PROXY VOTING

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PROXY VOTING
FIDUCIARY AND INVESTMENT RISK MANAGEMENT
ASSOCIATION 2008 NATIONAL RISK MANAGEMENT
TRAINING CONFERENCE

• Presented by
• Jeffrey S. Kropschot, VP and CCO
• A.G. Edwards Trust Company FSB

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PROXY VOTING

• Power/Duty to Vote Proxies
• The trustee has a duty to actively manage and
  protect the trust estate, which includes the
  power to vote proxies related to shares of stock
  held in a fiduciary capacity.
• The trustee has a duty to act solely in the
  economic interest of the trust, based on the
  intentions of the grantor.
• The duty of care requires an investment adviser
  with proxy voting authority to monitor corporate
  events and to vote proxies.
• An investment adviser must cast proxy votes in a
  manner consistent with the best interest of its
  clients and must not subrogate client interests
  to its own.

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PROXY VOTING

• Types of Proxy Issues
• Routine Matters that do not include
  authorization for a merger, consolidation or any
  matter which may affect substantially the rights
  or privileges of such stock. Examples include
• Election of Directors
• Selection of External Auditor
• Non-Routine - Matters that do include
  authorization for a merger, consolidation or any
  matter which may affect substantially the rights
  or privileges of such stock. NYSE Rule 452.11
  lists eighteen non-routine proxy issues.

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PROXY VOTING

• Bank Regulatory Guidance - OCC
• Should have internal policies that outline the
  banks position for voting proxies and for
  handling related social or controversial issues.
  The policy should include a provision that the
  bank maintain a record of how proxies are voted
  and, when a decision is made not to vote a proxy,
  the reasons why that decision was made.
• Should have a policy addressing investments in
  and voting of own bank stock, holding company
  stock, or stock of companies for which directors,
  officer, employees or related organizations have
  an interest that might interfere with the banks
  judgment.
• With respect to the financial report disclosures
  in 12 CFR 9.18(b)(6), a national bank should
  consider making the proxy voting policy and proxy
  voting records available to interested persons.

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PROXY VOTING

• Bank Regulatory Guidance - OTS
• The investment policy should contain guidelines
  and standards for voting proxies, particularly in
  regards to investments in the savings
  associations own securities or proprietary
  mutual funds. The policy should require that it
  vote shares in the best interest of each account.

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PROXY VOTING

• Bank Regulatory Guidance - FDIC
• Should have a policy addressing the voting of
  routine, as well as controversial, issues. The
  policy should require that it vote proxies in the
  best interest of the clients. The policy should
  also establish voting and recordkeeping
  procedures.

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PROXY VOTING

• Bank Regulatory Guidance - FRB
• Should have proxy voting policies and procedures
  suitable to assumed responsibilities. Policies
  should address voting of routine and non-routine
  issues (i.e., issues involving sensitive social
  issues, conflicts of interest, significant
  increases in management power or perquisites, or
  merger or buy-out proposals).

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PROXY VOTING

• SEC Investment Adviser Guidance
• 17 CFR 275.206(4)-6
• It is a fraudulent, deceptive, or manipulative
  act, practice or course of business for an
  investment adviser to exercise voting authority
  with respect to client securities unless the
  adviser
• Adopts and implements written policies and
  procedures that are reasonably designed to ensure
  that the adviser votes proxies in the best
  interests of its clients
• Discloses to its clients how they may obtain
  information regarding how their proxies were
  voted and
• Describes its proxy voting policies and
  procedures to its clients and provides copies
  upon request.

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PROXY VOTING

• Must adopt and implement written policies and
  procedures that are reasonably designed to ensure
  the adviser votes proxies in the best interests
  of its clients.
• Procedures should address situations where it
  would be in the clients best interest not to
  vote every proxy (e.g., cost of voting exceeds
  expected benefit to the client) .
• Procedures must address how the adviser addresses
  material conflicts arising between its interests
  and those of its clients.
• Advisers that vote securities based on a
  pre-determined voting policy could demonstrate
  that the vote was not a product of the conflict
  of interest.
• Advisers that vote securities based on a
  pre-determined voting policy, based on the
  recommendations of an independent third party,
  could demonstrate that the vote was not a product
  of the conflict of interest.
• Advisers can suggest that clients engage another
  party to determine how proxies should be voted.

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PROXY VOTING

• Must disclose to clients how they may obtain
  information regarding how their proxies were
  voted.

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PROXY VOTING

• Must describe proxy voting policies and
  procedures to clients and provides copies upon
  request.
• Description should be a concise summary of the
  advisers policies and procedures and should
  indicate that a copy of the policies and
  procedures is available upon request.
• Some advisers use a brochure (in lieu of Part II
  of Form ADV ) to make this concise summary and to
  offer clients the opportunity to request copies
  of the policies and procedures.

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PROXY VOTING

• SEC Investment Adviser Guidance
• 17 CFR 275.204-2(c)(2)(i-v)
• Adviser must retain the following records
• Copies of all required policies and procedures
• Copies of each proxy statement received
• Records of each vote cast on behalf of its
  clients
• Copies of documents created by the adviser that
  were material to making a decision on how to vote
  proxies on behalf of a client or that
  memorializes the basis for that decision and
• A copy of each written client request for
  information on how the adviser voted proxies on
  behalf of the client, and a copy of any written
  response by the investment adviser to any client
  request for information on how the adviser voted
  proxies on behalf of the requesting client.

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QUESTIONS
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REFERENCES

• OCC Handbooks (Various)
• http//www.occ.treas.gov/handbook/amgt.htm
• OTS Trust and Asset Management Handbook
• http//www.ots.treas.gov/da.cfm?catnumber106an7
  
• FDIC Trust Examination Manual
• http//www.fdic.gov/regulations/examinations/trust
  manual/index.html
• FRB Trust Examination Manual
• http//www.federalreserve.gov/boarddocs/supmanual/
  
• Federal Register Vol.68, No. 26 / Friday,
  February 7, 2003
• http//a257.g.akamaitech.net/7/257/2422/14mar20010
  800/edocket.access.gpo.gov/2003/pdf/03-2952.pdf
• 17 CFR 275.206(4)-6
• http//a257.g.akamaitech.net/7/257/2422/03jul20071
  500/edocket.access.gpo.gov/cfr_2007/aprqtr/pdf/17c
  fr275.206(4)-6.pdf
• 17 CFR 275.204-2(c)(2)(i-v)
• http//a257.g.akamaitech.net/7/257/2422/03jul20071
  500/edocket.access.gpo.gov/cfr_2007/aprqtr/pdf/17c
  fr275.204-2.pdf
• ISS Proxy Voting Guidelines
• http//www.issproxy.com/pdf/2007USSummaryGuideline
  s.pdf
• Summary of Proxy Voting Policies and Procedures