Dear Rick:
I’ve been a mutual fund investor for years and the other day I received a call from a company and they basically were encouraging me to vote my proxy statement. I’ve never voted in the past and I was surprised that I received a phone call. My first question is why do you think they contacted me and second, what should I look for when I vote my proxy?
Ron

Dear Ron:
I’ve noticed more and more companies are becoming very proactive in encouraging investors to vote their proxy statements. Therefore, the fact that you received a call is not that unusual. Just a couple of weeks ago, many of our clients received an “Extremely Important” letter to call a toll-free number, which was basically a proxy vote from a mutual fund company.

Proxy statements are required when a publicly held company seeks shareholder approval for a corporate matter. With mutual funds, typically the proxy statement is to vote for the board of directors, approving investment advisory agreements, or to raise fees. In addition, there may also be other items to vote on. I believe some companies have begun contacting shareholders and encouraging them to vote so that they don’t have to repeat the process. If the company does not receive a sufficient number of votes, they have to repeat the proxy process which is expensive and time consuming. That is why companies have begun calling and/or writing shareholders and encouraging them to vote.

One thing that I have discovered over the years is that proxy statements generally contain a wealth of information about the company and its management. Contained in proxy statements is information on executive compensation, credentials and affiliations of members of the board of directors, and in addition, you can see who inside the corporation owns stock.

When I get a proxy statement, particularly from a mutual fund company, what I tend to focus on the most is fees. I generally don’t want to see a company raising their fees. Therefore, in most cases if a mutual fund is attempting to raise their fees, I always vote against it. Of course there is the exception to the rule and that is if in the proxy materials they provide a good reason for the fee increase. In the great, great majority of situations, I always vote no when it comes to fee increases. It is the very rare case where I will vote for an increase in fees.

Over the last number of years they have made voting proxy statements easier than in the past. In the past, the only way to vote was to mail the ballot in. In today’s world, in many situations you’re allowed to vote over the phone and also on the internet.

Whether you decide to vote or not is totally up to you. However, I would recommend that you do review the proxy statement. As I mentioned earlier, a proxy statement contains a wealth of information about your investment, and the more you know about your investment, the better is it for you. Therefore, the next time you receive a proxy statement, as opposed to throwing it out, at least take some time to review the materials sent to you. Even if you decide that you are not going to vote, reading the materials will help you be a more informed investor and the more informed investor you are, the better investor you will be.

Good luck!

If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com