Denver
Investment Advisors LLC (DenverIA), unless otherwise directed by our clients,
will make reasonable attempts to research, vote and record all proxy ballots
for the security positions we maintain on our clients behalf. To execute this
responsibility to the highest standard, DenverIA relies heavily on its
subscription to RiskMetrics Group. RiskMetrics Group provides proxy research
and recommendations, as well as automated voting and record keeping through its
ISS Governance Services (ISS). Although RiskMetrics Group offers other
consulting services to companies that it also makes proxy vote recommendations
on, we review their policies and certain reports regarding its internal
controls a minimum of once per year and will only use RiskMetrics Groups ISS as
long as we deem it independent.
In the
rare instance where our portfolio research or security Analyst believes that
any ISS recommendation would be to the detriment of our investment clients, we
can and will override the ISS recommendation through a manual vote. The final
authorization to override an ISS recommendation must be approved by the CCO or
a member of the Management Committee, other than the Analyst seeking the
override. A written record supporting the decision to override the ISS
recommendation will be maintained.
For
any matters subject to proxy vote for mutual funds in which DenverIA is an
affiliated party, DenverIA will vote on behalf of clients invested in such
mutual funds in accordance with ISS, with no exceptions.
Client
information is automatically recorded in RiskMetric Groups system for record
keeping. RiskMetrics Group provides the necessary reports for the Blue Chip
Value Fund to prepare its Form N-PX annually.
Below
is a condensed version of the proxy voting recommendations contained in the ISS
Proxy Voting Manual.
Majority Vote Shareholder Proposals
Generally vote FOR precatory and binding resolutions requesting that the board change the companys bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it
does not conflict with the state law where the company is incorporated. Binding resolutions need to allow for a carve-out for a plurality vote standard when there are more nominees than board seats. Companies are strongly encouraged to also adopt a post-election policy (also known as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover
director.
Open Access
Vote shareholder proposals asking for open or proxy access on a CASE-BY-CASE
basis, taking into account:
3. Proxy Contests
Voting for Director Nominees in Contested Elections
Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors:
-
Long-term financial performance of the target company relative to its industry;
-
Managements track
record;
-
Background to the proxy contest;
-
Qualifications of director nominees (both slates);
-
Strategic plan
of dissident slate and quality of critique against management;
-
Likelihood that the proposed goals and objectives can be
achieved (both slates);
-
Stock ownership positions.
Reimbursing Proxy Solicitation Expenses
Vote CASE-BY-CASE on proposals to reimburse proxy solicitation expenses. When voting in conjunction with support of a dissident slate, vote FOR the reimbursement of all appropriate proxy solicitation expenses
associated with the election.
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Generally vote FOR shareholder proposals calling for the reimbursement of reasonable costs incurred in connection with nominating one or more candidates in a contested election where the following apply:
-
The election of fewer than 50 percent of the directors to be elected is contested in the election;
-
One or more of the dissidents candidates is elected;
-
Shareholders are not permitted to cumulate their votes for directors; and
-
The election occurred, and the expenses were incurred, after the adoption of this bylaw.
4. Takeover Defenses
Poison Pills
Vote FOR shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it UNLESS the company has: (1) A shareholder approved poison pill in place; or (2) The company has
adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:
-
Shareholders have approved the adoption of the plan; or
-
The board, in its exercise of its fiduciary
responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay that would result from seeking stockholder approval (i.e., the fiduciary out provision). A poison pill
adopted under this fiduciary out will be put to a shareholder ratification vote within 12 months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate.
Vote FOR shareholder proposals calling for poison pills to be put to a vote within a year after adoption. If the company has no non-shareholder approved poison pill in place and has adopted a policy with the provisions
outlined above, vote AGAINST the proposal. If these conditions are not met, vote FOR the proposal, but with the caveat that a vote within 12 months would be considered sufficient.
Vote CASE-by-CASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:
-
No lower than a 20 percent trigger, flip-in or flip-over;
-
A term of no more than three years;
-
No dead-hand, slow-hand, no-hand, or similar
feature that limits the ability of a future board to redeem the pill;
-
Shareholder redemption feature (qualifying offer
clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special meeting, or seek a written consent to vote on rescinding the pill.
Shareholder Ability to Call Special Meetings
Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings. Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.
Supermajority Vote Requirements
Vote AGAINST proposals to require a supermajority shareholder vote. Vote FOR proposals to lower supermajority vote requirements.
5. Mergers and Corporate Restructurings
For mergers and acquisitions, review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:
-
Valuation
- Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness
opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic rationale.
-
Market reaction
- How has the market responded to the proposed deal? A negative market
reaction should cause closer scrutiny of a deal.
-
Strategic rationale
- Does the deal make sense strategically? From where is the value
derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable.
-
Management should also have a favorable track record of successful integration of historical acquisitions.
-
Negotiations and process
- Were the terms of the transaction negotiated at
arm's-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation "wins" can also signify the deal makers' competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value.
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Conflicts of interest
- Are insiders benefiting from the transaction
disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests.
Consider whether these interests may have influenced these directors and officers to support or recommend the merger. The aggregate CIC figure may be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure
appears to be excessive, analyze the underlying assumptions to determine whether a potential conflict exists.
-
Governance
- Will the combined company have a better or worse governance profile than
the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.
6. State of Incorporation
Reincorporation Proposals
Vote CASE-BY-CASE on proposals to change a company's state of incorporation, taking into consideration both financial and corporate governance concerns, including:
-
The reasons for reincorporating;
-
A
comparison of the governance provisions;
-
Comparative economic benefits; and
-
A comparison of the jurisdictional laws.
7. Capital Structure
Common Stock Authorization
Vote CASE-BY-CASE on proposals to increase the number of shares of common stock authorized for issuance using a model developed by ISS. Vote FOR proposals to approve increases beyond the allowable increase when a
company's shares are in danger of being delisted or if a company's ability to continue to operate as a going concern is uncertain.
In addition, for capital requests less than or equal to 300 percent of the current authorized shares that marginally fail the calculated allowable cap (i.e., exceed the allowable cap by no more than 5 percent), on a
CASE-BY-CASE basis, vote FOR the increase based on the company's performance and whether the companys ongoing use of shares has shown prudence. Factors should include, at a minimum, the following:
-
Rationale;
-
Good performance with respect to
peers and index on a five-year total shareholder return basis;
-
Absence of non-shareholder approved poison pill;
-
Reasonable equity compensation burn rate;
-
No non-shareholder approved pay plans; and
-
Absence of egregious equity compensation
practices.
Dual-Class Stock
Vote AGAINST proposals to create a new class of common stock with superior voting rights. Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class
of stock that has superior voting rights.
Vote FOR proposals to create a new class of nonvoting or sub-voting common stock if:
Issue Stock for Use with Rights Plan
Vote AGAINST proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder approved shareholder rights plan (poison pill).
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Preferred Stock
Vote AGAINST proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights ("blank check" preferred stock), and AGAINST proposals to
increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose. Vote FOR proposals to create "declawed" blank check preferred stock (stock that cannot be used as a
takeover defense), and FOR proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. Vote CASE-BY-CASE on
proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company's industry and performance in terms of shareholder returns.
8. Executive and Director Compensation
Equity Compensation Plans
Vote CASE-BY-CASE on equity-based compensation plans. Vote AGAINST the equity plan if any of the following factors apply:
-
The total cost of the companys equity plans is unreasonable;
-
The plan expressly
permits the repricing of stock options without prior shareholder approval;
-
There is a disconnect between CEO pay and the
companys performance;
-
The companys three year burn rate exceeds the greater of 2% and the mean plus one standard
deviation of its industry group; or
-
The plan is a vehicle for poor pay practices.
Poor Pay Practices
Vote AGAINST or WITHHOLD from compensation committee members, the CEO, and potentially the entire board, if the company has poor compensation practices. Vote AGAINST equity plans if the plan is a vehicle for poor
compensation practices.
The following practices, while not exhaustive, are examples of poor compensation practices:
-
Egregious employment contracts (e.g., multi-year guarantees for salary increases, bonuses, and equity compensation);
-
Excessive perks (overly generous cost and/or reimbursement of taxes for personal use of corporate aircraft, personal security systems
maintenance and/or installation, car allowances, and/or other excessive arrangements relative to base salary);
-
Abnormally
large bonus payouts without justifiable performance linkage or proper disclosure (e.g., performance metrics that are changed, canceled, or replaced during the performance period without adequate explanation of the action and the link to
performance);
-
Egregious pension/SERP (supplemental executive retirement plan) payouts (inclusion of additional years of
service not worked that result in significant payouts, or inclusion of performance-based equity awards in the pension calculation;
-
New CEO with overly generous new hire package (e.g., excessive make whole provisions);
-
Excessive severance and/or change-in-control provisions: Inclusion of excessive change-in-control or severance payments, especially those with a multiple in excess of 3X cash pay;
-
Severance paid for a performance termination, (i.e., due to the executives failure to perform job functions at the
appropriate level);
-
Change-in-control payouts without loss of job or substantial diminution of job duties (single-triggered);
-
Perquisites for former executives such as car allowances, personal use of corporate aircraft, or other inappropriate arrangements;
-
Poor disclosure practices, (unclear explanation of how the CEO is involved in the pay setting process, retrospective
performance targets and methodology not discussed, or methodology for benchmarking practices and/or peer group not disclosed and explained);
-
Internal pay disparity (e.g., excessive differential between CEO total pay and that of next highest-paid named executive officer);
-
Other excessive compensation payouts or poor pay practices at the company.
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Director Compensation
Vote CASE-BY-CASE on compensation plans for non-employee directors, based on the cost of the plans against the companys allowable cap.
On occasion, director stock plans that set aside a relatively small number of shares when combined with employee or executive stock compensation plans will exceed the allowable cap. Vote for the plan if ALL of the
following qualitative factors in the boards compensation are met and disclosed in the proxy statement:
-
A minimum vesting of three years for stock options or restricted stock; or
-
Deferred stock payable at the end of a three-year deferral period.
-
A balanced mix of cash and equity, for example 40 percent cash/60 percent equity or 50 percent cash/50 percent equity; or
-
If the mix is heavier on the equity component, the vesting schedule or deferral period should be more stringent, with the lesser of
five years or the term of directorship.
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No retirement/benefits and perquisites provided to non-employee directors; and
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Detailed disclosure provided on cash and equity compensation delivered to each non-employee director for the most recent fiscal
year in a table. The column headers for the table may include the following: name of each non-employee director, annual retainer, board meeting fees, committee retainer, committee-meeting fees, and equity grants.
Employee Stock Purchase Plans--Qualified Plans
Vote CASE-BY-CASE on qualified employee stock purchase plans. Vote FOR employee stock purchase plans where all of the following apply:
-
Purchase price is at least 85 percent of fair market value;
-
Offering period is 27 months or less; and
-
The number of shares allocated to the plan is 10 percent or less
of the outstanding shares.
Vote AGAINST qualified employee stock purchase plans where any of the following apply:
-
Purchase
price is less than 85 percent of fair market value; or
-
Offering period is greater than 27 months; or
-
The number of shares allocated to the plan is more than 10 percent of the outstanding shares.
Employee Stock Purchase Plans--Non-Qualified Plans
Vote CASE-by-CASE on nonqualified employee stock purchase plans. Vote FOR nonqualified employee stock purchase plans with all the following features:
-
Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company);
-
Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary;
-
Company matching contribution up to 25 percent of employees contribution, which is effectively a discount of 20 percent from market value;
-
No discount on the stock price on the date of purchase since there is a company matching contribution.
Vote AGAINST nonqualified employee stock purchase plans when any of the plan features do not meet the above criteria. If the company matching contribution exceeds 25 percent of
employees contribution, evaluate the cost of the plan against its allowable cap.
Options Backdating
In cases where a company has practiced options backdating, vote AGAINST or WITHHOLD on a CASE-BY-CASE basis from the members of the compensation committee, depending on the severity of the practices and the subsequent
corrective actions on the part of the board. Vote AGAINST or WITHHOLD from the compensation committee members who oversaw the questionable options practices or from current compensation committee members who fail to respond to the issue proactively,
depending on several factors, including, but not limited to:
-
Reason and motive for the options backdating issue (inadvertent
vs. deliberate grant date changes);
-
Length of time of options backdating;
-
Size of restatement due to options backdating;
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Corrective actions taken by the board or compensation committee, such as canceling or repricing backdated options, or recoupment of
option gains on backdated grants;
-
Adoption of a grant policy that prohibits backdating, and creation of a fixed grant
schedule or window period for equity grants going forward.
Option Exchange Programs/Repricing Options
Vote CASE-by-CASE on management proposals seeking approval to exchange/reprice options, considering:
-
Historic trading patterns--the stock price should not be so volatile that the options are likely to be back in-the-money over the near term;
-
Rationale for the re-pricing--was the stock price decline beyond management's control?
-
Is this a value-for-value exchange?
-
Are surrendered stock options added back to the plan reserve?
-
Option vesting--does the new option vest immediately or is there a black-out period?
-
Term of the option--the term should remain the same as that of the replaced option;
-
Exercise price--should be set at fair market or a premium to market;
-
Participants--executive officers and directors should be excluded.
If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the companys three-year average burn rate. In addition to the above considerations, evaluate the
intent, rationale, and timing of the repricing proposal. The proposal should clearly articulate why the board is choosing to conduct an exchange program at this point in time. Repricing underwater options after a recent precipitous drop in the
companys stock price demonstrates poor timing. Repricing after a recent decline in stock price triggers additional scrutiny and a potential AGAINST vote on the proposal. At a minimum, the decline should not have happened within the past year.
Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done
to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price.
Vote FOR shareholder proposals to put option repricings to a shareholder vote.
Stock Plans in Lieu of Cash
Vote CASE-by-CASE on plans that provide participants with the option of taking all or a portion of their cash compensation in the form of stock, and on plans that do not provide a dollar-for-dollar cash for stock
exchange. In cases where the exchange is not dollar-for-dollar, the request for new or additional shares for such equity program will be considered using the binomial option pricing model. In an effort to capture the total cost of total
compensation, ISS will not make any adjustments to carve out the in-lieu-of cash compensation. Vote FOR non-employee director-only equity plans that provide a dollar-for-dollar cash-for-stock exchange.
Transfer Programs of Stock Options
Vote AGAINST or WITHHOLD from compensation committee members if they fail to submit one-time transfers to shareholders for approval.
Vote CASE-BY-CASE on one-time transfers. Vote FOR if:
-
Executive officers and non-employee directors are excluded from participating;
-
Stock options are purchased by third-party financial institutions at a discount to their fair value
using option pricing models such as Black-Scholes or a Binomial Option Valuation or other appropriate financial models;
-
There is a two-year minimum holding period for sale proceeds (cash or stock) for all participants.
Additionally, management should provide a clear explanation of why options are being transferred and whether the events leading up
to the decline in stock price were beyond management's control. A review of the company's historic stock price volatility should indicate if the options are likely to be back in-the-money over the near term.
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Vote AGAINST equity plan proposals if the details of ongoing Transfer of Stock Options programs are not provided to shareholders. Since TSOs will be one of the award types under a stock plan, the ongoing TSO program, structure and mechanics must be disclosed to shareholders. The specific criteria to be considered in evaluating these proposals include, but not limited, to the following:
Amendments to existing plans that allow for introduction of transferability of stock options should make clear that only options granted post-amendment shall be transferable.
Shareholder Proposals on Compensation
Advisory Vote on Executive Compensation (Say-on-Pay)
Generally, vote FOR shareholder proposals that call for non-binding shareholder ratification of the compensation of the named executive officers and the accompanying narrative disclosure of material factors provided to
understand the Summary Compensation Table.
Compensation Consultants--Disclosure of Board or Companys Utilization
Generally vote FOR shareholder proposals seeking disclosure regarding the company, board, or compensation committees use of compensation consultants, such as company name, business relationship(s) and fees paid.
Disclosure/Setting Levels or Types of Compensation for Executives and Directors
Generally, 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.
Vote AGAINST shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation. Vote AGAINST shareholder proposals requiring director fees be paid in stock
only. Vote CASE-BY-CASE on all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long-term corporate outlook.
Pay for Superior Performance
Generally vote FOR shareholder proposals based on a case-by-case analysis that requests the board establish a pay-for-superior performance standard in the company's compensation plan for senior executives. The proposal
should have the following principles:
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Sets compensation targets for the plans annual and long-term incentive pay
components at or below the peer group median;
-
Delivers a majority of the plans target long-term compensation through
performance-vested, not simply time-vested, equity awards;
-
Provides the strategic rationale and relative weightings of the
financial and non-financial performance metrics or criteria used in the annual and performance-vested long-term incentive components of the plan;
-
Establishes performance targets for each plan financial metric relative to the performance of the companys peer companies;
-
Limits payment under the annual and performance-vested long-term incentive components of the plan to when the companys performance on its selected financial performance metrics exceeds peer group median
performance.
Consider the following factors in evaluating this proposal:
-
What aspects of the companys annual and long-term equity incentive programs are performance-driven?
-
If the annual and long-term equity incentive programs are performance driven, are the performance criteria and hurdle rates
disclosed to shareholders or are they benchmarked against a disclosed peer group?
-
Can shareholders assess the correlation between pay and performance based on the current disclosure?
-
What type of industry and stage of business cycle does the company belong to?
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Performance-Based Awards
Vote CASE-BY-CASE on shareholder proposal requesting that a significant amount of future long-term incentive compensation awarded to senior executives shall be performance-based and requesting that the board adopt and
disclose challenging performance metrics to shareholders, based on the following analytical steps:
-
First, vote FOR
shareholder proposals advocating the use of performance-based equity awards, such as performance contingent options or restricted stock, indexed options or premium-priced options, unless the proposal is overly restrictive or if the company has
demonstrated that it is using a substantial portion of performance-based awards for its top executives. Standard stock options and performance-accelerated awards do not meet the criteria to be considered as performance-based awards.
Further, premium-priced options should have a premium of at least 25 percent and higher to be considered performance-based awards.
-
Second, assess the rigor of the companys performance-based equity program. If the bar set for the performance-based program
is too low based on the companys historical or peer group comparison, generally vote FOR the proposal. Furthermore, if target performance results in an above target payout, vote FOR the shareholder proposal due to programs poor design.
If the company does not disclose the performance metric of the performance-based equity program, vote FOR the shareholder proposal regardless of the outcome of the first step to the test.
In general, vote FOR the shareholder proposal if the company does not meet both of these two requirements.
Pre-Arranged Trading Plans (10b5-1 Plans)
Generally vote FOR shareholder proposals calling for certain principles regarding the use of prearranged trading plans (10b5-1 plans) for executives. These principles include:
-
Adoption, amendment, or termination of a 10b5-1 plan must be disclosed within two business days in a Form 8-K;
-
Amendment or early termination of a 10b5-1 plan is allowed only under extraordinary circumstances, as determined by the board;
-
Ninety days must elapse between adoption or amendment of a 10b5-1 plan and initial trading under the plan;
-
Reports on Form 4 must identify transactions made pursuant to a 10b5-1 plan;
-
An executive may not trade in company stock outside the 10b5-1 Plan.
-
Trades under a 10b5-1 plan must be handled by a broker who does not handle other securities transactions for the executive.
Recoup Bonuses
Vote on a CASE-BY-CASE on proposals to recoup unearned incentive bonuses or other incentive payments made to senior executives if it is later determined that fraud, misconduct, or negligence significantly contributed
to a restatement of financial results that led to the awarding of unearned incentive compensation, taking into consideration:
Severance Agreements for Executives/Golden Parachutes
Vote FOR shareholder proposals requiring that golden parachutes or executive severance agreements be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into
employment contracts. Vote on a CASE-BY-CASE basis on proposals to ratify or cancel golden parachutes. An acceptable parachute should include, but is not limited to, the following:
-
The triggering mechanism should be beyond the control of management;
-
The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation during the five years prior to the change of control);
-
Change-in-control payments should be double-triggered, i.e., (1) after a change in control has taken place, and (2) termination of the executive as a result of the change in control. Change in
control is defined as a change in the company ownership structure.
Supplemental Executive Retirement Plans (SERPs)
Generally vote FOR shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote unless the companys executive pension plans do not contain excessive benefits
beyond what is offered under employee-wide plans. Generally vote FOR shareholder proposals requesting to limit the executive benefits provided under the companys supplemental executive retirement plan (SERP) by limiting covered compensation to a senior executives annual salary and excluding of
all incentive or bonus pay from the plans definition of covered compensation used to establish such benefits.
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9. Corporate Social Responsibility (CSR) Issues
Consumer Lending
Vote CASE-BY CASE on requests for reports on the companys lending guidelines and procedures, including the establishment of a board committee for oversight, taking into account:
-
Whether the company has adequately disclosed mechanisms to prevent abusive lending practices;
-
Whether the company has adequately disclosed the financial risks of the lending products in question;
-
Whether the company has been subject to violations of lending laws or serious lending controversies;
-
Peer companies policies to prevent abusive lending practices.
Pharmaceutical Pricing
Generally vote AGAINST proposals requesting that companies implement specific price restraints on pharmaceutical products unless the company fails to adhere to legislative guidelines or industry norms in its product
pricing.
Vote CASE-BY-CASE on proposals requesting that the company evaluate their product pricing considering:
-
The existing level of disclosure on pricing policies;
-
Deviation from established industry pricing norms;
-
The companys existing initiatives to provide its products to needy consumers;
-
Whether the proposal focuses on specific products or geographic regions.
Product Safety and Toxic Materials
Generally vote FOR proposals requesting the company to report on its policies, initiatives/procedures, and oversight mechanisms related to toxic materials and/or product safety in its supply chain, unless:
-
The company already discloses similar information through existing reports or policies such as a supplier code of conduct and/or a
sustainability report;
-
The company has formally committed to the implementation of a toxic materials and/or product safety
and supply chain reporting and monitoring program based on industry norms or similar standards within a specified time frame; and
-
The company has not been recently involved in relevant significant controversies or violations.
Vote CASE-BY-CASE on resolutions requesting that companies develop a feasibility assessment to phaseout of certain toxic chemicals
and/or evaluate and disclose the financial and legal risks associated with utilizing certain chemicals, considering:
-
Current
regulations in the markets in which the company operates;
-
Recent significant controversy, litigation, or fines stemming from
toxic chemicals or ingredients at the company; and
-
The current level of disclosure on this topic.
Climate Change
In general, vote FOR resolutions requesting that a company disclose information on the impact of climate change on the companys operations unless:
-
The company already provides current, publicly available information on the perceived impact that climate change may have on the company as well as associated policies and procedures to
address such risks and/or opportunities;
-
The companys level of disclosure is comparable to or better than information
provided by industry peers; and
-
There are no significant fines, penalties, or litigation associated with the companys
environmental performance.
Greenhouse Gas Emissions
Generally vote FOR proposals requesting a report on greenhouse gas emissions from company operations and/or products unless this information is already publicly disclosed or such factors are not integral to the
companys line of business. Generally vote AGAINST proposals that call for reduction in greenhouse gas emissions by specified amounts or within a restrictive time frame unless the company lags industry standards and has been the subject of recent, significant fines, or litigation resulting from greenhouse gas emissions.
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Political Contributions and Trade Associations Spending
Generally vote AGAINST proposals asking the company to affirm political nonpartisanship in the workplace so long as:
-
The company is in compliance with laws governing corporate political activities; and
-
The company
has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and not coercive.
Vote AGAINST proposals to publish in newspapers and public media the company's political contributions as such publications could present significant cost to the company without providing commensurate value to
shareholders. Vote CASE-BY-CASE on proposals to improve the disclosure of a company's political contributions and trade association spending, considering:
-
Recent significant controversy or litigation related to the companys political contributions or governmental affairs; and
-
The public availability of a company policy on political contributions and trade association spending including information on the types of organizations supported, the business rationale for
supporting these organizations, and the oversight and compliance procedures related to such expenditures.
Vote AGAINST proposals barring the company from making political contributions. Businesses are affected by legislation at the federal, state, and local level and barring contributions can put the company at a
competitive disadvantage. Vote AGAINST proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the
business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders.
Sustainability Reporting
Generally vote FOR proposals requesting the company to report on policies and initiatives related to social, economic, and environmental sustainability, unless:
-
The company already discloses similar information through existing reports or policies such as an environment, health, and safety (EHS) report; a comprehensive code of
corporate conduct; and/or a diversity report; or
-
The company has formally committed to the implementation of a reporting
program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame.
2008 US Proxy Voting Guidelines
Concise
Summary
|
-13-
|
Item 8- Portfolio Managers
of Closed-End Management Investment Companies.
(a)(1) Portfolio Manager
As
of the filing date of this report, the Blue Chip Value Fund is managed by the
Value Equity Research Team at Denver Investment Advisors LLC. Mr. Kris B.
Herrick, CFA is the Director for this investment team. He works closely with
three senior research analysts, Mr. Mark M. Adelmann, CFA, CPA, Mr. Troy
Dayton, CFA and Mr. Derek R. Anguilm, CFA (the Team). These individuals have
each been assigned specific sectors to focus their research efforts. The Team
is further supported by dedicated research analysts who all may recommend
purchase and sell decisions for the Fund. Every new investment is presented to
the Team, which reviews investment ideas to determine whether that potential investment
is attractive and compatible with the Funds investment objective. The Team
typically seeks to reach consensus on all investment decisions.
Kris B. Herrick, CFA,
a Vice President of Denver Investment Advisors is
Director of Value Research with the Equity Value Research Team responsible for
managing Blue Chip Value Fund. Mr. Herrick has been a Research Analyst with
Denver Investment Advisors since 2000. Prior to joining Denver Investment
Advisors, he was a Financial Services Analyst with Jurika & Voyles from
1997 to 2000. Mr. Herrick has a total of 10 years of professional experience.
Mark M. Adelmann, CFA,
CPA,
a Vice President of Denver
Investment Advisors, is a Senior Research Analyst with the Equity Value
Research Team responsible for managing Blue Chip Value Fund. Mr. Adelmann has
been a research analyst with the Equity Value research team at Denver
Investment Advisors since 1995. Prior to joining Denver Investment Advisors he
worked with Deloitte & Touche for 15 years in auditing and financial
reporting. Mr. Adelmann has a total of 26 years of professional experience.
Derek R. Anguilm, CFA,
a Vice President of Denver Investment Advisors, is a
Senior Research Analyst with the Equity Value Research Team responsible for
managing Blue Chip Value Fund. Mr. Anguilm has been a Research Analyst with
Denver Investment Advisors since 2000. Prior to joining Denver Investment
Advisors he interned with Everen Securities from 1999 to 2000. Mr. Anguilm has
a total of 8 years of professional experience.
Troy Dayton, CFA,
a Vice President of Denver Investment Advisors, is a
Senior Research Analyst with the Equity Value Research Team responsible for
managing Blue Chip Value Fund. Mr. Dayton has been a Research Analyst with the
Equity Value research team at Denver Investment Advisors since 2002. Prior to
joining Denver Investment Advisors, he was an Equity Research Analyst with
Jurika & Voyles from 2001 to 2002. Mr. Dayton was an Equity Research
Associate with Dresdner Global Investors from 1998 to 2001 and an Equity
Research Associate with Jurika & Voyles from 1996 to 1998. Mr. Dayton has
a total of 11 years of professional experience.
(a)(2) Other Accounts Managed
As of the most recently
completed fiscal year end (December 31, 2007), the following table summarizes
the other investment activities of each portfolio manager.
Portfolio
Manager:
|
Herrick
|
Adelmann
|
Dayton
|
Anguilm
|
|
|
|
|
|
Registered
Inv Companies
|
|
|
|
|
Assets
|
$588,797,161
|
$588,797,161
|
$588,797,161
|
$588,797,161
|
# of
Accounts
|
6
|
6
|
6
|
6
|
|
|
|
|
|
Performance
Based
|
|
|
|
|
Assets
|
$31,145,796
|
$31,145,796
|
$31,145,796
|
$31,145,796
|
# of
Accounts
|
1
|
1
|
1
|
1
|
|
|
|
|
|
|
|
|
|
|
Other
Pooled Accts
|
|
|
|
|
Assets
|
$0
|
$0
|
$0
|
$0
|
# of
Accounts
|
0
|
0
|
0
|
0
|
|
|
|
|
|
Performance
Based
|
|
|
|
|
Assets
|
$0
|
$0
|
$0
|
$0
|
# of
Accounts
|
0
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
Other
Accts
|
|
|
|
|
Assets
|
$528,583,875
|
$528,583,875
|
$528,583,875
|
$528,583,875
|
# of
Accounts
|
713*
|
713*
|
713*
|
713*
|
|
|
|
|
|
Performance
Based
|
|
|
|
|
Assets
|
$0
|
$0
|
$0
|
$0
|
# of
Accounts
|
0
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand
Totals
|
|
|
|
|
Assets
|
$1,117,381,036
|
$1,117,381,036
|
$1,117,381,036
|
$1,117,381,036
|
# of
Accounts
|
719*
|
719*
|
719*
|
719*
|
* Totals include 648 accounts within separately managed
account (SMA) wrap programs which Denver Investment Advisors LLC serves as a
portfolio manager.
Potential material conflicts
of interest that may arise when a portfolio manager has day-to-day management
responsibilities with respect to other accounts in addition to the Fund,
include conflicts relating to the allocation of limited investment
opportunities, the order of executing transactions when the aggregation of the
order is not possible, personal investing activities, differences in advisory
fee arrangements, structure of portfolio manager compensation and proxy voting
of portfolio securities. While there can be no guarantee, Denver Investment
Advisors LLC believes that the controls and oversight relating to these
potential material conflicts of interest involving the Fund and its other
managed funds and accounts is effective.
(a)(3) Manager Compensation
As of the most recently
completed fiscal year end (December 31, 2007), each of the Funds portfolio
managers is a partner of Denver Investment Advisors LLC. As such, the primary
compensation comes from a base salary and a predetermined percentage of
distributed profit based on the overall profitability of the firm. New business
marketing incentives are generally paid to marketing personnel, but at times
portfolio managers who help open new institutional accounts with an ongoing
service role may also receive an incentive based on expected revenue.
Additionally, the management committee of Denver Investment Advisors LLC may
award an incentive compensation bonus to partners who significantly exceed
expectations over an extended period. The criteria for the incentive compensation
pool, while generally not directly tied to performance, include the following
factors: performance, growth and/or retention of assets, profitability and
intangibles. There is a composite of similarly managed accounts for each
investment style at Denver Investment Advisors LLC, and the Fund is included in
the appropriate composite. The performance criteria emphasizes pre-tax
long-term (3-5 year when available) results of the composites combined with the
specific partners buy list for that investment style where applicable,
rather than any specific Fund or account result.
(a)(4)Equity Securities in
the Registrant
The
table below
identifies ownership in the Blue Chip Value Fund by each portfolio manager as
of December 31, 2007:
Portfolio Manager
|
Ownership Range
|
Kris Herrick
|
None
|
Mark Adelmann
|
$0 10,000
|
Derek Anguilm
|
None
|
Troy Dayton
|
None
|
Item 9 - Purchases of
Equity Securities by Closed-End Management Investment Company and Affiliated
Purchasers
Not applicable.
Item 10 - Submission of Matters
to Vote of Security Holders
There have been no material
changes to the procedures by which shareholders may recommend nominees to the
Registrants Board of Directors, where those changes were implemented after the
Registrant last provided disclosure in response to the requirements of Item
7(d)(2)(ii)(G) of Schedule 14A or this Item.