U.S. Trust Hedge Fund Management, Inc.
PROXY VOTING POLICY
(Policy Revised June 2007)
Summary
U.S. Trust Hedge Fund Management, Inc. ("USTHFM") is responsible for voting
proxies related to securities holdings in certain accounts of USTHFM clients.
As a fiduciary, USTHFM must act solely in the best interests of clients when
exercising its proxy authority. USTHFM's policies, procedures and voting
decisions are based on the long-term economic interests of clients.
USTHFM's voting policy is summarized as follows:
1. All of USTHFM's clients are registered or private investment funds (each,
a "USTHFM Fund"). USTHFM is the discretionary investment adviser of each
USTHFM Fund. Each USTHFM Fund invests primarily in alternative investment
vehicles (e.g., hedge funds, private equity funds and other alternative
investment pools) (each, a "Portfolio Fund" and, collectively, the
"Portfolio Funds"), but also may hold other securities. USTHFM has
authority to vote: (a) securities issued by Portfolio Funds that are held
by a USTHFM Fund; and (b) other securities held by a USTHFM Fund.
2. Appendix A sets forth USTHFM's current policies with respect to voting on
issues presented by Portfolio Funds. Appendix B and Appendix C set forth
USTHFM's current policies with respect to voting publicly-traded
securities.
3. With respect to the routine matters involving publicly-traded securities
set forth in Appendix B, USTHFM will vote in accordance with the views and
recommendations of the company's management, except as specified otherwise
in Appendix B.
4. With respect to the matters involving publicly-traded securities
identified in Appendix C, USTHFM will vote in accordance with the
guidelines set forth in Appendix C. To the extent any policy in Appendix B
or C conflicts with a specific policy set forth in Appendix A, Appendix A
will control.
5. With respect to any matter that is not identified in Appendix A, B or C,
USTHFM will consider such matter on a case-by-case basis and vote in a
manner consistent with its fiduciary obligations and the interests of the
applicable USTHFM Fund.
6. Notwithstanding the foregoing, USTHFM may override the guidelines set
forth in Appendices A, B and C, if USTHFM determines that a vote contrary
to the guidelines is appropriate from the standpoint of the interests of
the applicable USTHFM Fund and is consistent with USTHFM's fiduciary
responsibilities under applicable law. It is the responsibility of the
Portfolio Managers of USTHFM Funds to highlight potentially significant
proxy issues (regardless of whether such issues are classified as routine
or non-routine) with respect to the Portfolio Funds or other companies
such Portfolio Managers follow and to suggest voting recommendations based
on their in-depth knowledge of the issues involved.
7. Proxies are voted by the Portfolio Manager of the applicable USTHFM Fund
or the Portfolio Manager's designee, with input from other USTHFM
investment professionals, as the person voting the proxy deems
appropriate. Because different USTHFM Portfolio Managers vote proxies on
behalf of different USTHFM Funds, and because some USTHFM Funds' interests
may differ from the interests of other USTHFM Funds, a Portfolio Manager
voting proxies for a USTHFM Fund may vote differently on certain issues
than other Portfolio Managers voting on the same issues for other USTHFM
Funds.
8. Unless USTHFM is required to waive its voting rights as specified in
Appendix A, USTHFM will generally vote on each matter, so as to avoid any
default voting decisions; however, USTHFM may refrain from voting a proxy
when USTHFM determines that refraining from voting is in the best
interests of the applicable USTHFM Fund. In making such a determination,
USTHFM will consider various factors, including without limitation: (a)
the costs associated with exercising the proxy (e.g., translation or
travel costs); and (b) any legal restrictions on trading resulting from
the exercise of a proxy.
9. USTHFM may utilize the services of an independent proxy voting service as
USTHFM deems appropriate.
Conflicts of Interest
From time to time, USTHFM may experience material conflicts of interest with
respect to proxy voting. Because this Proxy Voting Policy contains voting
guidelines that are pre-determined and designed to be in the best interests of
clients, application of those guidelines to vote client proxies should, in most
cases, adequately address any possible conflict of interest. USTHFM will follow
the procedures set forth in Appendix D in connection with voting securities
issued by companies affiliated with USTHFM and with voting securities issued by
investment companies and alternative investment vehicles advised or sub-advised
by USTHFM or one of its affiliates.
Recordkeeping
USTHFM will maintain the following records for five years (retention during the
first two years must be in the offices of USTHFM or an affiliated company):
1. A copy of this Proxy Voting Policy, including any amendments hereto or
modifications hereof as USTHFM may from time to time make;
2. Records of votes cast by USTHFM on behalf of its clients;
3. Records of written requests by clients for their proxy voting information
and copies of any written responses of USTHFM to written or oral requests
for such information;
4. Any document prepared by USTHFM, its affiliates or agents, in connection
with any voting decision or memorializing the basis for such decision; and
5. Copies of proxy statements issued with respect to the securities of clients
for whom USTHFM exercises voting authority; provided, however, that, at
USTHFM's option, USTHFM may rely on proxy statements filed on the EDGAR
system instead of retaining its own copies of such documents.
USTHFM's records will enable each client, including named fiduciaries of a plan
client or other agents of the client, to review USTHFM's voting procedures, as
well as actions taken in individual voting situations on behalf of that client.
At any time, a client may request a copy of this Proxy Voting Policy or of
USTHFM's proxy voting record with respect to securities held by that client.
Within seven days of receiving the client's request, USTHFM will send to the
client the requested information by first class mail or comparable delivery
method.
Appendix A - Page 3
Proxy Voting Policy
Appendix A - USTHFM Voting Policies for Alternative Investment Vehicles
The voting rights of investors in alternative investment vehicles (i.e., hedge
funds, private equity funds and other alternative investment pools) (each, a
"Portfolio Fund" and, collectively, the "Portfolio Funds") generally are rights
of contract set forth in the limited liability company agreement, the limited
partnership agreement and/or other governing document of the Portfolio Fund.
USTHFM has adopted the following guidelines with respect to voting securities
issued by Portfolio Funds:
1 - General Policy
The general policy is to vote proxy proposals, amendments, consents or
resolutions relating to Portfolio Funds (collectively, "proxies") in a manner
that serves the best interests of USTHFM's clients invested in the Portfolio
Fund, as determined by USTHFM in its discretion, taking into account relevant
factors, including:
o the impact on the value of the returns of the Portfolio Fund
o the attraction of additional capital to the Portfolio Fund
o alignment of Management's (as defined below) interests with
Portfolio Fund Owners' (as defined below) interests, including
establishing appropriate incentives for Management
o the costs associated with the proxy
o impact on redemption or withdrawal rights
o the continued or increased availability of portfolio information
o industry and business practices
2 - Specific Policies
A. Routine matters
Routine matters are typically proposed by Management of a Portfolio Fund
and meet the following criteria: (i) they do not measurably change the
structure, management, control or operation of the Portfolio Fund; (ii) they do
not measurably change the terms of, or fees or expenses associated with, an
investment in the Portfolio Fund; and (iii) they are consistent with customary
industry standards and practices, as well as the laws of the state of formation
applicable to the Portfolio Fund.
For routine matters, USTHFM will vote in accordance with the
recommendation of the Portfolio Fund's management, directors, general partners,
managing members or trustees (collectively, "Management"), as applicable,
unless, in USTHFM's opinion, such recommendation is not in the best interests of
USTHFM's clients invested in the Portfolio Fund.
USTHFM will generally vote for the following proposals:
1. To change capitalization, including to increase authorized common
shares or units or to increase authorized preferred shares or units
as long as there are not disproportionate voting rights per preferred
share or unit.
2. To elect or re-elect board members.
3. To appoint or elect auditors.
4. To set time and location of annual meeting.
5. To establish a master/feeder structure without a significant increase
in fees or expenses.
6. To change the fiscal year or term of the Portfolio Fund.
7. To change the name of the Portfolio Fund.
8. To change the state or form of organization of the Portfolio Fund.
B. Non-routine matters
Non-routine matters involve a variety of issues and may be proposed by
Management or beneficial owners of a Portfolio Fund (i.e., shareholders,
members, partners, etc. (collectively, the "Portfolio Fund Owners")). These
matters may involve one or more of the following: (i) a measurable change in the
structure, management, control or operation of the Portfolio Fund; (ii) a
measurable change in the terms of, or fees or expenses associated with, an
investment in the Portfolio Fund; or (iii) a change that is inconsistent with
industry standards and/or the laws of the state of formation applicable to the
Portfolio Fund.
1. Structure, management and investment authority
On a case-by-case basis, USTHFM will decide the following matters, taking
into account this Proxy Voting Policy and the factors relevant to each decision,
including without limitation the factors specified below:
a. Approval or renewal of investment advisory agreements
o current and proposed fee schedules
o performance history of the Portfolio Fund
o continuation of Management talent
o alignment of interests between Management and Portfolio
Fund Owners
b. Approval or renewal of distribution agreements
o current and proposed distribution payments
o other terms of the current and proposed distribution
agreements
c. Approval of distribution plans
o compensation arrangements
o proposed changes from the current distribution plan, if
applicable
o current size of Portfolio Fund and any recent changes in
the size
d. Change in fees or expenses
o comparison to industry standards
o potential impact on the value of the returns of the
Portfolio Fund
o retention of Management talent
e. Change in the "fundamental policies" of the Portfolio Fund
o Management's reasons for the proposed change
o performance history of the Portfolio Fund
o any proposed change in Management
f. Change in side pocket limitations
o Potential impact on the value of the returns of the
Portfolio Fund
g. Conversion of the Portfolio Fund from closed-end to open-end form (or from
open-end to closed-end form)
o Management's reasons for the proposed change
o performance history of the Portfolio Fund
o continuation of Management talent
o effect on the Portfolio Fund's investment strategy
o potential impact on the value of the returns of the
Portfolio Fund
h. Conversion of the Portfolio Fund from a 3(c)(1) fund to a 3(c)(7) fund
o Management's reasons for the proposed change
o anticipated effects of the change
i. Termination or liquidation of the Portfolio Fund
o terms of liquidation
o past performance of the Portfolio Fund
o strategies employed to avoid terminating or liquidating
the Portfolio Fund
2. Classes of shares or units and voting rights
USTHFM will generally vote against the following proposals:
a. To establish a class or classes with terms that may disadvantage
other classes.
b. To introduce unequal voting rights.
c. To change the amendment provisions of an entity by removing
investor approval requirements.
C. All other matters
All other proxy decisions regarding securities issued by Portfolio
Companies will be determined on a case-by-case basis taking into account the
general policy set forth above.
D. Waiving voting rights
U.S. Trust, USTHFM, and their affiliates are subject to certain
U.S. banking laws, including the Bank Holding Company Act of 1956, as amended
(the "BHCA"). In addition, USTHFM provides discretionary advice to USTHFM Funds
that are registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The BHCA and the 1940 Act limit the percentage of a Portfolio
Fund's voting securities that discretionary clients of USTHFM and its affiliates
may hold in the aggregate. Accordingly, USTHFM generally waives its voting
rights with respect to Portfolio Funds in which it has used its discretionary
authority to invest client assets. USTHFM's waiver of voting rights with respect
to a Portfolio Fund waives the voting rights of all of USTHFM's discretionary
clients invested in that Portfolio Fund.
Appendix B
Proxy Voting Policy
Appendix B - USTHFM Voting Policies for Publicly-Traded Securities
(Routine Issues)
USTHFM has determined that the following items are considered routine and will
generally be voted in a manner consistent with the recommendations of
management of the issuer:
1. Ratification of auditors and compensation paid to auditors
2. Corporate housekeeping matters - including proposals relating to the
conduct of the annual meeting, name changes, non-substantive or corrective
changes to charter or by-laws (including increasing or decreasing the
number of directors), proposals as to the creation of corporate governance,
nominating or other committees and proposals concerning the composition of
such committees, and proposals relating to whether one individual may act
as both Chairman and CEO or otherwise hold simultaneous officer and
director positions.
3. Routine capitalization matters - including matters relating to adjusting
authorized common or preferred stock, reverse splits or other business
matters not related to anti-takeover measures, issuance of shares in
connection with an acquisition, or increase in capital stock for a
shareholder rights plan.
4. Composition of the board - including removal of directors for cause,
establishing term limits for directors, requiring two candidates for each
board seat; except that proposals relating to whether a majority of the
board must be independent are not considered routine.
5. General corporate matters - such as formation of a holding company,
reincorporation under the laws of a different state or country, issuance of
special reports (including reports on employment and recruiting practices
in relation to gender, race or other characteristics) and reports on
charitable/political contributions and activities, adoption, renewal or
amendment of shareholder rights plan, establishing or amending employee
savings, employee stock ownership plans or investment plans.
6. Routine procedural matters - such as the opening of the shareholder
meeting, acknowledgement of the proper convening of meeting, that the
meeting has been convened under local regulatory requirements, the presence
of quorum, the agenda for the meeting, the election of the chair of the
meeting, the appointment of shareholders to cosign the minutes of the
meeting, regulatory filings, the designation of inspector(s) or shareholder
representative(s) for the meeting, the designation of two shareholders to
approve and sign minutes of the meeting, the allowance of questions, the
publication of minutes, the closing of the meeting, and authorizing the
board to ratify and execute approved resolutions, and prepare and approve
the list of shareholders.
7. Remuneration report - In several non-U.S. markets, including the United
Kingdom, Sweden, Australia, and the Netherlands, shareholders are given the
opportunity to ratify the company's equity based, and cash compensation
policies. We generally vote for the routine approval of remuneration
reports in non-U.S. markets.
8. Annual formal discharge of the board and management - In several non-U.S.
markets, shareholders are asked to approve actions taken by the board and
management during the year. The annual formal discharge is a tacit vote of
confidence in the company's management. We generally vote for discharge of
the board and management, unless there are serious questions about actions
of the board or management for the year in question or unless legal action
is being taken against the board or management by other shareholders. In
addition, we typically vote against proposals to remove the annual
discharge of board and management from the agenda.
Appendix C - Page 6
Proxy Voting Policy
Appendix C - USTHFM Voting Policies for Publicly-Traded Securities
(Non-Routine Issues)
USTHFM has adopted the following guidelines with respect to the following
non-routine issues:
1 - Proposals Regarding Director Elections
i. Election of directors - We typically vote for on individual director
nominees in an uncontested election of directors. We evaluate a contested
election of directors on a case-by-case basis considering such factors as
the long-term financial performance of the company relative to its
industry, management's track record, the qualifications of the nominees
for both slates and an evaluation of what each side is offering
shareholders.
ii. Cumulative voting for the election of directors - Cumulative voting
permits a shareholder to amass (cumulate) all his/her votes for directors
and apportion these votes among one, or a few, or all directors on a
multi-candidate slate. We believe that cumulative voting favors special
interest candidates who may not represent the interests of all
shareholders. We typically vote against proposals for cumulative voting
and for proposals to eliminate cumulative voting.
iii. Classified boards - We believe that electing directors is one of the most
basic rights that an investor can exercise in stock ownership. We believe
that a non-classified board (requiring re-election of all directors
annually) increases the accountability of the board to shareholders. We
typically vote against proposals seeking classification of a board and for
proposals seeking declassification.
iv. Term limits for independent directors - We believe that term limits can
result in arbitrarily discarding knowledgeable, experienced directors. We
believe that qualified and diligent directors should be allowed to
continue to serve the interests of a company's shareholders and that term
limits do not serve shareholders' interests. We typically vote against
proposals to set any term limits.
v. Proposals concerning whether a majority of the board must be independent -
We believe that it is beneficial for a majority of the board of directors
of a company to be comprised of independent directors. As such, we
typically vote for such proposals.
vi. Proposals requiring a majority vote for election of directors - We
typically vote for reasonably crafted shareholder proposals calling for
directors to be elected with an affirmative majority of votes cast and/or
the elimination of the plurality standard for electing directors
(including binding resolutions requesting that the board amend the
company's bylaws), provided the proposal includes a carve-out for a
plurality voting standard when there are more director nominees than board
seats (e.g., contested elections).
2 - Other Director-Related Proposals
i. Proposals limiting liability or providing indemnification of directors -
We believe that, in order to attract qualified, effective and experienced
persons to serve as directors, it is appropriate for a company to offer
appropriate and competitive protection to directors from exposure to
unreasonable personal liability potentially arising from serving as a
director. We will typically vote for such proposals.
ii. Proposals regarding director share ownership - Similarly to employee stock
ownership, director stock ownership aligns the interests of directors and
shareholders. Whether through outright purchase (with the director's cash
compensation) or through option grants, we believe director share
ownership is in the interests of shareholders. We typically vote for such
proposals.
3 - Anti-Takeover Proposals and Shareholder Rights
i. Shareholder rights plans and poison pills - Poison pills are a defense
against takeover offers that are not welcomed by incumbent management.
Such plans typically allow shareholders (other then the shareholder making
the takeover offer) to purchase stock at significantly discounted prices.
Such a plan may serve to entrench management and directors and may
effectively prevent any takeover, even at a substantial premium to
shareholders. We typically vote against poison pill plans and against
proposals to eliminate a requirement that poison pill plans be submitted
to shareholders for approval.
ii. Defensive Use of Share Issuances - We typically vote against management
requests to issue shares in the event of a takeover offer or exchange bid
for the company's shares.
iii. Other anti-takeover provisions - We typically vote against other
anti-takeover provisions, such as blank check preferred stock, greenmail
provisions, shark repellants and increases in authorized shares for
anti-takeover purposes and will typically vote for proposals such as fair
price amendments.
iv. Limitations on shareholder rights - We typically vote against proposals
that limit shareholders' corporate rights, including the right to act by
written consent, the right to remove directors, to amend bylaws, to call
special meetings, or nominate directors.
v. Proposals regarding supermajority vote requirement - We support
shareholders' ability to approve or reject matters based on a simple
majority. We typically vote against proposals to institute a supermajority
vote requirement.
vi. Proposals regarding confidential voting - Confidential voting allows
shareholders to vote anonymously and we believe helps large institutional
shareholders avoid undue influence that may be exerted by special interest
groups. Prohibiting confidential voting may discourage some shareholders
from exercising their voting rights, which we believe is not in the best
interests of a company's shareholders. We typically vote for the adoption
of confidential voting proposals and against proposals to prohibit
confidential voting.
vii. Discretionary voting of unmarked proxies - Such proposals often provide
management with the discretion to vote unmarked proxies as management
determines. Except for the discretion to vote unmarked proxies with
respect to a proposal to adjourn a meeting and to set a new meeting date,
we believe it is not proper to provide management with the discretion to
vote unmarked proxies. We typically vote against such proposals.
4 - Management Compensation Proposals
i. Equity-based compensation plans - We will assess the potential cost of
equity-based compensation plans by using the quantitative approach used by
a proxy voting service in evaluating such plans. The quantitative approach
is designed to estimate the total cost of a proposed plan, both in terms
of voting dilution cost and transfer of shareholder value. We will
evaluate whether the estimated cost is reasonable by comparing the cost to
an allowable cap. The allowable cap is industry specific, market
cap-based, and pegged to the average amount paid by companies performing
in the top quartile of their peer groupings. We typically vote for
equity-based plans with costs within the allowable cap and against those
with costs above the allowable cap. In addition, we generally vote against
plans that provide: (a) for repricing of underwater stock; (b) excessive
CEO compensation relative to company performance (i.e.,
pay-for-performance disconnect); or (c) excessive three-year average burn
rate. We may also vote against an equity-based plan proposal if there are
significant concerns about egregious compensation practices, even if the
costs of such plans are within the allowable cap.
ii. Shareholder proposals on compensation - disclosure/setting levels or types
of compensation for executives and directors - We typically vote for
shareholder proposals seeking additional disclosure of executive and
director pay information, provided the information requested is relevant
to shareholders' needs, would not put the company at a competitive
disadvantage relative to its industry, and is not unduly burdensome to the
company. We typically vote against shareholder proposals seeking to set
absolute levels on compensation or otherwise dictate the amount or form of
compensation. We typically vote against shareholder proposals requiring
director fees be paid in stock only.
iii. Performance-based awards - We typically vote for shareholder proposals
advocating the use of performance-based awards like indexed,
premium-priced, and performance-vested options or performance-based
shares, unless: (a) the proposal is overly restrictive (e.g., it mandates
that awards to all employees must be performance-based or all awards to
top executives must be a particular type, such as indexed options); and
(b) the company demonstrates that it is using a substantial portion of
performance-based awards for its top executives, where substantial portion
would constitute 50 percent of the shares awarded to those executives for
that fiscal year.
iv. Severance agreements for executives/golden parachutes - We typically vote
for shareholder proposals to require golden parachutes or executive
severance agreements to be submitted for shareholder ratification, unless
the proposal requires shareholder approval prior to entering into
employment contracts. We typically vote for proposals to ratify or cancel
golden parachutes if they include the following: (a) the triggering
mechanism is beyond the control of management; (b) the amount does not
exceed three times base salary (defined as the average annual taxable W-2
compensation during the five years prior to the year in which the change
of control occurs); and (c) change-in-control payments include the
following double-triggers: (I) after a change in control has taken place,
and (II) termination of the executive as a result of the change in
control. A change in control is defined as a change in the company
ownership structure.
v. Supplemental executive retirement plans (SERPs) - We typically vote for
shareholder proposals requesting to put extraordinary benefits contained
in SERP agreements to a shareholder vote unless the company's executive
pension plans do not contain excessive benefits beyond what is offered
under employee-wide plans.
vi. Retirement bonuses for directors and statutory auditors - We typically
vote against payment of retirement benefits to non-executive directors and
statutory auditors. When one or more of the individuals to whom the
grants are being proposed has not served in an executive capacity for the
company for at least three years, we oppose payment, particularly as the
size of these payments may be at the discretion of the board. If any one
individual does not meet our criteria, we typically vote against the
entire proposal.
All other shareholder proposals regarding executive and director pay will be
voted on a case-by-case basis taking into account company performance, pay level
versus peers, pay level versus industry, and long-term corporate outlook.
5 - Non-Routine General Corporate Matters
i. Proposals relating to asset sales, mergers, acquisitions, reorganizations
and restructurings - These proposals are typically brought by management
for underlying business reasons. We believe that management best
understands the corporation's business and is best situated to take
appropriate courses of action. Thus, we typically vote for such proposals.
ii. Financial results/director and auditor reports - We typically vote for
approval of financial statements and director and auditor reports, unless:
(a) there are concerns about the statements presented or audit procedures
used; or (b) the company is not responsive to shareholder questions about
specific items that should be publicly disclosed.
iii. Appointment of statutory auditors - We typically vote for the appointment
or reelection of statutory auditors, unless: (a) there are serious
concerns about the statutory reports presented or the audit procedures
used; (b) questions exist concerning any of the statutory auditors being
appointed; or (c) the auditors have previously served the company in an
executive capacity or are otherwise considered affiliated with the
company.
iv. Allocation of income - We typically vote for approval of the allocation of
income, unless: (a) the dividend payout ratio has been consistently below
30 percent without adequate explanation; or (b) the payout is excessive
given the company's financial position.
v. Stock (scrip) dividend alternative - We generally vote for most stock
(scrip) dividend proposals. However, we typically vote against proposals
that do not allow for a cash option unless management demonstrates that
the cash option is harmful to shareholder value.
vi. Amendments to articles of incorporation or articles of association - We
generally vote for proposals to amend articles of incorporation or
articles of association if: (a) shareholder rights are protected; (b)
there is negligible or positive impact on shareholder value; (c)
management provides adequate reasons for the amendments; and (d) the
company is required to do so by law (if applicable). We typically vote
against proposals to amend articles if the amendment is deemed not to be
in the long-term economic best interest of shareholders.
vii. Change in company fiscal term - We typically vote for proposals to change
a company's fiscal term unless a company's motivation for the change is to
postpone its Assembly General Meeting.
viii. Lower disclosure threshold for stock ownership - We typically vote against
proposals to lower the stock ownership disclosure threshold below five
percent unless specific reasons exist to implement a lower threshold.
ix. Amend quorum requirements - We generally vote against proposals to lower
the quorum requirement, unless we believe the proposal is consistent with
market norms, the company's reasons for the change are in line with
shareholders' interests, and the company's ownership structure would not
hamper wider shareholder participation. Companies that have a substantial
shareholder or shareholder group should set their quorum requirement well
above the percentage of shares owned by such shareholder or shareholder
group. Quorum requirements are intended to ensure that a broad range of
shareholders is represented at meetings.
x. Increase in borrowing powers - We generally vote for proposals to approve
increases in a company's borrowing powers after taking into account
management's stated need for the increase, the size of the increase, and
the company's current debt-to-equity ratio or gearing level. Large
increases in borrowing powers can sometimes result in dangerously high
debt-to-equity ratios that could harm shareholder value. If an increase
is excessive without sufficient justification and if a company already has
an exceptionally high debt-to-equity ratio compared to its industry, we
typically vote against the proposal.
xi. Share repurchase plans - We typically vote for share repurchase plans,
unless: (a) clear evidence of past abuse of the authority is available; or
(b) the plan contains no safeguards against selective buybacks.
xii. Reissuance of shares repurchased - We typically vote for proposals to
reissue any repurchased shares unless there is clear evidence of abuse of
this authority in the past.
xiii. Capitalization of reserves for bonus issues/increase in par value - We
typically vote for proposals to capitalize reserves for bonus issues of
shares or to increase par value.
xiv. Adjust par value of common stock - We typically vote for management
proposals to reduce par value of common stock.
xv. Issuances of shares with or without preemptive rights - General issuances:
We typically vote for proposals for the issuance of shares with preemptive
rights to a maximum of 100 percent over currently issued capital. We
typically vote for proposals for the issuance of shares without preemptive
rights to a maximum of 20 percent of currently issued capital. We
typically vote against proposals for the general issuance of shares with
or without preemptive rights above and beyond the aforementioned
thresholds. Specific Issuances: We typically vote on a case-by-case
basis.
xvi. Control and profit transfer agreements - We generally vote for management
proposals to approve control and profit transfer agreements between a
parent and its subsidiaries.
xvii. Mandatory takeover bid waivers - We generally vote against proposals to
waive mandatory takeover bid requirements. The requirement that a takeover
bid should be launched when a substantial amount of shares have been
acquired prevents the entrenchment of the controlling shareholder and
protects minority owners. However, we are in favor of a waiver of
mandatory takeover bid requirements when the event prompting the takeover
bid is a repurchase by the company of its own shares. When a company
repurchases its own shares, the relative stake of a large shareholder
increases even though the number of shares held by the large shareholder
has not changed. In certain markets, notably the United Kingdom,
Ireland and Australia, the mandatory bid rules require a large shareholder
to make a takeover bid if its stake in the company is increased on a
relative basis as a result of a share repurchase by the company. Companies
in these markets may seek a waiver from the takeover bid requirement
applicable to their large shareholder. Under such circumstances, we
generally vote for such a waiver if the share repurchase would not push
the large shareholder's stake in the company above 50 percent.
xviii. Expansion of business activities - We typically vote for the expansion of
business activities unless the new business takes the company into risky
areas.
xix. Related-party transactions - We generally vote for related-party
transactions, unless the agreement requests a strategic move outside the
company's charter or contains unfavorable terms to shareholders.
xx. Proposals for extinguishing shareholder preemptive rights - Preemptive
rights permit shareholders to share proportionately in any new issues of
stock of the same class. For companies having large, actively-traded
equity capitalizations, individual shareholder's proportionate ownership
may easily be obtained by market purchases. We believe that greater
financing flexibility and reduced expenses afforded by not having
preemptive rights are more beneficial to shareholders than the ability to
maintain proportionate ownership through preemptive rights. We typically
vote for proposals to extinguish such rights and against proposals to
create such rights.
xxi. Proposals requiring consideration of comparative fee information by
independent auditors - The cost of an audit is determined mainly by the
specific characteristics of each corporation, which may not be comparable
even for companies within the same industry. Thus, the comparison of one
auditor's fees with those of another auditor for a different corporation
is not meaningful. We further believe that the cost of the audit should
not be the overriding factor in the selection of auditors. As such, we
typically vote against such proposals.
xxii. Proposals mandating diversity in hiring practices or board composition -
We believe that management is best able to make hiring and firing
decisions and should make those decisions, consistent with the
requirements of applicable law, based on the best available talent for the
position in question. We believe that federal and state
anti-discrimination laws should control to prevent discriminatory
practices and that the vast majority of corporations make concerted
efforts to comply with federal and state laws that prohibit employment
discrimination. We typically vote against such proposals.
xxiii. Proposals prohibiting dealings with certain countries - The decision to
prohibit business dealings with any country is a policy issue that we
believe is best reserved to the U.S. government. If the U.S. government
has not prohibited trade or business dealing with companies in a
particular foreign country, then we believe it is up to management to
determine whether it would be appropriate for a company to do business in
that country. We typically vote against such proposals.
xxiv. Proposals to limit the number of other public corporation boards on which
the CEO serves - We believe that service on multiple boards may enhance
the CEO's performance by broadening his or her experience and facilitating
the development of a strong peer network. We feel that management and the
board are best suited to determine the impact of multiple board
memberships on the performance of the CEO. We typically vote against such
proposals.
xxv. Proposals to limit consulting fees to an amount less than audit fees - We
believe that access to the consulting services of professionals is a
valuable resource of increasing importance in the modern world that should
be at the disposal of management. We believe that restricting management's
access to such resources is not in the interests of the corporation's
shareholders. We typically vote against such proposals.
xxvi. Proposals to require the expensing of stock options - Current accounting
standards in the U.S. require the expensing of stock options, but not all
foreign countries have adopted this standard. We believe that the
expensing of stock options is beneficial in reviewing the financial
condition of an issuer. We typically vote for such proposals.
xxvii. Proposals restricting business conduct for social and political reasons -
We do not believe that social and political restrictions should be placed
on a company's business operations, unless determined to be appropriate by
management. While, from an investment perspective, we may consider how a
company's social and political practices may affect present and
prospective valuations and returns, we believe that proposals that
prohibit companies from lines of business for social or political reasons
are often motivated by narrow interest groups and are not in the best
interest of the broad base of shareholders of a company. We believe that
management is in the best position to determine these fundamental business
questions. We typically vote against such proposals.
xxviii. Proposals requiring companies' divestiture from various businesses -
Proposals to require companies to divest from certain businesses, like
tobacco, or from businesses that do not follow certain labor practices,
are often motivated by narrow special interest groups. We believe that
management is best suited to determine a company's business strategy and
to consider the interests of all shareholders with respect to such
matters. We typically vote against such proposals.
6 - Distressed and Defaulted Securities
i. Waivers and consents - We may consider the following when determining
whether to support a waiver or consent to changes in provisions of
indentures governing debt securities which are held on behalf of clients:
(a) likelihood that the granting of such waiver or consent will
potentially increase recovery to clients; (b) potential for avoiding
cross-defaults under other agreements; and (c) likelihood that deferral of
default will give the obligor an opportunity to improve its business
operations. We will generally vote such proposals on a case-by-case
basis.
ii. Voting on Chapter 11 plans of liquidation or reorganization - We may
consider the following when determining whether to vote for or against a
Chapter 11 plan in a case pending with respect to an obligor under debt
securities which are held on behalf of clients: (a) other alternatives to
the proposed plan; (b) whether clients are treated appropriately and in
accordance with applicable law with respect to their distributions; (c)
whether the vote is likely to increase or decrease recoveries to clients.
We will generally vote such proposals on a case-by-case basis.
7 -Other Shareholder proposals
Other shareholder proposals may arise from time to time that have not been
previously considered by management. These proposals often have a narrow
parochial focus. We typically vote with management with regard to such
proposals.
Appendix D
Proxy Voting Policy
Appendix D - Conflicts Procedures
Conflicts Related to Voting Securities Issued By Investment
Companies and Alternative Investment Vehicles Advised or
Sub-advised by USTHFM or Its Affiliates
We may have voting authority for securities issued by mutual funds, hedge funds
or other alternative investment vehicles advised or sub-advised by us or our
affiliates. In these circumstances, we may have a conflict of interest in voting
these securities on behalf of our clients, particularly in matters relating to
approval of investment management agreements, changes in advisory or other fees,
or mergers and acquisitions. In all cases, it is our policy to vote these
securities in accordance with the recommendations of an independent proxy voting
firm.
Conflicts Associated with Voting Securities Issued by Affiliated
Companies
USTHFM is affiliated with a company whose shares are publicly traded. USTHFM may
have voting authority for securities issued by such affiliate. We may have a
conflict of interest in voting these securities on behalf of our clients as a
result of this affiliation. In all cases, it is our policy to vote any
securities issued by an affiliate in accordance with the recommendation of an
independent proxy voting firm.
USTHFM will periodically obtain representations and assurances from any such
independent voting firm that it is not itself conflicted from making
recommendations. If USTHFM determines that such firm also has a conflict, USTHFM
will secure the services of another independent proxy voting firm and vote the
securities in accordance with the recommendations of that firm.