AIG GLOBAL INVESTMENT CORP. ("AIGGIC" or the "ADVISER")
Proxy Voting Policies and Procedures
The following are proxy voting policies and procedures ("Policies and
Procedures") adopted by AIG Global Investment Corp. ("AIGGIC" or the "Adviser"),
an investment adviser registered with the U.S. Securities and Exchange
Commission ("SEC") under the Investment Advisers Act of 1940, as amended
("Advisers Act"), with respect to voting securities held by client portfolios
that are registered as investment companies under the Investment Company Act of
1940, as amended ("1940 Act") (referred to herein as "clients"). Clients include
Excelsior Absolute Return Fund of Funds Master Fund, LLC (the "Fund") which is
an investment company registered with the SEC under the 1940 Act; AIGGIC serves
as investment manager to the Fund pursuant to a sub-advisory agreement between
AIGGIC and U.S. Trust Hedge Fund Management, Inc. These Policies and Procedures
are adopted to ensure compliance by AIGGIC with Rule 206(4)-6 under the Advisers
Act and other applicable fiduciary obligations under rules and regulations of
the SEC and interpretations of its staff. AIGGIC follows these Policies and
Procedures for each of its clients as required under the Advisers Act and other
applicable law, unless expressly directed by a client in writing to refrain from
voting that client's proxies or to vote in accordance with the client's proxy
voting policies and procedures. With respect to the Fund, AIGGIC follows both
these Policies and Procedures and the proxy voting policies and procedures
adopted by the Fund and its Board of Trustees.
Proxy voting is an important right of shareholders for which reasonable
care and diligence must be undertaken to ensure such rights are properly and
timely exercised. The SEC has stated that an investment adviser, as a fiduciary
for its clients, must vote proxies in the best interests of the clients. The SEC
believes a conflict of interest arises when the adviser or its affiliates have
other relationships with the companies whose securities are owned by the
clients. Rule 206(4)-6 is designed to address how an adviser would resolve such
conflicts.
AIGGIC has engaged a third party vendor to vote proxies on its behalf. The
vendor receives, in a majority of cases, proxies directly from the client's
custodian and votes them based on these general voting guidelines. In those
circumstances where AIGGIC receives proxies, these proxies are promptly faxed to
the third party vendor, who then votes them in accordance with these general
voting guidelines. The vendor will maintain a listing of all votes cast on
behalf of AIGGIC.
I. Definitions
A. "Best interest of clients". In the view of AIGGIC, this means
clients' best economic interest over the long term -- that is, the common
interest that all clients share in seeing the value of a common investment
increase over time. Clients may have differing political or social
interests, but their best economic interest is generally uniform.
B. "Material conflict of interest". Circumstances when AIGGIC, or any
member of its senior management or any of its portfolio managers or
portfolio analysts, knowingly does business with a particular proxy issuer
or closely affiliated entity which may appear to create a material conflict
between the interests of AIGGIC and the interests of its clients in how
proxies of that issuer are voted.
II. General Policy
Where AIGGIC is given responsibility for voting proxies, we must take reasonable
steps under the circumstances to ensure that proxies are received and voted with
a view to enhancing the value of the shares of stock held in client accounts.
These Policies and Procedures expressly address the voting of proxies or
securities with respect to which the issuers solicit proxies to vote on
proposals that are put to a vote of shareholders. The Fund may invest all or
some portion of its assets in the securities of privately placed investment
vehicles ("Private Investment Funds"), which do not typically convey traditional
voting rights to the holder, and the occurrence of corporate governance or other
notices for this type of investment is substantially less that that encountered
in connection with registered equity securities. On occasion, however, the Fund
may receive notices from the Private Investment Funds seeking the consent of
holders in order to materially change certain rights within the structure of the
security issued by the Private Investment Fund or change material terms of the
Private Investment Fund's constituent documents. AIGGIC shall follow these
Policies and Procedures, to the extent applicable, in exercising the rights of
the Fund to vote or consent in connection with its investments in Private
Investment Funds. The Advisor shall take such action as may be necessary to
enable the Fund to comply with all disclosure and recordkeeping obligations
imposed by applicable rules and regulations.
The financial interest of our clients is the primary consideration in
determining how proxies should be voted. In the case of social and political
responsibility issues that in our view do not primarily involve financial
considerations, the diversity of our clients means that we are unable to
represent each such view in each instance. Thus, AIGGIC exercises its vote on
these issues in what it believes to be the best economic interests of its
clients unless a private account client has provided specific instructions
otherwise for its voting securities. When making specific proxy decisions,
AIGGIC generally adheres to its specific voting policies contained in Section VI
herein. The guidelines set forth positions of AIGGIC on recurring issues and
criteria for addressing non-recurring issues. The general voting policies of
AIGGIC are described below.
III. General Voting Policies
A. Client's Best Interest. These Policies and Procedures are designed
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and implemented in a way that is reasonably expected to ensure that proxies
are voted in the best interest of clients. Proxies will be voted with the
aim of furthering the best economic interests of clients, promoting high
levels of corporate governance and adequate disclosure of company policies,
activities and returns, including fair and equal treatment of shareholders.
B. Shareholder Activism. AIGGIC seeks to develop relationships with
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the management of portfolio companies to encourage transparency and
improvements in the treatment of owners and stakeholders. Thus, AIGGIC may
engage in dialogue with the management of portfolio companies with
respect to pending proxy voting issues.
C. Case-by-Case Basis. While these Policies and Procedures guide our
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decisions each proxy vote is ultimately cast on a case-by-case basis, taking
into consideration the contractual obligations under the advisory agreement
or comparable document, and all other relevant facts and circumstances at
the time of the vote. AIGGIC may cast proxy votes in favor of management
proposals or seek to change the views of management, considering specific
issues as they arise on their merits. AIGGIC may also join with other
investment managers in seeking to submit a shareholder proposal to a company
or to oppose a proposal submitted by the company. Any such action is
primarily based on grounds of fundamental share value.
D. Individualized. These Policies and Procedures are tailored to
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suit the advisory business of AIGGIC and the types of securities
portfolios it manages. To the extent that clients have adopted their
own procedures, AIGGIC may vote the same securities differently depending
upon clients' directions.
E. Material Conflicts of Interest. Material conflicts are
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resolved in the best interest of clients. When a material conflict of
interest between AIGGIC and its respective client(s) is identified,
AIGGIC will choose among the procedures set forth in Section IV.B.3.b.,
below, to resolve such conflict.
F. Limitations. The circumstances under which AIGGIC may take a
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limited role in voting proxies, include the following.
1. No Responsibility. AIGGIC will not vote proxies for client
accounts in which the client contract specifies that AIGGIC will not
vote. Under such circumstances, the clients' custodians ("Custodians")
are instructed to mail proxy material directly to such clients.
2. Limited Value. AIGGIC may abstain from voting a client
proxy if the effect on shareholders' economic interests or the value
of the portfolio holding is indeterminable or insignificant.
3. Unjustifiable Costs. AIGGIC may abstain from voting a
client proxy for cost reasons.
4. Securities Lending Arrangements. If voting securities are
part of a securities lending program, AIGGIC may be unable to vote
while the securities are on loan.
5. Special Considerations. The responsibilities of AIGGIC for voting
proxies are determined generally by its obligations under each advisory
contract or similar document. If a client requests in writing that
AIGGIC vote its proxy in a manner inconsistent with these Policies and
Procedures, AIGGIC may follow the client's direction or may request that
the client vote the proxy directly. As a courtesy to certain clients,
AIGGIC may, from time to time, agree to vote proxies on securities over
which AIGGIC holds no discretionary management authority. AIGGIC is
under no obligation to vote these securities as they are not part of the
clients' managed accounts, AIGGIC exercises no discretion over such
securities, and they are not generally included in the securities which
AIGGIC follows as an investment adviser. To the extent that AIGGIC has
agreed to perform the courtesy service of mechanically casting the vote
on any such securities and no specific voting instructions are provided
by the client(s), AIGGIC will not research the companies and will either
vote with management or abstain unless the security being voted happens
to be covered by AIGGIC in its capacity as investment adviser.
G. Sources of Information. AIGGIC may conduct research
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internally and/or use the resources of an independent research consultant.
AIGGIC may consider legislative materials, studies of corporate governance
and other proxy voting issues, and/or analyses of shareholder and management
proposals by a certain sector of companies, e.g. small cap companies.
H. Availability of Policies and Procedures. AIGGIC will provide
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clients with a copy of these Policies and Procedures, as revised from time
to time, upon request.
I. Disclosure of Vote. As described in Part II of AIGGIC's Form ADV, a
client may obtain information on how its proxies were voted by requesting
such information from AIGGIC. AIGGIC does not generally disclose client
proxy votes to third parties, other than as required for the Fund, unless
specifically requested, in writing, by the client.
IV. Proxy Voting Procedures
A. General
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1. Accounts for Which AIGGIC Has Proxy Voting Responsibility
AIGGIC is generally responsible for voting proxies with respect to securities
held in client accounts unless the investment management agreement explicitly
states that AIGGIC will not vote proxies for the account. AIGGIC is not
responsible for voting client securities which are not part of the managed
account. However, AIGGIC may, as a courtesy, vote certain client securities
which are not part of the managed account at the request of its clients subject
to the limitations described in Section III.F.5., above.
2. Adherence to Client Proxy Voting Policies
If a client has its own proxy voting policy, AIGGIC and the client will agree in
writing on whether AIGGIC will vote in accordance with its own policy, whether
AIGGIC will vote that client's securities in accordance with the client's policy
or whether the client will vote its own securities.
3. Disclosure of Proxy Voting Intentions
AIGGIC personnel should not discuss with members of the public how AIGGIC
intends to vote on any particular proxy proposal. This does not restrict
communications in the ordinary course of business with other clients for which
AIGGIC votes proxies. Disclosure of AIGGIC's proxy voting intentions -
especially where 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, as amended. In the event that AIGGIC wishes to discuss its voting
intentions outside the firm, AIGGIC should consult with its counsel before any
such discussions.
B. Operational Procedures
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1. Role of the Proxy Administrator
Once a client account is established and the proxy voting responsibility is
determined, the Proxy Administrator ("PA"), is responsible for receiving and
processing proxies for securities held in the portfolios of our clients and
ensuring that votes are cast. The PA is responsible for ensuring that the
registered owners of record, e.g. the client, trustee or custodian bank, that
receive proxy materials from the issuer or its information agent, forward proxy
materials to AIGGIC. Proxies may also be delivered electronically through a
proxy service. The PA logs in any proxy materials received, matches them to the
securities to be voted and confirms that the correct amount of shares, as of the
record date, is reflected on the proxy. Once the proxy statement is logged in,
the PA gives it to a research analyst ("Analyst") for consideration.
The PA also compiles and maintains information, for each client for which AIGGIC
votes proxies, showing the issuer's name, meeting date and manner in which it
voted on each proxy proposal. The PA is also responsible for monitoring
compliance with client proxy voting policies. A copy of each proxy statement is
kept. AIGGIC generally seeks to vote proxies at least one (1) week prior to the
deadline. Unfortunately, proxy materials are often received with less than a
week's time before the deadline, and in such cases, AIGGIC uses reasonable
efforts to exercise its vote.
2. Material Conflicts of Interest
a. AIGGIC will take steps to identify the existence of any
material conflicts of interest relating to the securities to be voted or the
issue at hand. Senior management, portfolio managers and Analysts of AIGGIC are
expected to disclose to the PA any personal conflicts such as officer or
director positions held by them, their spouses or close relatives in the
portfolio company. Conflicts based on business relationships or dealings of
affiliates of AIGGIC will only be considered to the extent that the AIGGIC has
actual knowledge of such business relationships.
b. When a material conflict of interest between AIGGIC's
interests and its clients' interests appears to exist, AIGGIC may choose among
the following options to eliminate such conflict: (1) vote in accordance with
these Policies and Procedures if it involves little or no discretion; (2) vote
as recommended by a third-party service if AIGGIC utilizes such a service;
(3) "echo vote" or "mirror vote" the proxies in the same proportion as the votes
of other proxy holders that are not clients of AIGGIC; (4) if possible, erect
information barriers around the person or persons making voting decisions
sufficient to insulate the decision from the conflict; (5) if practical, notify
affected clients of the conflict of interest and seek a waiver of the conflict;
or (6) if agreed upon in writing with the client, forward the proxies to
affected clients allowing them to vote their own proxies.
3. Role of the Research Analysts
The PA ensures that each proxy statement is directed to the Analyst responsible
for following the particular security or industry. The Analysts are responsible
for considering the substantive issues relating to any vote, deciding how the
shares will be voted, and instructing the PA how to vote the proxies. In
determining how to vote a given proxy, Analysts will adhere to these Proxy
Voting Policies and Procedures, as revised from time to time, except to the
extent superseded by client proxy voting policies or to the extent that a
material conflict of interest is identified. In the event of a personal material
conflict of interest, the Analyst will refer the decision to another AIGGIC
Analyst who has no such conflict. In the event of an organizational conflict,
AIGGIC will follow the procedures outlined in Section IV.B.2.b., above. If there
is no material conflict of interest, the vote recommendation will be forwarded
to the PA to be cast. The Analyst may consult with the PA and/or Senior
Management as necessary to identify and resolve conflicts. Analysts are
responsible for documenting the rationale for any vote recommendation.
4. Role of the Third-Party Service Provider(s)
AIGGIC may engage a third-party service provider to provide notification of
impending votes, including shareholder resolutions, which may be viewed on-line.
In addition, AIGGIC may engage a third-party service provider to provide
web-based proxy voting and recordkeeping services.
V. Documentation, Recordkeeping and Reporting Requirements
A. Documentation. The PA is responsible for:
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1. implementing and updating these Policies and Procedures;
2. overseeing the proxy voting process;
3. consulting with Analysts for the relevant portfolio
security; and
4. maintaining proxy voting records.
B. Recordkeeping.
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1. AIGGIC will maintain records of all proxies voted.
2. As required by Rule 204-2(c), such records will include: (a) a
copy of the Policies and Procedures; (b) a copy of any document created
by AIGGIC that was material to making a decision how to vote proxies on
behalf of a client or that memorializes the basis for that decision; and
(c) each written client request for proxy voting records and AIGGIC's
written response to any (written or oral) client request for such
records.
3. AIGGIC will maintain proxy statements and record of votes cast
pursuant to Rule 204-2(c). AIGGIC may rely on the SEC's EDGAR system to
keep records of certain proxy statements if the proxy statements are
maintained by issuers on that system (e.g., large U.S.-based issuers).
4. Duration. Proxy voting books and records will be maintained
in an easily accessible place for a period of five years, the
first two in AIGGIC's office.
C. Reporting. AIGGIC will initially inform clients of these Policies and
Procedures and how a client may learn of the voting record for client's
securities through summary disclosure in Part II of AIGGIC's Form ADV. Upon
receipt of a client's request for more information, AIGGIC will provide to
the client a copy of these Policies and Procedures and/or, in accordance
with the client's stated requirements, how the client's proxies were voted
during the period requested subsequent to the adoption of these Policies and
Procedures. Such periodic reports, other than those required for the Fund,
will not be made available to third parties absent the express written
request of the client.
Review of Policies and Procedures. These Policies and Procedures will be
subject to periodic review as deemed appropriate by AIGGIC.
VI. Specific Voting Policies
A. Summary.
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AIGGIC's current policies with respect to a number of common issues are briefly
summarized as follows:
|X| AIGGIC generally votes with the recommendations of a company's
Board of Trustees on routine or non-controversial issues (see
examples below).
|X| In general, AIGGIC opposes anti-takeover proposals, unless unusual
circumstances dictate otherwise.
|X| In general, AIGGIC votes to support the elimination of
anti-takeover policies, unless unusual circumstances dictate
otherwise.
|X| On issues relating to social and/or political responsibility,
AIGGIC votes all client shares in what we believe to be the best
economic interests of our clients unless directed by a client to
vote in a certain manner.
|X| Proposals not covered by the above-stated guidelines and contested
situations are evaluated on a case-by-case basis by the Analyst
principally responsible for the particular security.
B. Examples of Proxy Voting With Management On
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Non-Controversial Matters.
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|X| Election of trustees, in the absence of a contest or controversy.
|X| Ratification of selection of independent auditors, in the absence
of controversy.
|X| Stock option plans for executives, employees or trustees which
would not increase the aggregate number of shares of stock
available for grant under all currently active plans to over 10%
of the total number of shares outstanding, and which AIGGIC does
not oppose for other valid reasons.
|X| Stock splits, if not for anti-takeover purposes.
|X| Change of state of incorporation for specific corporate
purposes and not for anti-takeover purposes.
|X| Employee stock purchase plans and employee stock ownership
plans permitting purchase of company stock at 85% or more of fair
market value.
C. Guidelines for Specific Proxy Voting Issues.
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1. The Board of Trustees
a. Voting on Trustee Nominees in Uncontested Elections
Votes on trustee nominees are made on a case-by-case basis, examining the
following factors:
|X| Long-term corporate performance record relative to a market index;
|X| Composition of board and key board committees;
|X| Nominee's attendance at meetings (past two years);
|X| Nominee's investment in the company;
|X| Whether a retired CEO sits on the board; and
|X| Whether the chairman is also serving as CEO.
In cases of significant votes and when information is readily available, we also
review:
|X| Corporate governance provisions and takeover activity;
|X| Board decisions regarding executive pay;
|X| Trustee compensation; |X| Number of other board seats held by
nominee; and
|X| Interlocking directorships.
b. Chairman and CEO are the Same Person
We vote on a case-by-case basis on shareholder proposals that would require the
positions of chairman and CEO to be held by different persons.
c. Majority of Independent Trustees
Shareholder proposals that request that the board be comprised of a majority of
independent trustees are evaluated on a case-by-case basis.
We vote for shareholder proposals that request that the board audit,
compensation and/or nominating committees include independent trustees
exclusively.
d. Stock Ownership Requirements
We generally vote against shareholder proposals requiring trustees to own a
minimum amount of company stock in order to qualify as a trustee, or to remain
on the board.
e. Term of Office
We generally vote against shareholder proposals to limit the tenure of outside
trustees.
f. Trustee and Officer Indemnification and Liability
Protection
Proposals concerning trustee and officer indemnification and liability
protection are evaluated on a case-by-case basis.
We generally vote against proposals to limit or eliminate entirely trustee and
officer liability for monetary damages for violating the duty of care.
We generally vote against indemnification proposals that would expand coverage
beyond just legal expenses to acts, such as negligence, that are more serious
violations of fiduciary obligations than mere carelessness.
We generally vote for only those proposals that provide such expanded coverage
in cases when a trustee's or officer's legal defense was unsuccessful if: (1)
the trustee was found to have acted in good faith and in a manner that he
reasonably believed was in the best interests of the company, and (2) only if
the trustee's legal expenses would be covered.
2. Charitable Contributions
We generally vote against shareholder proposals to eliminate, direct or
otherwise restrict charitable contributions.
3. Proxy Contests
a. Voting for Trustee Nominees in Contested Elections
Votes in a contested election of trustees are evaluated on a case-by-case basis,
considering the following factors:
|X| Long-term financial performance of the target company
relative to its industry;
|X| Management's track record;
|X| Background to the proxy contest;
|X| Qualifications of trustee nominees (both slates);
|X| Evaluation of what each side is offering shareholders as well as
the likelihood that the proposed objectives and goals can be
met; and
|X| Stock ownership positions.
b. Reimburse Proxy Solicitation Expenses
Decisions to provide full reimbursement for dissidents waging a proxy contest
are made on a case-by-case basis.
4. Auditors
We generally vote for proposals to ratify auditors, unless: an auditor has a
financial interest in or association with the company, and is therefore not
independent; or there is reason to believe that the independent auditor has
rendered an opinion which is neither accurate nor indicative of the company's
financial position.
5. Proxy Contest Defenses
a. Board Structure: Staggered vs. Annual Elections
We generally vote against proposals to classify the board.
We vote for proposals to repeal classified boards and to elect all trustees
annually.
b. Shareholder Ability to Remove Trustees
We vote against proposals that provide that trustees may be removed only for
cause.
We vote for proposals to restore shareholder ability to remove trustees with or
without cause.
We vote against proposals that provide that only continuing trustees may elect
replacements to fill board vacancies.
We vote for proposals that permit shareholders to elect trustees to fill board
vacancies.
c. Cumulative Voting
We vote against proposals to eliminate cumulative voting.
We vote for proposals to permit cumulative voting.
d. Shareholder Ability to Call Special Meetings
We vote against proposals to restrict or prohibit shareholder ability to call
special meetings.
We vote for proposals that remove restrictions on the right of shareholders to
act independently of management.
e. Shareholder Ability to Act by Written Consent
We vote against proposals to restrict or prohibit shareholder ability to take
action by written consent.
We vote for proposals to allow or make easier shareholder action by written
consent.
f. Shareholder Ability to Alter the Size of the Board
We review on a case-by-case basis proposals that seek to fix the size of the
board.
We vote against proposals that give management the ability to alter the size of
the board without shareholder approval.
6. Tender Offer Defenses
a. Poison Pills
We vote for shareholder proposals that ask a company to submit its poison pill
for shareholder ratification.
We review on a case-by-case basis shareholder proposals to redeem a company's
poison pill.
We review on a case-by-case basis management proposals to ratify a poison pill.
b. Fair Price Provisions
We vote case-by-case on fair price proposals, taking into consideration whether
the shareholder vote requirement embedded in the provision is no more than a
majority of disinterested shares.
We vote for shareholder proposals to lower the shareholder vote requirement in
existing fair price provisions.
c. Greenmail
We vote for proposals to adopt anti-greenmail charter or bylaw amendments or
otherwise restrict a company's ability to make greenmail payments.
We review on a case-by-case basis anti-greenmail proposals when they are bundled
with other charter or bylaw amendments.
d. Pale Greenmail
We review on a case-by-case basis restructuring plans that involve the payment
of pale greenmail.
e. Unequal Voting Rights
We vote against dual class exchange offers.
We vote against dual class recapitalizations.
f. Supermajority Shareholder Vote Requirement to Amend the
Declaration of Trust or Bylaws
We vote against management proposals to require a supermajority shareholder vote
to approve the declaration of trust and bylaw amendments.
We vote for shareholder proposals to lower supermajority shareholder vote
requirements for the declaration of trust and bylaw amendments.
g. Supermajority Shareholder Vote Requirement to Approve
Mergers
We vote against management proposals to require a supermajority shareholder vote
to approve mergers and other significant business combinations.
We vote for shareholder proposals to lower supermajority shareholder vote
requirements for mergers and other significant business combinations.
h. White Squire Placements
We vote for shareholder proposals to require approval of blank check preferred
stock issues for other than general corporate purposes.
7. Miscellaneous Governance Provisions
a. Confidential Voting
We vote for shareholder proposals that request corporations to adopt
confidential voting, use independent tabulators and use independent inspectors
of election as long as the proposals include clauses for proxy contests as
follows: in the case of a contested election, management is permitted to request
that the dissident group honor its confidential voting policy. If the dissidents
agree, the policy remains in place. If the dissidents do not agree, the
confidential voting policy is waived.
We vote for management proposals to adopt confidential voting.
b. Equal Access
We vote for shareholder proposals that would allow significant company
shareholders equal access to management's proxy material in order to evaluate
and propose voting recommendations on proxy proposals and trustee nominees, and
in order to nominate their own candidates to the board.
c. Bundled Proposals
We review on a case-by-case basis bundled or "conditioned" proxy proposals. In
the case of items that are conditioned upon each other, we examine the benefits
and costs of the packaged items. In instances when the joint effect of the
conditioned items is not in shareholders' best interest, we vote against the
proposals. If the combined effect is positive, we support such proposals.
d. Shareholder Advisory Committees
We review on a case-by-case basis proposals to establish a shareholder advisory
committee.
8. Capital Structure
a. Common Stock Authorization
We review on a case-by-case basis proposals to increase the number of shares of
common stock authorized for issue.
We vote against proposed common stock authorizations that increase the 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
We vote for management proposals to increase common share authorization for a
stock split, provided that the split does not result in an increase of
authorized but unissued shares of more than 100% after giving effect to the
shares needed for the split.
c. Reverse Stock Splits
We vote for management proposals to implement a reverse stock split, provided
that the reverse split does not result in an increase of authorized but unissued
shares of more than 100% after giving effect to the shares needed for the
reverse split.
d. Blank Check Preferred Authorization
We 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.
We review on a case-by-case basis proposals that would authorize the creation of
new classes of preferred stock with unspecified voting, conversion, dividend and
distribution, and other rights.
We review on a case-by-case basis proposals to increase the number of authorized
blank check preferred shares.
e. Shareholder Proposals Regarding Blank Check Preferred
Stock
We vote for shareholder proposals to have blank check preferred stock
placements, other than those shares issued for the purpose of raising capital or
making acquisitions in the normal course of business, submitted for shareholder
ratification.
f. Adjust Par Value of Common Stock
We vote for management proposals to reduce the par value of common stock.
g. Pre-emptive Rights
We review on a case-by-case basis proposals to create or abolish pre-emptive
rights. In evaluating proposals on preemptive rights, we look at the size of a
company and the characteristics of its shareholder base.
h. Debt Restructurings
We review on a case-by-case basis proposals to increase common and/or preferred
shares and to issue shares as part of a debt-restructuring plan. We consider the
following issues:
Dilution - How much will ownership interest of existing shareholders be reduced,
and how extreme will dilution to any future earnings be?
Change in Control - Will the transaction result in a change in control of the
company?
Bankruptcy - Is the threat of bankruptcy, which would result in severe losses in
shareholder value, the main factor driving the debt restructuring?
Generally, we approve proposals that facilitate debt restructurings unless there
are clear signs of self-dealing or other abuses.
i. Share Repurchase Programs
We vote for management proposals to institute open-market share repurchase plans
in which all shareholders may participate on equal terms.
9. Executive and Trustee Compensation
In general, we vote on a case-by-case basis on executive and trustee
compensation plans, with the view that viable compensation programs reward the
creation of shareholder wealth by having a high payout sensitivity to increases
in shareholder value.
Other factors, such as repricing underwater stock options without shareholder
approval, would cause us to vote against a plan. Additionally, in some cases we
would vote against a plan deemed unnecessary.
a. OBRA-Related Compensation Proposals
|X| Amendments that Place a Cap on Annual Grant or Amend
Administrative Features
Vote for plans that simply amend shareholder-approved plans to include
administrative features or place a cap on the annual grants any one participant
may receive to comply with the provisions of Section 162(m) of the Omnibus
Budget Reconciliation Act of 1993 ("OBRA").
|X| Amendments to Add Performance-Based Goals
We vote for amendments to add performance goals to existing compensation plans
to comply with the provisions of Section 162(m) of OBRA.
|X| Amendments to Increase Shares and Retain Tax Deductions
Under OBRA
Votes on amendments to existing plans to increase shares reserved and to qualify
the plan for favorable tax treatment under the provisions of Section 162(m)
should be evaluated on a case-by-case basis.
|X| Approval of Cash or Cash-and-Stock Bonus Plans
We vote for cash or cash-and-stock bonus plans to exempt the compensation from
taxes under the provisions of Section 162(m) of OBRA.
b. Shareholder Proposals to Limit Executive and Trustee Pay
We review on a case-by-case basis all shareholder proposals that seek additional
disclosure of executive and trustee pay information.
We review on a case-by-case basis all other shareholder proposals that seek to
limit executive and trustee pay.
c. Golden and Tin Parachutes
We vote for shareholder proposals to have golden and tin parachutes submitted
for shareholder ratification.
We review on a case-by-case basis all proposals to ratify or cancel golden or
tin parachutes.
d. Employee Stock Ownership Plans (ESOPs)
We vote for proposals that request shareholder approval in order to implement an
ESOP or to increase authorized shares for existing ESOPs, except in cases when
the number of shares allocated to the ESOP is "excessive" (i.e., generally
greater than five percent of outstanding shares).
e. 401(k) Employee Benefit Plans
We vote for proposals to implement a 401(k) savings plan for employees.
10. State of Incorporation
a. Voting on State Takeover Statutes
We review on a case-by-case basis proposals to opt in or out of state takeover
statutes (including control share acquisitions statutes, control share cash-out
statutes, freeze-out provisions, fair price provisions, stakeholder laws, poison
pill endorsements, severance pay and labor contract provisions, anti-greenmail
provisions, and disgorgement provisions).
b. Voting on Reincorporation Proposals
Proposals to change a company's state of incorporation are examined on a
case-by-case basis.
11. Mergers and Corporate Restructurings
a. Mergers and Acquisitions
Votes on mergers and acquisitions are considered on a case-by-case basis, taking
into account at least the following:
|X| Anticipated financial and operating benefits;
|X| Offer price (cost vs. premium);
|X| Prospects of the combined companies;
|X| How the deal was negotiated; and
|X| Changes in corporate governance and their impact on shareholder
rights.
b. Corporate Restructuring
Votes on corporate restructuring proposals, including minority squeeze-outs,
leveraged buyouts, spin-offs, liquidations, and asset sales are considered on a
case-by-case basis.
c. Spin-offs
Votes on spin-offs are considered on a case-by-case basis depending on the tax
and regulatory advantages, planned use of sale proceeds, market focus, and
managerial incentives.
d. Asset Sales
Votes on asset sales are made on a case-by-case basis after considering the
impact on the balance sheet/working capital, value received for the asset, and
potential elimination of diseconomies.
e. Liquidations
Votes on liquidations are made on a case-by-case basis after reviewing
management's efforts to pursue other alternatives, appraisal value of assets,
and the compensation plan for executives managing the liquidation.
f. Appraisal Rights
We vote for proposals to restore, or provide shareholders with, rights of
appraisal.
g. Changing Corporate Name
We vote for changing the corporate name.
12. Mutual Fund Proxies
a. Election of Trustees
We vote on trustee nominees on a case-by-case basis.
b. Investment Advisory Agreement
We vote on investment advisory agreements on a case-by-case basis.
c. Fundamental Investment Restrictions
We vote on amendments to a fund's fundamental investment restrictions on a
case-by-case basis.
d. Distribution Agreements
We vote on distribution agreements on a case-by-case basis.
13. Social and Environmental Issues
We consider shareholder social and environmental proposals on a case-by-case
basis.
VII. Employee Benefit Plans
AIGGIC also serves as investment adviser for employee benefit plans. The Staff
of the Department of Labor (the "DOL") has set forth specific duties for such
advisers that vote proxies for such plans. In summary, the SEC and DOL Staff
impose the following responsibilities on AIGGIC:
1. There must be a clear delineation of the proxy voting
responsibilities between the adviser and the client;
2. The adviser must adopt and implement written policies and
procedures that are reasonably designed to ensure that the adviser
votes proxies in the best interest of its clients;
3. The adviser must disclose its proxy voting procedures to its
clients;
4. The adviser must disclose to clients how they may obtain
information on how it voted their proxies;
5. The adviser must address material conflicts between its
interests and those of its clients with respect to proxy voting.
Additionally, the procedures must address how the adviser resolves those
conflicts in the best interests of its clients;
6. The procedures should identify personnel responsible for
monitoring corporate actions, describe the basis on which decisions are
made to vote proxies, and identify personnel involved in making voting
decisions and those responsible for ensuring that proxies are submitted
in a timely manner;
7. The adviser must maintain proxy voting books and records in
an easily accessible place for five years, the first two years in an
appropriate office of the investment adviser.
8. The adviser must take steps that are reasonable under the
circumstances to verify that it has actually received the proxies for
which it has voting authority;
9. With respect to ERISA accounts, although the named
fiduciary that has delegated proxy voting authority to it may
periodically monitor the Adviser's proxy voting activities, the adviser
may not permit the named fiduciary to determine how the adviser will
vote the proxies (the named fiduciary, in turn, must keep records of its
monitoring activities);
10. Also with respect to ERISA accounts, the adviser must act
prudently, solely in the interests of plan participants and
beneficiaries, and for the exclusive purpose of providing benefits to
them.
VIII. Tender Offers
With respect to the responsibilities of an adviser to an ERISA plan in
takeovers, a joint DOL/Department of Treasury statement announced that ERISA
does not require an adviser automatically to tender shares to capture any
premium over market in these situations. Rather, the adviser must weigh the
terms of any offer against the underlying intrinsic value of the company and the
likelihood that the value will be realized by current management or by another
offer. Similarly, the Advisers Act would not require an adviser to tender shares
owned by a client that were issued by a company involved in a merger or
reorganization solely to capture premium, but rather would be permitted to
review all of the terms and conditions of the proposal before determining
whether or not to tender shares.
IX. Proxies of Shares of Non-U.S. Corporations
AIGGIC has implemented general voting policies with respect to non-US
shares owned by clients. However, due to differences in the laws governing the
issuance and use of proxies, as well as other differences between U.S. and
non-U.S. businesses, AIGGIC may take different steps with respect to voting
these non-U.S. proxies. First, although U.S. companies must give shareholders at
least 20 days' advance notice to vote proxies, some non-U.S. companies may
provide considerably shorter notice; or none at all. AIGGIC is not required to
"rush" voting decisions in order to meet an impractical deadline, and as a
result, AIGGIC may not vote certain proxies. In addition, certain non-U.S.
regulations impose additional costs to an account that votes proxies, and AIGGIC
will take that into consideration when determining whether or not to cast its
vote.
X. Proxy Committee
AIGGIC has established a Proxy Committee. The AIGGIC Proxy Committee (the
"Committee") is comprised of members of AIGGIC's investment and compliance
departments. Generally, the Committee meets on a quarterly basis to review
current shareholder issues and review proxy voting activity for the preceding
quarter. The Committee conducts an annual review of the proxy voting guidelines
for domestic and non-U.S. accounts, usually during the fourth calendar quarter.
Each guideline is reviewed individually to ensure that the interests of AIGGIC's
clients are best served. Based on these analyses and criteria established by the
Committee, in many instances AIGGIC does not vote according to management's
recommendations, particularly with respect to executive compensation and social
issues. AIGGIC's voting record more closely corresponds to management's
recommendations in areas such as the election of directors, ratifying the
selection of auditors and other corporate governance issues. Issues not
addressed in the voting guidelines are determined on a case-by-case basis with
input from the Committee and portfolio management teams.
Date: ________________________________, 2004