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EXHIBIT 7
W. H. REAVES & CO., INC.
PROXY VOTING POLICIES AND PROCEDURES
1. BACKGROUND
The act of managing assets of clients may include the voting of proxies
related to such managed assets. Where the power to vote in person or by
proxy has been delegated, directly or indirectly, to the investment
adviser, the investment adviser has the fiduciary responsibility for (a)
voting in a manner that is in the best interests of the client, and (b)
properly dealing with potential conflicts of interest arising from proxy
proposals being voted upon.
The policies and procedures of W. H. Reaves & Company, Inc. ("WHR") ("the
Adviser") for voting proxies received for accounts managed by the Adviser
are set forth below and are applicable if:
- The underlying advisory agreement entered into with the client
expressly provides that the Adviser shall be responsible to vote
proxies received in connection with the client's account; or
- The underlying advisory agreement entered into with the client is
silent as to whether or not the Adviser shall be responsible to
vote proxies received in connection with the client's account AND
the Adviser has discretionary authority over investment decisions
for the client's account; or
- In case of an employee benefit plan, the client (or any plan
trustee or other fiduciary) HAS NOT reserved the power to vote
proxies in either the underlying advisory agreement entered into
with the client or in the client's plan documents.
These Proxy Voting Policies and Procedures are designed to ensure that
proxies are voted in an appropriate manner and should complement the
Adviser's investment policies and procedures regarding its general
responsibility to monitor the performance and/or corporate events of
companies which are issuers of securities held in managed accounts. Any
questions about these policies and procedures should be directed to WHR's
Compliance Department.
PROXY VOTING POLICIES
In the absence of specific voting guidelines from a client, WHR will vote
proxies in a manner that is in the best interest of the client, which may
result in different voting results for proxies for the same issuer. The
Adviser shall consider only those factors that relate to the client's
investment or dictated by the client's written instructions, including how
its vote will economically impact and affect the value of the client's
investment (keeping in mind that, after conducting an
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appropriate cost-benefit analysis, not voting at all on a presented
proposal may be in the best interest of the client). WHR believes that
voting proxies in accordance with the following policies is in the best
interests of its clients.
A. SPECIFIC VOTING POLICIES
1. Routine Items:
- The Adviser will generally vote for the election of
directors (where no corporate governance issues are
implicated).
- The Adviser will generally vote for the selection of
independent auditors.
- The Adviser will generally vote for increases in or
reclassification of common stock.
- The Adviser will generally vote for management
recommendations adding or amending indemnification
provisions in charter or by-laws.
- The Adviser will generally vote for changes in the board of
directors.
- The Adviser will generally vote for outside director
compensation.
- The Adviser will generally vote for proposals that maintain
or strengthen the shared interests of shareholders and
management
- The Adviser will generally vote for proposals that increase
shareholder value
- The Adviser will generally vote for proposals that will
maintain or increase shareholder influence over the issuer's
board of directors and management
- The Adviser will generally vote for proposals that maintain
or increase the rights of shareholders
2. Non-Routine and Conflict of Interest Items:
- The Adviser will generally vote for management proposals for
merger or reorganization if the transaction appears to offer
fair value.
- The Adviser will generally vote against shareholder
resolutions that consider only non-financial impacts of
mergers
- The Adviser will generally vote against anti-greenmail
provisions.
B. General Voting Policy
If the proxy includes a Routine Item that implicates corporate
governance changes, a Non-Routine Item where no specific policy
applies or a Conflict of
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Interest Item where no specific policy applies, then the Adviser may
engage an independent third party to determine how the proxies should
be voted.
In voting on each and every issue, the Adviser and its employees shall vote
in a prudent and timely fashion and only after a careful evaluation of the
issue(s) presented on the ballot.
In exercising its voting discretion, the Adviser and its employees shall
avoid any direct or indirect conflict of interest raised by such voting
decision. The Adviser will provide adequate disclosure to the client if any
substantive aspect or foreseeable result of the subject matter to be voted
upon raises an actual or potential conflict of interest to the Adviser or:
- any affiliate of the Adviser. For purposes of these Proxy Voting
Policies and Procedures, an affiliate means:
(i) any person directly, or indirectly through one or more
intermediaries, controlling, controlled by or under
common control with the Adviser;
(ii) any officer, director, principal, partner, employer,
or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of the Adviser; or
(iii) any other person for which a person described in
clause (ii) acts in any such capacity;
- any issuer of a security for which the Adviser (or any affiliate
of the Adviser) acts as a sponsor, advisor, manager, custodian,
distributor, underwriter, broker, or other similar capacity; or
- any person with whom the Adviser (or any affiliate of the
Adviser) has an existing, material contract or business
relationship that was not entered into in the ordinary course of
the Adviser's (or its affiliate's) business.
After informing the client of any potential conflict of interest, the
Adviser will take other appropriate action as required under these Proxy
Voting Policies and Procedures, as provided below.
The Adviser shall keep certain records required by applicable law in
connection with its proxy voting activities for clients and shall provide
proxy-voting information to clients upon their written or oral request.
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3. PROXY VOTING PROCEDURES
A. The Account Representative or the Portfolio Manager the
"Responsible Party") shall be designated by the Adviser to make
discretionary investment decisions for the client's account will
be responsible for voting the proxies related to that account.
The Responsible Party should assume that he or she has the power
to vote all proxies related to the client's account if any one of
the three circumstances set forth in Section 1 above regarding
proxy voting powers is applicable.
B. All proxies and ballots received by WHR will be forwarded to the
Responsible Party and then logged in upon receipt in the "Receipt
of Proxy Voting Material" log.
C. Prior to voting, the Responsible Party will verify whether his or
her voting power is subject to any limitations or guidelines
issued by the client (or in the case of an employee benefit plan,
the plan's trustee or other fiduciaries).
D. Prior to voting, the Responsible Party will verify whether an
actual or potential conflict of interest with the Adviser or any
Interested Person exists in connection with the subject
proposal(s) to be voted upon. The determination regarding the
presence or absence of any actual or potential conflict of
interest shall be adequately documented by the Responsible Party
(i.e., comparing the apparent parties affected by the proxy
proposal being voted upon against the Adviser's internal list of
Interested Persons and, for any matches found, describing the
process taken to determine the anticipated magnitude and possible
probability of any conflict of interest being present), which
shall be reviewed and signed off on by the Responsible Party's
direct supervisor (and if none, by the board of directors or a
committee of the board of directors of the Adviser).
E. If an actual or potential conflict is found to exist, written
notification of the conflict (the "Conflict Notice") shall be
given to the client or the client's designee (or in the case of
an employee benefit plan, the plan's trustee or other fiduciary)
in sufficient detail and with sufficient time to reasonably
inform the client (or in the case of an employee benefit plan,
the plan's trustee or other fiduciary) of the actual or potential
conflict involved.
Specifically, the Conflict Notice should describe:
- the proposal to be voted upon;
- the actual or potential conflict of interest involved;
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- the Adviser's vote recommendation (with a summary of
material factors supporting the recommended vote); and
- if applicable, the relationship between the Adviser and any
Interested Person.
The Conflict Notice will either request the client's consent to
the Adviser's vote recommendation or may request the client to
vote the proxy directly or through another designee of the
client. The Conflict Notice and consent thereto may be sent or
received, as the case may be, by mail, fax, electronic
transmission or any other reliable form of communication that may
be recalled, retrieved, produced, or printed in accordance with
the recordkeeping policies and procedures of the Adviser. If the
client (or in the case of an employee benefit plan, the plan's
trustee or other fiduciary) is unreachable or has not
affirmatively responded before the response deadline for the
matter being voted upon, the Adviser may:
- engage a non-Interested Party to independently review the
Adviser's vote recommendation if the vote recommendation
would fall in favor of the Adviser's interest (or the
interest of an Interested Person) to confirm that the
Adviser's vote recommendation is in the best interest of the
client under the circumstances;
- cast its vote as recommended if the vote recommendation
would fall against the Adviser's interest (or the interest
of an Interested Person) and such vote recommendation is in
the best interest of the client under the circumstances; or
- abstain from voting if such action is determined by the
Adviser to be in the best interest of the client under the
circumstances.
F. The Responsible Party will promptly vote proxies received in a
manner consistent with the Proxy Voting Policies and Procedures
stated above and guidelines (if any) issued by client (or in the
case of an employee benefit plan, the plan's trustee or other
fiduciaries if such guidelines are consistent with ERISA).
G. In accordance with SEC Rule 204-2(c)(2), as amended, the
Responsible Party shall retain in the respective client's file,
the following:
- A copy of the proxy statement received (unless retained by a
third party for the benefit of the Adviser OR the proxy
statement is available from the SEC's Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system);
- A record of the vote cast (unless this record is retained by
a third party for the benefit of the Adviser AND the third
party is able to promptly provide the Adviser with a copy of
the voting record upon its request);
- A record memorializing the basis for the vote cast;
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- A copy of any document created by the Adviser or its
employees that was material in making the decision on how to
vote the subject proxy; and,
- A copy of any Conflict Notice, conflict consent or any other
written communication (including emails or other electronic
communications) to or from the client (or in the case of an
employee benefit plan, the plan's trustee or other
fiduciaries) regarding the subject proxy vote cast by, or
the vote recommendation of, the Adviser.
The above copies and records shall be retained in the client's
file for a period not less than five (5) years (or in the case of
an employee benefit plan, no less than six (6) years), which
shall be maintained at the appropriate office of the Adviser.
H. Periodically, but no less than annually, the Adviser will:
1. Verify that all annual proxies for the securities held
in the client's account have been received;
2. Verify that each proxy received has been voted in a
manner consistent with the Proxy Voting Policies and
Procedures and the guidelines (if any) issued by the
client (or in the case of an employee benefit plan, the
plan's trustee or other fiduciaries);
3. Review the files to verify that records of the voting
of the proxies have been properly maintained;
4. Prepare a written report for each client regarding
compliance with the Proxy Voting Policies and
Procedures; and
5. Maintain an internal list of Interested Persons.
PROXIES AND CLASS ACTION LAWSUITS
WHR will be required to take action and render advice with respect to voting of
proxies solicited by or with respect to the issuers of securities in which
assets of the Account may be invested from time to time. However, WHR will NOT
take any action or render any advice with respect to any securities held in the
Account, which are named in or subject to class action lawsuits. WHR may, only
at the client's request, offer clients advice regarding corporate actions
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