Background & Explanation

The Elite Group of Mutual Funds is a small family of two funds. The Elite Funds are the only client for McCormick Capital Management the Investment Advisor. With over thirty-five years of voting proxies, the investment advisor has developed an unusual but unique approach to voting proxies.

In participating in, and observing thousands of proxy issues over the last several decades, we have rarely observed when corporate management has lost a vote in those securities for which we had responsibility. This would include management’s nominees for directors, corporate governance issues, and their opposition to social issues. With few exceptions, other shareholders routinely “rubber stamp” management directors and their proposals. With these realities, the challenge is to develop a proxy policy that would be in the best interest of our shareholders and deliver the “biggest bang” for our small number of shares.

Proxy Issues

Nominees for Directors: Given that there are no alternatives nominated for director, we will withhold all votes for management nominees.

Independent Auditors

We believe that the relationship between the company and its auditors should be limited primarily to the audit engagement, although it may include certain closely related activities that do not, in the aggregate, raise any appearance of impaired independence.

We will vote against proposed auditors where non-audit fees make up more that 50% of the total fees paid by the company to the audit firm.

We will evaluate on a case-by-case basis instances in which the audit firm has a substantial non-audit relationship with the company (regardless of its size relative to the audit fee) to determine whether we believe independence has been compromised.

Compensation / Option plans etc.

We will oppose. As a generalization, management compensation is overly generous.

Corporate governance

Issues that we interpret as technical in nature (such as increasing shares outstanding) we vote in favor. Issues such as staggered boards, different class of stocks, cumulative voting and super majority voting, we oppose. Any issues that would entrench management’s position, we oppose.

Corporate and social policy issues

We believe that “ordinary business matters” are primarily the responsibility of management and should be approved solely by the corporation’s board of directors. Proposals in this category, initiated primarily by shareholders, typically request that the company disclose or amend certain business practices.

Material Conflicts of Interest

The SEC regulations required a policy to address how proxies would be voted if there were a “material conflict of interest” between the investment advisor and our mutual funds. Granted, that much larger financial institutions with many subsidiaries and divisions may have many conflicts when voting proxies. However, given the size, and nature of the Elite Mutual Funds, it is difficult to imagine any “material conflict” between the advisor and the funds. If such an issue does materialize, the proxy vote will be determined by a majority vote of the independent trustees.