All of the named investment companies advised with the exception of Fidelity Bond-Debenture Fund, Puritan Fund, Fidelity Convertible & Senior Securities Fund, and Everest Fund are usually invested at least 90% or better in common stocks which have full voting rights. Fidelity Bond-Debenture Fund is a bond fund, and Fidelity Convertible & Senior Securities Fund is a convertible bond and/or convertible preferred stock fund. Such securities rarely if ever have any voting rights. In the case of Puritan Fund and Everest Fund, as a rule, approximately 70% of the portfolios of these Funds are invested in common stocks with full voting rights. The remaining assets are invested in bonds or convertible securities with no voting rights. The directors of the Funds in the Fidelity Group of Funds have established policies for voting the common stocks owned by the Funds. In general, the policy is to support management of the portfolio company unless the action proposed by management is believed not to best serve the economic interests of the shareholders of the Fund. Each Fund states in its Registration Statement that investment in portfolio securities will not be made with a view to control the management of a portfolio company. Similar representations are made in the prospectus of each of the Funds being publicly offered. Recently, various Funds have voted against management proposals for merger, increasing debt, cumulative voting for directors, and a proposal to do away with preemptive rights of shareholders. It was felt that all of these proposals could adversely affect the economic interests of the shareholders. I hope this gives you the information you are seeking and that it will be of some help to you. Senior Specialist in Business Economics, Economics Division, The Library of Congress, Congressional Research Service, Washington, D.C. DEAR MR. ALLEN: In response to your letter of December 19, 1973, I am pleased to advise you that: (1) Investors Diversified Services, Inc. generally has full voting rights for the securities it owns. Some preferreds have voting rights only in the event of default. Enclosed is a list of portfolio securities as of the date of our last annual report which indicates voting rights of preferred and common stocks then held by IDS. IDS holds other securities of course, but I assume you are interested in corporate securities such as those listed. (2) Where IDS has full or partial voting rights, it is the practice for us to exercise them. I do not know of any circumstances under which I would anticipate that these rights would not be exercised. (3) The basic policy we have with respect to exercising voting rights is to enhance the investment value of the securities. In the absence of a significant issue, we are inclined to vote a management proxy; but where a significant issue is presented, we vote the issue on its merits. I trust that the foregoing is sufficient for your purposes, but if any further information is desired, please do not hesitate to let me know. Sincerely yours, CHARLES R. OREM. INVESTOR DIVERSIFIED SERVICES, INC.-INVESTMENTS IN STOCK OF UNAFFILIATED ISSUERS, DEC. 31, 1972 1 The company organized, and is the principal underwriter and investment manager for, Investors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Inc., Progressive Fund, Inc. LOOMIS-SAYLES & CO., INC., Boston, Mass., January 22, 1974. Mr. JULIUS W. ALLEN, DEAR MR. ALLEN: Mr. Harrison referred to me your letter to him of December 19, 1973 requesting information relating to policies and practices of our firm with respect to voting of corporate securities. I apologize for not responding more promptly. Having missed your January 10 deadline, I assumed incorrectly that you would not have any need for the information. Your first question asks for percentage figures with respect to voting rights of the securities which our firm-holds. First of all, you should understand that our firm does not "hold" any voting securities except for some stock in two of the mutual funds which we manage. I assume that your question relates to securities held in the accounts of our investment advisory clients. As to our client accounts 1. Approximately one half of our client accounts are non-discretionary accounts in which we would have no voting power. 2. Five of our client accounts are registered investment companies where we have full investment discretion and full responsibility to administer the affairs of the investment companies. As to these five clients, we have full voting authority. These five clients would represent about 6% of the total capital we have under supervision. 3. In the remainder of our accounts (approximately 44% of total capital) we have full investment discretion and the securities would normally be held by a bank as custodian or trustee. In some instances the securities would be held by a broker as custodian. For all practical purposes, we do not have full or partial voting rights as to any of these securities. The voting would be done by the client, the trustee, or the custodian, although the procedure would be to consult with us on any voting questions that had investment significance. You have also asked as to our practice as to exercising voting rights when we have such rights. Wherever we have full or partial voting rights, our practice would be to exercise the right to vote. Your last question relates to the basic policies of our firm with respect to the voting of proxies. Enclosed is a copy of the statement of policies with respect to voting of proxies that has been adopted by the board of directors of each of the five investment companies whose securities we vote. This same approach would be used in the case of any other client securities where we might have voting power. Sincerely yours, R. B. KITTREDGE, Vice President. OCTOBER 17, 1972. To: Directors of Loomis-Sayles Mutual Fund, Inc., Loomis-Sayles Capital Development Fund, Inc. Guidelines for: 1. Voting Proxies. 2. Action to be taken when Tenders are made for Portfolio Securities. VOTING OF PROXIES Proxies are forwarded to the Fund Manager at Loomis Sayles by The First National Bank of Boston, the Funds' custodian. Normally these proxies are signed by the Bank, in the name of our nominee, with the vote on each item left blank to be completed by the Fund. The following guidelines will apply to the Fund Manager in voting proxies on behalf of the Fund: 1. The policy of the Fund is to vote-not abstain from voting-on all issues presented to it as a stockholder in a portfolio company. 2. All issues presented for shareholder vote should be considered by the Fund Manager from an investment point of view and should be voted in the best investment interests of Fund shareholders. 3. Proxies covering routine matters will be voted in favor of management proposals. 4. Proxies involving nonroutine issues will mended by management, except in unusual cases generally be voted as recomsuch as a. A request by management for approval of a stock option plan that provides an excessive number of shares. Stock option plans setting aside more than 5% of the common stock capitalization will be discussed with the President or Chairman of the Fund before voting. Consideration will be given to stock set aside in previous years under the plan and to any other company-sponsored programs for employee stock ownership. b. Mergers or acquisitions which are not believed to be in the best interests of shareholders of the portfolio company. 5. In the case of relinquishing preemptive rights, the proxy in question will be discussed with the President or Chairman of the Fund. If this discussion produces the conclusion that the preemptive rights should not be relinquished, then the proxy will be voted in the negative. 6. All nonroutine proxy statement problems, including those raising issues of corporate responsibility, will be carefully considered by the Fund Manager. Cases involving requests for approval of mergers or acquisitions or any other special instances which the Fund Manager believes deserve special attention will be discussed with the President or Chairman before the proxy vote is cast. In these instances the President or Chairman and the Fund Manager will decide whether they should contact the Fund Directors before voting the proxy. 7. Where a proxy is voted against the management recommendation, the Fund Manager will write a brief letter to the company in question setting forth the reason for opposing the position of management. Copies of such letters shall be made available to the Directors at their regular meetings. TENDER OFFERS FOR PORTFOLIO SECURITIES In the event a tender offer is made for a portfolio holding, the Fund Manager will follow the procedures below: 31-269 - 74-26 1. He will check the Loomis Sayles Research Department's point of view toward the tender offer with emphasis on the value being offered in exchange. 2. He will discuss this with the President or Chairman of the Fund. 3. The President or Chairman and the Fund Manager will decide whether they should contact the Directors of the Fund before making a final decision whether or not to accept the tender offer. Mr. JULIUS W. ALLEN, T. ROWE PRICE ASSOCIATES, INC., Senior Specialist in Business Economics, Economics Division, The Library of Congress, Congressional Research Service, Washington, D.C. DEAR MR. ALLEN: Reference is made to your letter of December 19, 1973 addressed to Mr. Charles W. Shaeffer, President and Chairman of the Board of T. Rowe Price Associates, Inc. requesting information relating to the policies and practices of investment advisers with respect to corporate securities. T. Rowe Price Associates, Inc. does not "hold" any significant amount of securities in its own name. The firm serves as investment adviser to four mutual funds and a number of private clients including corporation, pension and profit sharing funds, endowment funds and other institutional and individual investors. While the personnel of the adviser in their capacities as officers and agents of the investment companies vote the proxies received with respect to the securities held by the investment companies, it is the policy of the firm not to vote proxies of the securities held by its private clients. However, in certain isolated situations the adviser has agreed to advise private clients with respect to how the clients might wish to consider voting proxies. In those cases, generally recommendations are based on the potential investment implications of the question presented. Social issues are considered as part of the continuing process of evaluating corporate managements and are generally voted (or advice is rendered) on the basis of the investment implications of the issues presented. Should you have any further questions in this regard, I would be pleased to hear from you. Sincerely, Mr. JULIUS W. ALLEN, H. SPENCER EVERETT, Jr., General Counsel. MASSACHUSETTS FINANCIAL SERVICES, INC., Senior Specialist in Business Economics, Economics Division, The Library of Congress, Congressional Research Service, Washington, D.C. DEAR MR. ALLEN: Your December 19, 1973 letter asks for certain information relating to our policies with respect to voting corporate securities. At the outset, I think it is important to point out that Massachusetts Financial Services, Inc. (MFS) does no own any corporate securities. MFS is the investment adviser to various investment clients including five open-end investment companies. The Trustees and Directors of those mutual funds have delegated to MFS a dominant role in the determinations made with respect to the voting of corporate securities held by the funds. Final responsibility ultimately rests upon the Trustees or Directors of each fund. 1. The funds hold full voting rights for that percentage of their portfolios invested in preferred and common stocks. This leaves only the portion held in debt securities and cash or cash equivalencies which would have no voting rights. 2. In general, the funds exercise their voting rights. However, when it has been in the best interests of the shareholders to do so, votes have been withheld. One occasion where a fund withheld its vote involved a proxy statement of a utility company proposing to increase its board of directors by three members without naming the proposed new members. The fund communicated with the company, suggesting that there was a lack of stockholder representation on the board and suggesting for election to the board a well-known New York City utility investment expert. The suggestion was not accepted and the fund withheld its proxy; the matter was not pursued further. 3. Each proxy received by a fund is assigned to the responsible analyst for analysis and recommendation. Where the proxy agenda is routine, he notes this, but if the agenda is not routine, he prepares a critical analysis of the proposals. His analysis and his recommendations are presented to counsel and then to a designated Director or Trustee in a written memorandum. If controversial matters are involved which are not the subject of firm policy or if the Director of Research disagrees with the analyst, the issues will be resolved by the Directors of MFS. Proposals of minority stockholders are analyzed in the same manner as those of managements. If a proxy is withheld or a proposal disapproved, a letter may be written to the management giving the reasons for the action taken. Proxy items of various companies have drawn negative votes from the funds. Several proposals to amend retirement and pension plans of portfolio companies have not been approved by the funds. The primary reason for the negative votes in this area has been that the proposals would, if approved, allow the company to continue to increase benefits without obtaining subsequent shareholder approval. Another area in which the funds have voted negative is that of a change in the capital structure of the company. In each case, the proposed method of additional financing did not seem to be in the best interests of the stockholders. In conclusion, each proxy is voted on its own merits, non-routine matters being given special analysis. In addition to the five fund clients, MFS has an Investment Counsel Division which provides investment advice to a small number of substantial clients, such as corporate pension plans and endowment funds. MFS prefers that these clients make all proxy voting decisions themselves. If you have any questions, or require additional information on the above mat. ters, please do not hesitate to contact the undersigned. Very truly yours, ARNOLD D. SCOTT, Mr. JULIUS W. ALLEN, SCUDDER, STEVENS, & CLARK, New York, N.Y., December 27, 1973. Senior Specialist in Business Economics, Economics Division, The Library of In light of the increased number of issues presented to shareholders at annual meetings, which are not of major investment significance, it is our policy to have proxies sent by custodian banks directly to the beneficial owner rather than to Scudder, Stevens & Clark as investment counsel. Sincerely, ECKLEY B. COXE, IV, Senior Vice President. PART II: RESPONSES RECEIVED FROM BROKERAGE HOUSES BACHE & Co., INC., New York, N.Y., January 25, 1974. Mr. JULIUS W. ALLEN, DEAR MR. ALLEN: This is in reply to your letter of January 4, 1974 to Mr. John E. Leslie in which you request certain information relating to the procedures of Bache & Co. Incorporated in voting of corporate securities held in our corporation's name. As you are probably aware, corporations such as ours which are members of one or more national securities exchanges are required to follow the rules and regulations prescribed. For example, as a member organization of the New York Sock Exchange, Inc., our corporation is governed by the proxy rules of the Exchange. I have attached for your convenience copies of Exchange rules 450 through 454 covering the ground rules on the transmission of proxy material and the giving and voting of proxies by member organizations. Your letter inquired about our procedures in voting corporate securities beneficially owned by our corporation and held in its own name. Since the extent of our proprietary holdings of securities has not been significant, the |