting authority in a uniform manner for all BlackRock clients, the Committee, in conjunction with the portfolio manager of an account, may determine that the specific circumstances of such account require that such account’s proxies be voted differently due to such account’s investment objective or other factors that differentiate it from other accounts. In addition, on proxy votes that are akin to investment decisions, BlackRock believes portfolio managers may from time to time
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7 The Committee may delegate day-to-day administrative responsibilities to other BlackRock personnel and/or outside service providers, as appropriate.
8 The Committee will normally defer to portfolio managers on proxy votes that are akin to investment decisions except for proxy votes that involve a material conflict of interest, in which case it will determine, in its discretion, the appropriate voting process so as to address such conflict.
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legitimately reach differing but equally valid views, as fiduciaries for BlackRock’s clients, on how best to maximize economic value in respect of a particular investment.
The Committee will also be responsible for ensuring the maintenance of records of each proxy vote, as required by Advisers Act Rule 204-2.9 All records will be maintained in accordance with applicable law. Except as may be required by applicable legal requirements, or as otherwise set forth herein, the Committee’s determinations and records shall be treated as proprietary, nonpublic and confidential.
The Committee shall be assisted by other BlackRock personnel, as may be appropriate. In particular, the Committee has delegated to the BlackRock Operations Department responsibility for monitoring corporate actions and ensuring that proxy votes are submitted in a timely fashion. The Operations Department shall ensure that proxy voting issues are promptly brought to the Committee’s attention and that the Committee’s proxy voting decisions are appropriately disseminated and implemented.
To assist BlackRock in voting proxies, the Committee may retain the services of a firm providing such services. BlackRock has currently retained Institutional Shareholder Services (“ISS”) in that role. ISS is an independent adviser that specializes in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided to BlackRock may include, but are not limited to, in-depth research, voting recommendations (which the Committee is not obligated to follow), vote execution, and recordkeeping.
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9 The Committee may delegate the actual maintenance of such records to an outside service provider. Currently, the Committee has delegated the maintenance of such records to Institutional Shareholder Services.
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II. Special Circumstances
Routine Consents. BlackRock may be asked from time to time to consent to an amendment to, or grant a waiver under, a loan agreement, partnership agreement, indenture or other governing document of a specific financial instrument held by BlackRock clients. BlackRock will generally treat such requests for consents not as “proxies” subject to these Proxy Voting Policies and Procedures but as investment matters to be dealt with by the responsible BlackRock investment professionals would, provided that such consents (i) do not relate to the election of a board of directors or appointment of auditors of a public company, and (ii) either (A) would not otherwise materially affect the structure, management or control of a public company, or (B) relate to a company in which BlackRock clients hold only interests in bank loans or debt securities and are consistent with customary standards and practices for such instruments.
Securities on Loan. Registered investment companies that are advised by BlackRock as well as certain of our advisory clients may participate in securities lending programs. Under most securities lending arrangements, securities on loan may not be voted by the lender (unless the loan is recalled). BlackRock believes that each client has the right to determine whether participating in a securities lending program enhances returns, to contract with the securities lending agent of its choice and to structure a securities lending program, through its lending agent, that balances any tension between loaning and voting securities in a matter that satisfies such client. If client has decided to participate in a securities lending program, BlackRock will therefore defer to the client’s determination and not attempt to seek recalls solely for the purpose of voting routine proxies as this could impact the returns received from securities lending and make the client a less desirable lender in a marketplace. Where a client retains a lending agent that is unaffiliated with BlackRock, BlackRock will generally not seek to vote proxies relating to securities on loan because BlackRock does not have a contractual right to recall such loaned securities for the purpose of voting proxies. Where BlackRock or an affiliate acts as the lending agent, BlackRock will also generally not seek to recall loaned securities for proxy voting purposes, unless the portfolio manager responsible for the account or the Committee determines that voting the proxy is in the client’s best interest and requests that the security be recalled.
Voting Proxies for Non-US Companies. While the proxy voting process is well established in the United States, voting proxies of non-US companies frequently involves logistical issues which can affect BlackRock’s ability to vote such proxies, as well as the desirability of voting such proxies. These issues include (but are not limited to): (i) untimely notice of shareholder meetings, (ii) restrictions on a foreigner’s ability to exercise votes, (iii) requirements to vote proxies in person, (iv) “shareblocking” (requirements that investors who exercise their voting rights surrender the right to dispose of their holdings for some specified period in proximity to the shareholder meeting), (v) potential difficulties in translating the proxy, and (vi) requirements to provide local agents with unrestricted powers of attorney to facilitate voting instructions.
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As a consequence, BlackRock votes proxies of non-US companies only on a “best-efforts” basis. In addition, the Committee may determine that it is generally in the best interests of BlackRock clients not to vote proxies of companies in certain countries if the Committee determines that the costs (including but not limited to opportunity costs associated with shareblocking constraints) associated with exercising a vote generally are expected to outweigh the benefit the client will derive by voting on the issuer’s proposal. If the Committee so determines in the case of a particular country, the Committee (upon advice from BlackRock portfolio managers) may override such determination with respect to a particular issuer’s shareholder meeting if the Committee believes the benefits of seeking to exercise a vote at such meeting outweighs the costs, in which case BlackRock will seek to vote on a best-efforts basis.
Securities Sold After Record Date. With respect to votes in connection with securities held on a particular record date but sold from a client account prior to the holding of the related meeting, BlackRock may take no action on proposals to be voted on in such meeting.
Conflicts of Interest. From time to time, BlackRock may be required to vote proxies in respect of an issuer that is an affiliate of BlackRock (a “BlackRock Affiliate”), or a money management or other client of BlackRock (a “BlackRock Client”).10 In such event, provided that the Committee is aware of the real or potential conflict, the following procedures apply:
• | | The Committee intends to adhere to the voting guidelines set forth herein for all proxy issues including matters involving BlackRock Affiliates and BlackRock Clients. The Committee may, in its discretion for the purposes of ensuring that an independent determination is reached, retain an independent fiduciary to advise the Committee on how to vote or to cast votes on behalf of BlackRock’s clients; and |
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• | | if the Committee determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Committee shall determine how to vote the proxy after consulting with the BlackRock Legal and Compliance Department and concluding that the vote cast is in the client’s best interest notwithstanding the conflict. |
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10 Such issuers may include investment companies for which BlackRock provides investment advisory, administrative and/or other services.
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III. Voting Guidelines
The Committee has determined that it is appropriate and in the best interests of BlackRock’s clients to adopt the following voting guidelines, which represent the Committee’s usual voting position on certain recurring proxy issues that are not expected to involve unusual circumstances. With respect to any particular proxy issue, however, the Committee may elect to vote differently than a voting guideline if the Committee determines that doing so is, in the Committee’s judgment, in the best interest of its clients. The guidelines may be reviewed at any time upon the request of any Committee member and may be amended or deleted upon the vote of a majority of voting Committee members present at a Committee meeting for which there is a quorum.
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A. Boards of Directors
These proposals concern those issues submitted to shareholders relating to the composition of the Board of Directors of companies other than investment companies. As a general matter, the Committee believes that a company’s Board of Directors (rather than shareholders) is most likely to have access to important, nonpublic information regarding a company’s business and prospects, and is therefore best-positioned to set corporate policy and oversee management. The Committee therefore believes that the foundation of good corporate governance is the election of qualified, independent corporate directors who are likely to diligently represent the interests of shareholders and oversee management of the corporation in a manner that will seek to maximize shareholder value over time. In individual cases, the Committee may look at a Director nominee’s history of representing shareholder interests as a director of other companies, or other factors to the extent the Committee deems relevant.
The Committee’s general policy is to vote:
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| # | | |
| | | VOTE and DESCRIPTION |
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| A.1 | | FOR nominees for director of United States companies in |
| | | uncontested elections, except for nominees who |
| | | • | | have missed at least two meetings and, as a result, |
| | | | | attended less than 75% of meetings of the Board of |
| | | | | Directors and its committees the previous year, unless the |
| | | | | nominee missed the meeting(s) due to illness or company |
| | | | | business |
| | | • | | voted to implement or renew a “dead-hand” poison pill |
| | | • | | ignored a shareholder proposal that was approved by |
| | | | | either a majority of the shares outstanding in any year or |
| | | | | by the majority of votes cast for two consecutive years |
| | | • | | failed to act on takeover offers where the majority of the |
| | | | | shareholders have tendered their shares |
| | | • | | are corporate insiders who serve on the audit, |
| | | | | compensation or nominating committees or on a full |
| | | | | Board that does not have such committees composed |
| | | | | exclusively of independent directors |
| | | • | | on a case-by-case basis, have served as directors of other |
| | | | | companies with allegedly poor corporate governance |
| | | • | | sit on more than six boards of public companies |
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| A.2 | | FOR nominees for directors of non-U.S. companies in uncontested |
| | | elections, except for nominees from whom the Committee |
| | | determines to withhold votes due to the nominees’ poor records of |
| | | representing shareholder interests, on a case-by-case basis |
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| A.3 | | FOR proposals to declassify Boards of Directors, except where |
| | | there exists a legitimate purpose for classifying boards |
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| A.4 | | AGAINST proposals to classify Boards of Directors, except where |
| | | there exists a legitimate purpose for classifying boards |
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| A.5 | | AGAINST proposals supporting cumulative voting |
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| A.6 | | FOR proposals eliminating cumulative voting |
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| A.7 | | FOR proposals supporting confidential voting |
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| A.8 | | FOR proposals seeking election of supervisory board members |
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| A.9 | | AGAINST shareholder proposals seeking additional |
| | | representation of women and/or minorities generally (i.e., not |
| | | specific individuals) to a Board of Directors |
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| A.10 | | AGAINST shareholder proposals for term limits for directors |
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| A.11 | | FOR shareholder proposals to establish a mandatory retirement |
| | | age for directors who attain the age of 72 or older |
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| A.12 | | AGAINST shareholder proposals requiring directors to own a |
| | | minimum amount of company stock |
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| A.13 | | FOR proposals requiring a majority of independent directors on a |
| | | Board of Directors |
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| A.14 | | FOR proposals to allow a Board of Directors to delegate powers to |
| | | a committee or committees |
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| A.15 | | FOR proposals to require audit, compensation and/or nominating |
| | | committees of a Board of Directors to consist exclusively of |
| | | independent directors |
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| A.16 | | AGAINST shareholder proposals seeking to prohibit a single |
| | | person from occupying the roles of chairman and chief executive |
| | | officer |
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| A.17 | | FOR proposals to elect account inspectors |
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| A.18 | | FOR proposals to fix the membership of a Board of Directors at a |
| | | specified size |
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| A.19 | | FOR proposals permitting shareholder ability to nominate |
| | | directors directly |
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| A.20 | | AGAINST proposals to eliminate shareholder ability to nominate |
| | | directors directly |
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| A.21 | | FOR proposals permitting shareholder ability to remove directors |
| | | directly |
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| A.22 | | AGAINST proposals to eliminate shareholder ability to remove |
| | | directors directly |
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B. Auditors
These proposals concern those issues submitted to shareholders related to the selection of auditors. As a general matter, the Committee believes that corporate auditors have a responsibility to represent the interests of shareholders and provide an independent view on the propriety of financial reporting decisions of corporate management. While the Committee will generally defer to a corporation’s choice of auditor, in individual cases, the Committee may look at an auditors’ history of representing shareholder interests as auditor of other companies, to the extent the Committee deems relevant.
The Committee’s general policy is to vote:
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| B.1 | | FOR approval of independent auditors, except for |
| | | • | | auditors that have a financial interest in, or material |
| | | | | association with, the company they are auditing, and are |
| | | | | therefore believed by the Committee not to be independent |
| | | • | | auditors who have rendered an opinion to any company which |
| | | | | in the Committee’s opinion is either not consistent with best |
| | | | | accounting practices or not indicative of the company’s |
| | | | | financial situation |
| | | • | | on a case-by-case basis, auditors who in the Committee’s |
| | | | | opinion provide a significant amount of non-audit services to |
| | | | | the company |
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| B.2 | | FOR proposals seeking authorization to fix the remuneration of |
| | | auditors |
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| B.3 | | FOR approving internal statutory auditors |
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| B.4 | | FOR proposals for audit firm rotation, except for proposals that |
| | | would require rotation after a period of less than 5 years |
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C. Compensation and Benefits
These proposals concern those issues submitted to shareholders related to management compensation and employee benefits. As a general matter, the Committee favors disclosure of a company’s compensation and benefit policies and opposes excessive compensation, but believes that compensation matters are normally best determined by a corporation’s board of directors, rather than shareholders. Proposals to “micro-manage” a company’s compensation practices or to set arbitrary restrictions on compensation or benefits will therefore generally not be supported.
The Committee’s general policy is to vote:
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| C.1 | | IN ACCORDANCE WITH THE RECOMMENDATION OF ISS |
| | | on compensation plans if the ISS recommendation is based solely |
| | | on whether or not the company’s plan satisfies the allowable cap |
| | | as calculated by ISS. If the recommendation of ISS is based on |
| | | factors other than whether the plan satisfies the allowable cap the |
| | | Committee will analyze the particular proposed plan. This policy |
| | | applies to amendments of plans as well as to initial approvals. |
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| C.2 | | FOR proposals to eliminate retirement benefits for outside |
| | | directors |
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| C.3 | | AGAINST proposals to establish retirement benefits for outside |
| | | directors |
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| C.4 | | FOR proposals approving the remuneration of directors or of |
| | | supervisory board members |
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| C.5 | | AGAINST proposals to reprice stock options |
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| C.6 | | FOR proposals to approve employee stock purchase plans that |
| | | apply to all employees. This policy applies to proposals to amend |
| | | ESPPs if the plan as amended applies to all employees. |
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| C.7 | | FOR proposals to pay retirement bonuses to directors of Japanese |
| | | companies unless the directors have served less than three years |
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| C.8 | | AGAINST proposals seeking to pay outside directors only in stock |
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| C.9 | | FOR proposals seeking further disclosure of executive pay or |
| | | requiring companies to report on their supplemental executive |
| | | retirement benefits |
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| C.10 | | AGAINST proposals to ban all future stock or stock option grants |
| | | to executives |
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| C.11 | | AGAINST option plans or grants that apply to directors or |
| | | employees of “related companies” without adequate disclosure of |
| | | the corporate relationship and justification of the option policy |
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| C.12 | | FOR proposals to exclude pension plan income in the calculation |
| | | of earnings used in determining executive bonuses/compensation |
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D. Capital Structure
These proposals relate to various requests, principally from management, for approval of amendments that would alter the capital structure of a company, such as an increase in authorized shares. As a general matter, the Committee will support requests that it believes enhance the rights of common shareholders and oppose requests that appear to be unreasonably dilutive.
The Committee’s general policy is to vote:
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| D.1 | | AGAINST proposals seeking authorization to issue shares without |
| | | preemptive rights except for issuances up to 10% of a non-US |
| | | company’s total outstanding capital |
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| D.2 | | FOR management proposals seeking preemptive rights or seeking |
| | | authorization to issue shares with preemptive rights |
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| D.3 | | FOR management proposals approving share repurchase programs |
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| D.4 | | FOR management proposals to split a company’s stock |
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| D.5 | | FOR management proposals to denominate or authorize |
| | | denomination of securities or other obligations or assets in Euros |
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| D.6 | | FOR proposals requiring a company to expense stock options |
| | | (unless the company has already publicly committed to do so by a |
| | | certain date). |
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E. Corporate Charter and By-Laws
These proposals relate to various requests for approval of amendments to a corporation’s charter or by-laws, principally for the purpose of adopting or redeeming “poison pills”. As a general matter, the Committee opposes poison pill provisions.
The Committee’s general policy is to vote:
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| E.1 | | AGAINST proposals seeking to adopt a poison pill |
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| E.2 | | FOR proposals seeking to redeem a poison pill |
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| E.3 | | FOR proposals seeking to have poison pills submitted to |
| | | shareholders for ratification |
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| E.4 | | FOR management proposals to change the company’s name |
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F. Corporate Meetings
These are routine proposals relating to various requests regarding the formalities of corporate meetings.
The Committee’s general policy is to vote:
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| F.1 | | AGAINST proposals that seek authority to act on “any other |
| | | business that may arise” |
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| F.2 | | FOR proposals designating two shareholders to keep minutes of |
| | | the meeting |
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| F.3 | | FOR proposals concerning accepting or approving financial |
| | | statements and statutory reports |
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| F.4 | | FOR proposals approving the discharge of management and the |
| | | supervisory board |
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| F.5 | | FOR proposals approving the allocation of income and the |
| | | dividend |
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| F.6 | | FOR proposals seeking authorization to file required |
| | | documents/other formalities |
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| F.7 | | FOR proposals to authorize the corporate board to ratify and |
| | | execute approved resolutions |
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| F.8 | | FOR proposals appointing inspectors of elections |
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| F.9 | | FOR proposals electing a chair of the meeting |
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| F.10 | | FOR proposals to permit “virtual” shareholder meetings over the |
| | | Internet |
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| F.11 | | AGAINST proposals to require rotating sites for shareholder |
| | | meetings |
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G. Investment Companies
These proposals relate to proxy issues that are associated solely with holdings of shares of investment companies, including, but not limited to, investment companies for which BlackRock provides investment advisory, administrative and/or other services. As with other types of companies, the Committee believes that a fund’s Board of Directors (rather than its shareholders) is best-positioned to set fund policy and oversee management. However, the Committee opposes granting Boards of Directors authority over certain matters, such as changes to a fund’s investment objective, that the Investment Company Act of 1940 envisions will be approved directly by shareholders.
The Committee’s general policy is to vote:
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| G.1 | | | FOR nominees for director of mutual funds in uncontested |
| | | elections, except for nominees who |
| | • | have missed at least two meetings and, as a result, attended |
| | | less than 75% of meetings of the Board of Directors and its |
| | | committees the previous year, unless the nominee missed the |
| | | meeting due to illness or fund business |
| | • | ignore a shareholder proposal that was approved by either a |
| | | majority of the shares outstanding in any year or by the |
| | | majority of votes cast for two consecutive years |
| | • | are interested directors who serve on the audit or nominating |
| | | committees or on a full Board that does not have such |
| | | committees composed exclusively of independent directors |
| | • | on a case-by-case basis, have served as directors of companies |
| | | with allegedly poor corporate governance |
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| G.2 | | | FOR the establishment of new series or classes of shares |
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| G.3 | | | AGAINST proposals to change a fund’s investment objective to |
| | | nonfundamental |
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| G.4 | | | FOR proposals to establish a master-feeder structure or |
| | | authorizing the Board to approve a master-feeder structure without |
| | | a further shareholder vote |
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| G.5 | | | AGAINST a shareholder proposal for the establishment of a |
| | | director ownership requirement |
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| G.6 | | | FOR classified boards of closed-end investment companies |
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H. Environmental and Social Issues
These are shareholder proposals to limit corporate conduct in some manner that relates to the shareholder’s environmental or social concerns. The Committee generally believes that annual shareholder meetings are inappropriate forums for the discussion of larger social issues, and opposes shareholder resolutions “micromanaging” corporate conduct or requesting release of information that would not help a shareholder evaluate an investment in the corporation as an economic matter. While the Committee is generally supportive of proposals to require corporate disclosure of matters that seem relevant and material to the economic interests of shareholders, the Committee is generally not supportive of proposals to require disclosure of corporate matters for other purposes.
The Committee’s general policy is to vote:
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| H.1 | | AGAINST proposals seeking to have companies adopt |
| | | international codes of conduct |
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| H.2 | | AGAINST proposals seeking to have companies provide non- |
| | | required reports on: |
| | | • | environmental liabilities; |
| | | • | bank lending policies; |
| | | • | corporate political contributions or activities; |
| | | • | alcohol advertising and efforts to discourage drinking by |
| | | | minors; |
| | | • | costs and risk of doing business in any individual country; |
| | | • | involvement in nuclear defense systems |
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| H.3 | | AGAINST proposals requesting reports on Maquiladora |
| | | operations or on CERES principles |
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| H.4 | | AGAINST proposals seeking implementation of the CERES |
| | | principles |
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Notice to Clients
BlackRock will make records of any proxy vote it has made on behalf of a client available to such client upon request.11 BlackRock will use its best efforts to treat proxy votes of clients as confidential, except as it may decide to best serve its clients’ interests or as may be necessary to effect such votes or as may be required by law.
BlackRock encourage clients with an interest in particular proxy voting issues to make their views known to BlackRock, provided that, in the absence of specific written direction from a client on how to vote that client’s proxies, BlackRock reserves the right to vote any proxy in a manner it deems in the best interests of its clients, as it determines in its sole discretion.
These policies are as of the date indicated on the cover hereof. The Committee may subsequently amend these policies at any time, without notice.
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11 Such request may be made to the client’s portfolio or relationship manager or addressed in writing to Secretary, BlackRock Equity Investment Policy Oversight Committee, Legal and Compliance Department, BlackRock Inc., 40 East 52nd Street, New York, New York 10022.
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