December 4, 2002

Mr. Jonathan Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Re: Proposed Rule: Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies
File No. S7-36-02
Release Nos.: 33-8131, 34-46518, IC-25739

Dear Mr. Katz,

I strongly endorse the SEC's proposal to require management investment companies to disclose both their guidelines for voting proxies of portfolio securities and the records of their proxy votes. As an individual stockholder I regularly cast proxy votes, but my individual votes will have negligible impact on the outcome. As a holder also of mutual funds, however, the votes cast by the funds I own greatly magnify my impact to the extent that my wishes coincide with those of the mutual fund administrators. But the only way for me to assess the degree of correspondence between my philosophy of corporate governance and that of the mutual funds I own or may purchase is for such funds to publish both their guidelines and their voting records.

By being required to disclose their proxy voting policies and records, mutual fund managers will be further encouraged to perform their fiduciary duty by becoming more assertive in matters of corporate governance. Such activism should on balance accrue to the benefit of the shareholders.

The transparency of an investment company's guidelines for proxy voting will help potential investors decide whether or not they wish to own shares in the company's mutual funds. To the extent that the guidelines conflict with the philosophies of current shareholders, such shareholders will be provided information that might provide a basis for disposing of their holdings or for "educating" the fund management in matters of corporate governance.

In the remainder of this latter I address some of the questions (shown in boldface) posed in the proposed rule.

Should we require funds to disclose their policies and procedures with respect to voting proxies of portfolio securities?

Absolutely, for the reasons given above.

Should we provide greater specificity with regard to the disclosure that funds are required to make? For example, should our forms expressly require disclosure of any or all of the specific matters enumerated above or of any other specific matters?

The SEC should recommend - rather than require - the set of issues to be addressed in the investment companies' proxy voting guidelines. The document containing these guidelines, however, should either list the SEC's recommendations or indicate how the reader may obtain a copy thereof. The list of issues suggested in the proposed rule should be expanded to include:

  1. Independence of directors and the duties assigned solely to independent directors (e.g., serving on the audit and compensation committees).

  2. Degree to which the outside auditing firm may conduct other business with the company.

  3. The philosophy for insulating the proxy voting decision from potential conflicts of interest such as management of the pension plan of the company whose proxy is being voted.

Is the SAI (and, for closed-end funds, Form N-CSR) the appropriate location for funds to disclose their policies and procedures with respect to voting proxies relating to portfolio securities? Will our proposals provide adequate access to fund proxy voting policies and procedures by fund shareholders and prospective investors? Should the disclosure be included in a document that is delivered to every shareholder?

That depends on the length of the policy statement. If it is relatively short (say, six pages or less), it should be included in the annual report or proxy. Lengthy statements may be included in the SAI or other special-purpose document available both in printed and electronic versions, with instructions for obtaining such document included in the annual report. This will provide adequate access to the voting policies and procedures.

What would be the benefits to fund shareholders and others of having funds' proxy voting records disclosed?

Shareholders would be able to determine directly the degree to which the fund was voting their wishes. This information could be useful in making a decision to buy shares in the fund, sell shares, or contact the fund management to express the shareholder's concerns.

Is it sufficient to require that a fund's proxy voting record be made available to investors or should we require a fund to deliver its proxy voting record to each investor? For example, should a fund's complete proxy voting record be included in its reports to shareholders?

Requiring the complete voting records to be included in printed reports mailed to investors would, in many instances, result in an unwieldy and unnecessarily costly report. It would be sufficient to make this information available and readily obtainable to the interested stockholder upon request.

Should a fund be permitted to meet its obligation to disclose its proxy voting record exclusively through posting the required information on its website?

Because not all investors have access to and familiarity with the Internet, an investor should have the option to obtain the information readily via telephone or written request.

The proposal would require funds to disclose their proxy voting records semi-annually. Will this provide sufficiently frequent disclosure to investors? Should we require funds to disclose their proxy voting records more frequently? If so, through what means? Would less frequent disclosure, e.g., annually, be sufficient?

Printed versions of proxy voting records should be updated semi-annually. Web-based voting records should be updated on a continuing basis whenever proxy votes are cast. Links to web sites that report the proxy votes of fund managers may be found at See the web site of the California Public Employees Retirement System ( for a comprehensive reporting format.

Are we proposing to require too much or too little information to be disclosed in proposed Form N-CSR? For example, should we limit the disclosure to contested matters, not require disclosure with respect to any categories of "routine" matters, or otherwise limit the types of matters with respect to which disclosure is required?

All proxy votes should be disclosed.

Could funds generically disclose their votes on any categories of matters, e.g., votes with management (or votes as recommended by an independent third-party proxy voting service) on certain categories of issues? Would this type of summary disclosure provide investors with adequate information?

All proxy votes should be disclosed. Each disclosure should indicate the source of the item (management or shareholder), a reason for the vote, and (if relevant) why the vote did not conform to the fund's voting guidelines.

Should we require additional information, e.g., information about how other funds in the fund complex have voted?

A statement should be provided as to whether all funds in the complex are required to cast identical votes. If differing votes are allowed, the report should provide a list of other funds in the complex. It is not necessary for each fund to indicate how all other funds in the complex voted.

Should information about any other aspects of a fund's actual proxy voting record be required to be included in reports to shareholders? For example, should a fund be required to include in its reports to shareholders its votes on contested matters, management compensation issues, director elections, or any other matters?

The annual report or other report routinely mailed to all shareholders need only reference the proxies where votes were cast that violated the company's stated voting policies and procedures.

Thank you for the opportunity to comment on the proposed rule. I hope these comments have been helpful.

Yours truly,

William H. Levison