EX-99.PROXYPOL
HOW THE FUNDS VOTE PROXIES
The Funds' Investment Adviser votes proxies on behalf of the Funds pursuant to
written Proxy Policy Guidelines and Procedures ("Proxy Guidelines") adopted by
the Funds. A summary of the Proxy Guidelines is provided below. To obtain
information on how your Fund's securities were voted, please contact your
account representative at 1-800-551-8043.
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NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
PROXY VOTING SUMMARY
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REVISED 10/10/03
Nicholas-Applegate Capital Management takes seriously the responsibility of
voting proxies on behalf of our clients. Our policies and procedures are
designed to meet all applicable fiduciary standards and to protect the rights
and enhance the economic welfare of those to whom we owe a fiduciary duty.
A Proxy Committee, including executive, investment, sales, marketing, compliance
and operations personnel, is responsible for establishing our policies and
procedures. The Committee reviews these policies and procedures on a regular
basis and makes such changes as it believes are necessary. Our guidelines and
voting actions are to a large extent aligned with the voting recommendations of
Institutional Shareholder Services ("ISS"), a third-party proxy voting service
to which we subscribe.
We review all proxies for which we have voting responsibility, and vote all
proxies according to our written guidelines, taking into account ISS
recommendations and/or investment team input. Our guidelines address such
general areas as elections of directors and auditors, corporate defenses,
corporate governance, mergers and acquisitions, corporate restructuring, state
of incorporation, proxy contest issues, executive compensation, employee
considerations and social issue proposals.
The guidelines contained herein reflect our normal voting position on certain
issues, and will not apply in every situation. The guidelines are intended to
generally cover both U.S. and international proxy voting, although due to
country differences and requirements, international proxy voting may differ
depending on individual facts and circumstances. Some issues require a
case-by-case analysis prior to voting and, in those situations, input from our
investment team will normally be solicited. Even when our guidelines specify how
we normally vote on particular issues, we may change the vote if it is
reasonably determined to be in our clients best interest. In addition, on client
request, we may vote proxies for that client in a particular manner overall,
such as union or labor sensitive.
To ensure that voting responsibilities are met, the Committee has established
operational procedures to have client proxies reconciled against client
holdings. The procedures are also intended to ensure that proxies are voted
consistent with voting guidelines, that the best proxy analysis is used for each
issue, and all votes are recorded
and justified. Any variance from stated policy is carefully noted, including the
reason for the variance.
We maintain proxy voting records for all accounts and make these records
available to clients at their request.
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NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
PROXY VOTING GUIDELINES
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REVISED 10/10/03
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I EXTERNAL AUDITOR
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A. AUDITORS
VOTE FOR proposals to ratify auditors, unless there is a reason to believe the
auditing firm has a financial interest in or association with the company and
is, therefore, not independent; or there is reason to believe the auditor has
rendered an opinion that is neither accurate nor indicative of the company's
financial position.
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II BOARD OF DIRECTORS
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A. DIRECTOR NOMINEES
Votes on director nominees are normally voted in accordance with ISS
analysis and recommendation on each individual proposal. Evaluations are
based on the following criteria (and any others that may be deemed
relevant by ISS or Nicholas-Applegate):
o Long term corporate performance record based on increases in
shareholder wealth, earnings, financial strength
o Executive Compensation
o Director Compensation
o Corporate Governance Provisions and Takeover Activity
o Criminal Activity
o Investment in the Company
o Interlocking Directorships
o Inside, Outside, and Independent Directors
o Board Composition
o Number of Other Board Seats
o Any problems or issues that arose on Other Board assignments
o Support of majority-supported shareholder proposals.
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B. DIRECTOR INDEMNIFICATION AND LIABILITY PROTECTION
1. Proposals concerning director and officer indemnification and
liability protection are normally voted in accordance with ISS
analysis and recommendation on each individual proposal.
2. VOTE AGAINST proposals to limit or eliminate entirely the
liability for monetary damages of directors and officers for
violating the duty of care.
3. VOTE AGAINST indemnification proposals that would expand
coverage beyond just legal expenses to acts like negligence,
that are more serious violations of fiduciary obligation than
mere carelessness.
4. VOTE FOR only those proposals providing such expanded coverage
on cases when a director's or officer's legal defense was
unsuccessful if: (i) the director was found to have acted in
good faith and in a manner that he reasonably believed was in
the best interest of the company, and (ii) if only the
director's legal expenses would be covered.
C. DIRECTOR DUTIES AND STAKEHOLDER LAWS
VOTE AGAINST management or shareholder proposals to allow the board of
directors to consider the interests of "stakeholders" or
"non-shareholder constituents," unless these proposals make it clear
that these interests are to be considered in the context of the
prevailing commitment to shareholders.
D. DIRECTOR NOMINATIONS
VOTE FOR shareholder proposals asking that management allow large
shareholders equal access to management's proxy to discuss and evaluate
management's director nominees, and/or to nominate and discuss
shareholder nominees to the board.
E. INSIDE VERSUS INDEPENDENT DIRECTORS
1. Shareholder proposals asking that boards be comprised of a
majority of independent directors are normally voted in
accordance with ISS analysis and recommendation on each
individual proposal.
2. VOTE FOR shareholder proposals asking that board audit,
compensation and/or nominating committees be comprised
exclusively of independent directors.
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F. STOCK OWNERSHIP REQUIREMENTS
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.
G. TERM OF OFFICE
VOTE AGAINST proposals to limit the tenure of outside directors.
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III PROXY CONTESTS AND CORPORATE DEFENSES
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A. PROXY CONTESTS FOR BOARD SEATS
All votes in a contested election of directors are normally voted in
accordance with ISS analysis and recommendation on each individual
proposal.
B. CLASSIFIED BOARDS
1. VOTE AGAINST proposals to classify the board.
2. VOTE FOR proposals to repeal a classified board, and to elect
all directors annually.
C. CUMULATIVE VOTING
1. VOTE FOR proposals to permit cumulative voting in the election
of directors.
2. VOTE AGAINST proposals to eliminate cumulative voting in the
election of directors.
D. DIRECTOR NOMINATIONS
VOTE AGAINST management proposals to limit shareholders' ability to
nominate directors.
E. SHAREHOLDERS' RIGHT TO CALL SPECIAL MEETINGS
1. VOTE AGAINST management proposals to restrict or prohibit
shareholders' ability to call special meetings.
2. VOTE FOR shareholder proposals that remove restrictions on the
right of shareholders to act independently of management.
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F. SHAREHOLDER ACTION BY WRITTEN CONSENT
1. VOTE AGAINST management proposals to restrict or prohibit
shareholders' ability to take action by written consent.
2. VOTE FOR shareholder proposals to allow or make easier
shareholder action by written consent.
G. SIZE OF THE BOARD
1. VOTE FOR proposals that seek to fix the size of the Board.
2. VOTE AGAINST management proposals that give management the
ability to alter the size of the Board without shareholder
approval.
H. SHAREHOLDERS' ABILITY TO REMOVE DIRECTORS
1. VOTE AGAINST proposals that state directors may be removed only
for cause.
2. VOTE FOR proposals to restore shareholder ability to remove
directors with or without cause.
3. VOTE AGAINST proposals that provide that only continuing
directors may elect replacements to fill board vacancies.
4. VOTE FOR proposals that permit shareholders to elect directors
to fill board vacancies.
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IV TENDER OFFERS AND CORPORATE DEFENSES
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A. FAIR PRICE PROVISIONS
1. VOTE FOR management proposals to adopt a fair price provision,
as long as the shareholder vote requirement imbedded in the
provision is no more than a majority of the disinterested
shares.
2. VOTE FOR shareholder proposals to lower the shareholder vote
requirements imbedded in existing fair price provisions.
B. GREENMAIL
1. 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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2. Vote in accordance with ISS analysis and recommendation on each
individual proposal regarding anti-greenmail proposals when they
are bundled with other charter or bylaw amendments.
3. Vote on a CASE-BY-CASE basis regarding restructuring plans that
involve the payment of pale greenmail.
C. POISON PILLS
1. VOTE FOR shareholder proposals asking that a company submit its
poison pill for shareholder ratification.
2. Shareholder proposals to redeem a company's poison pill are
normally voted in accordance with ISS analysis and
recommendation on each individual proposal.
3. Management proposals to ratify a poison pill are normally voted
in accordance with ISS analysis and recommendation on each
individual proposal.
D. STAKEHOLDER PROVISIONS
VOTE AGAINST management proposals allowing the board to consider
stakeholders' (outside constituencies') interests when faced with a
tender offer.
E. SUPER-MAJORITY VOTE REQUIREMENT TO APPROVE MERGERS
1. VOTE FOR shareholder proposals to lower super-majority vote
requirements for mergers and other business combinations.
2. VOTE AGAINST management proposals to require a super-majority
shareholders' vote to approve mergers and other significant
business combinations.
F. SUPER-MAJORITY SHAREHOLDER VOTE REQUIREMENTS TO AMEND CHARTER OR BYLAWS
1. VOTE FOR shareholder proposals to lower super-majority vote
requirements to amend any bylaw or charter provision.
2. VOTE AGAINST management proposals to require a super-majority
vote to amend any bylaw or charter provision.
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G. UNEQUAL VOTING RIGHTS
VOTE AGAINST proposals for dual class exchange offers and dual class
recapitalizations.
H. EXISTING DUAL CLASS COMPANIES
1. VOTE FOR shareholder proposals asking that a company report to
shareholders on the financial impact of its dual class voting
structure.
2. VOTE FOR shareholder proposals asking that a company submit its
dual class voting structure for shareholder ratification.
I. WHITE SQUIRE PLACEMENTS
VOTE FOR shareholder proposals to require approval of blank check
preferred stock issues for other than general corporation purposes.
(e.g. raising capital or making acquisitions in the normal course of
business).
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V MISCELLANEOUS CORPORATE GOVERNANCE PROVISIONS
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A. ABSTENTION VOTES
VOTE FOR shareholder proposals recommending that votes to "abstain" not
be considered votes "cast" at an annual or special meeting, unless that
consideration is required by state law.
B. ANNUAL MEETINGS
1. VOTE AGAINST management proposals asking for authority to vote
at the meeting for "other matters".
2. VOTE AGAINST shareholder proposals to rotate the time or place
of annual meetings.
C. CONFIDENTIAL VOTING AND INDEPENDENT TABULATION AND INSPECTIONS
VOTE FOR proposals to adopt a policy that comprises both confidential
voting and the use of independent vote tabulators of elections.
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D. EQUAL ACCESS
VOTE FOR shareholder proposals to 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/or to nominate their own candidates to the board.
E. BUNDLED PROPOSALS
Bundled or "conditioned" proxy proposals are normally voted in
accordance with ISS analysis and recommendation on each individual
proposal. (e.g., management proposals to provide shareholders a special
dividend that are bundled with other charter or bylaw changes).
F. SHAREHOLDER ADVISORY COMMITTEE
1. Shareholder proposals to establish shareholder advisory
committees are normally voted in accordance with ISS analysis
and recommendation on each individual proposal.
2. Decisions on whether or not to join a shareholder advisory
committee are normally voted in accordance with ISS analysis and
recommendation on each individual proposal.
G. DISCLOSURE PROPOSALS
Shareholder proposals requesting fuller disclosure of company policies,
plans or business practices are normally voted in accordance with ISS
analysis and recommendation on each individual proposal.
H. CONFLICT OF INTEREST
When facing conflicts between our interests and the interests of our
clients, Nicholas-Applegate will always act in the best interests of its
clients. In proxy voting matters, conflicts of interest can arise in
many ways. For example, a proxy issue could arise for one of our public
clients that we also own in one or more client accounts. Or, a potential
client battling a contentious shareholder proposal may ask for our vote
in exchange for granting us an investment mandate. In these cases and
other potential conflict scenarios, Nicholas-Applegate must exercise
caution to ensure our clients' interests are not compromised.
We believe a reasonable process to screen for potential conflicts that
could influence our proxy voting is as follows:
(i) identify any situation where we DO NOT intend to vote in
accordance with our normal policy on any issue;
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(ii) determine who is directing (portfolio manager, client,
etc) us to vote contrary to our normal policy;
(iii) review and analyze for potential conflict issues (e.g.,
may require PM to disclose any relationship with the
issuer via a written questionnaire);
(iv) Proxy Committee to review request to vote contrary to
policy, and potential conflict if any, prior to voting,
and will make final decision.
(v) pursuant to the request of the Board of Trustees of the
Nicholas-Applegate Institutional Funds, NACM will report
to the Board any conflict of interest matter and how the
Committee resolved it.
The Proxy Committee will be responsible for implementing and following
the above process, and has the flexibility to use its reasonable
judgment in determining which steps are necessary under each set of
circumstances.
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VI CAPITAL STRUCTURE
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A. COMMON STOCK AUTHORIZATION
1. Proposals to increase the number of shares of common stock the
board is authorized to issue are normally voted in accordance
with ISS analysis and recommendation on each individual
proposal.
2. Proposals to increase the number of shares of common stock
authorized for issue are normally voted in accordance with ISS
analysis and recommendation on each individual proposal.
3. VOTE AGAINST proposed common share authorizations that increase
existing authorization by more than 100 percent unless a clear
need for the excess shares is presented by the company.
B. STOCK DISTRIBUTIONS: SPLITS AND DIVIDENDS
VOTE FOR management proposals to increase common share authorization for
a stock split, provided that the increase in authorized shares following
the split is not greater than 100 percent of existing authorized shares.
C. REVERSE STOCK SPLITS
VOTE FOR management proposals to implement a reverse stock split that
also reduce the number of authorized common shares to a level that does
not represent an increase of more than 100 percent of existing
authorized common shares.
D. BLANK CHECK PREFERRED STOCK
1. VOTE AGAINST management proposals authorizing the creation of
new classes of preferred stock which have unspecified rights
including voting, conversion or dividend distribution rights.
2. Management proposals to increase the number of authorized blank
check preferred shares are normally voted in accordance with ISS
analysis and recommendation on each individual proposal.
3. VOTE FOR shareholder proposals asking that any placement of
blank check preferred stock be first approved by shareholders,
unless the placement is for ordinary business purposes.
4. 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.
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E. ADJUSTMENTS TO PAR VALUE OF COMMON STOCK
VOTE FOR management proposals to reduce the par value of common stock.
F. PREEMPTIVE RIGHTS
Proposals to provide shareholders with preemptive rights are normally
voted in accordance with ISS analysis and recommendation on each
individual proposal.
G. DEBT RESTRUCTURING
Proposals to increase common and/or preferred shares and to issue shares
as part of a debt restructuring plan are normally voted in accordance
with ISS analysis and recommendation on each individual proposal.
H. SHARE REPURCHASE PROGRAMS
VOTE FOR management proposals to institute open-market share repurchase
plans in which all shareholders may participate on equal terms.
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VII EXECUTIVE COMPENSATION/EMPLOYEE CONSIDERATION
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A. INCENTIVE PLANS
All proposals on incentive compensation plans (including option plans)
for executives and directors are normally voted in accordance with ISS
analysis and recommendation on each individual proposal. The evaluation
is based on the following criteria (and any other that may be deemed
relevant by ISS or Nicholas-Applegate):
o Necessity
o Reasonableness Test
o Participation
o Dilution
o Shares Available
o Exercise and Payment Terms
o Change-in-Control Provisions
o Types of Awards
o Company specific dilution cap calculated
o Present Value of all incentives, derivative awards,
cash/bonus compensation
o Shareholder wealth transfer (dollar amount of shareholders'
equity paid it's executives)
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o Voting power dilution - Potential percent reduction in
relative voting power
o Criteria for awarding grants
o Process for determining pay levels
B. SHAREHOLDER PROPOSALS TO LIMIT EXECUTIVE AND DIRECTOR COMPENSATION
1. Generally, VOTE FOR shareholder proposals that seek additional
disclosure of executive and director compensation information.
2. All other shareholder proposals that seek to limit executive and
director compensation are normally voted in accordance with ISS
analysis and recommendation on each individual proposal.
C. GOLDEN PARACHUTES
1. VOTE FOR shareholder proposals to have golden and tin parachutes
submitted for shareholder ratification.
2. Proposals to ratify or cancel golden or tin parachutes are
normally voted in accordance with ISS analysis and
recommendation on each individual proposal.
D. EMPLOYEE STOCK OWNERSHIP PLANS (ESOP)
1. VOTE FOR proposals requesting shareholder approval to implement
Employee Stock Ownership Plans, or increase authorized shares
for existing Employee Stock Ownership Plans except when the
number of shares allocated to the ESOP is excessive (i.e.
greater than 5% of outstanding shares).
2. Votes directly pertaining to the approval of an ESOP or a
leveraged ESOP are normally voted in accordance with ISS
analysis and recommendation on each individual proposal. Our
evaluation is based on the following criteria (and any other
that may be deemed relevant):
o Reasonableness Test
o Participation
o Administration
o Shares Available
o Exercise and Payment Terms
o Change-in-Control Provisions
o Types of Awards
o Dilution
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E. 401(K) EMPLOYEE BENEFIT PLANS
VOTE FOR proposals to implement a 401(k) savings plan for employees.
F. DISCOUNTED OPTIONS/RESTRICTED STOCK
VOTE AGAINST discounted options and restricted stock without performance
criteria (except restricted stock in U.S.-style stock option plans,
which are normally voted in accordance with ISS analysis and
recommendation on each individual proposal.)
G. PENSION FUND CREDITS
VOTE FOR proposals that EXCLUDE pension fund credits from earnings when
calculating executive compensation. In addition, VOTE AGAINST proposals
that INCLUDE pension fund credits in earnings when calculating executive
compensation.
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VIII STATE OF INCORPORATION
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A. RE-INCORPORATION PROPOSALS
Proposals to change a corporation's state of incorporation are normally
voted in accordance with ISS analysis and recommendation on each
individual proposal.
B. STATE TAKEOVER STATUTES
Proposals to opt in or opt out of state takeover statutes are normally
voted in accordance with ISS analysis and recommendation on each
individual proposal.
C. STATE FAIR PRICE PROVISIONS
Proposals to opt out of S.F.P's are normally voted in accordance with
ISS analysis and recommendation on each individual proposal.
D. STAKEHOLDER LAWS
VOTE FOR proposals to opt out of stakeholder laws (allowing directors to
weigh the interest of constituencies other than shareholders in the
process of corporate decision making).
E. DISGORGEMENT PROVISIONS
Proposals to opt out of disgorgement provisions are normally voted in
accordance with ISS analysis and recommendation on each individual
proposal.
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IX MERGERS AND CORPORATE RESTRUCTURINGS
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A. MERGERS AND ACQUISITIONS
Votes on mergers and acquisitions are normally voted in accordance with
ISS analysis and recommendation on each individual proposal. The voting
decision depends on a number of factors, including:
o Anticipated financial and operating benefits
o Offer price (cost vs. premium)
o Prospects of the combined companies
o How the deal was negotiated
o Changes in corporate governance and their impact on
shareholder rights
o Other pertinent factors discussed below.
B. CORPORATE RESTRUCTURINGS
Votes on corporate restructuring proposals, including minority
squeezeouts, leveraged buyouts, spin-offs, liquidations and asset sales,
are normally voted in accordance with ISS analysis and recommendation on
each individual proposal.
C. SPIN-OFFS
Votes on spin-offs are normally voted in accordance with ISS analysis
and recommendation on each individual proposal, considering
o The tax and regulatory advantages
o Planned use of the sale proceeds
o Market focus
o Managerial incentives.
D. ASSET SALES
Votes on asset sales are normally voted in accordance with ISS analysis
and recommendation on each individual proposal, considering
o The impact on the balance sheet/working capital
o The value received for the asset
o The potential elimination of diseconomies.
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E. LIQUIDATIONS
Votes on liquidations normally voted in accordance with ISS analysis and
recommendation on each individual proposal, after reviewing
o Management's efforts to pursue other alternatives
o The appraisal value of the assets
o The compensation plan for executives managing the
liquidation.
F. RIGHTS OF APPRAISAL
VOTE FOR shareholder proposals to provide rights of appraisal to
dissenting shareholders.
G. CHANGING CORPORATE NAME
VOTE FOR changing the corporate name.
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X SOCIAL ISSUES PROPOSALS
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A. SOCIAL ISSUES PROPOSALS
Vote to ABSTAIN on social issue proposals, unless the proposal is likely
to affect shareholder value. If so, the issue is normally voted in
accordance with ISS analysis and recommendation on each individual
proposal, which is based on expected effect on shareholder value, and
then voted accordingly.
Generally, VOTE FOR disclosure reports that seek additional information.
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XI PROXIES NOT VOTED
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A. SHARES OUT ON LOAN
Proxies are not available to be voted when shares are out on loan
through client securities lending programs with their custodians.
B. SHARE-BLOCKING
Proxies are not voted for countries with "share-blocking", generally,
voting would restrict ability to sell shares. A list of countries with
"share-blocking" is available upon request.
C. OTHER
There may be circumstances, such as costs or other factors, where
Nicholas-Applegate would in its reasonable discretion refrain from
voting proxy shares.
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