CHEMICAL BANK (Report from the Trust and Investment Bank) I-Introduction Chemical Bank is organized into four functional units Metropolitan Bank Corporate Bank Trust and Investment Bank Each unit renders its particular services in different areas of the financial world. In this report, the purposes and operations of the Trust and Investment Bank are described. Because these services are used by so many people, they should be understood by all. WHAT IS THE TRUST AND INVESTMENT BANK? In general, the Trust and Investment Bank furnishes investment management or advice in the handling of other people's property, together with all types of administrative services. To provide the specialized services which meet customers' needs and problems, the Bank serves them through two groups, the Personal Group and the Corporate and Institutional Group. V—“Corporate Control"—-Voting of PROXIES In recent years, the spectre of the trust departments of the nation's banks investing their trust assets for the purpose of acquiring control of corporations has been raised repeatedly in surveys, investigations, reports and speeches. Chemical Bank believes that any such inferences are unrealistic and incorrect. As far as Chemical itself is concerned, it buys stocks for its personal and corporate fiduciary accounts solely for the purpose of investment and not, to the slightest extent, for control. As executor and as trustee, the Bank is under the serious legal responsibility of managing the accounts solely for the benefit of the beneficiaries and no other considerations affect its investment policy. The Trust and Investment Bank does not want to control corporations or to manage their affairs. Not only does it lack the experience and the time to manage national businesses, but its only purpose is to make prudent and promising investments for the estates and trusts committed to it. It cannot be restated too emphatically: In its capacity as executor or as trustee, Chemical buys stocks because they appear to be attractive investments and not for any other ulterior purpose. Inevitably, a large corporate fiduciary will find itself with substantial holdings of stock of one or more corporations. Where this exists at Chemical, it is because the stock was received from the decedent as part of his estate or was placed in trust by the person creating the trust, and the companies are usually small or closely held corporations. In those instances, and to the extent that the Bank does have a substantial voice in the corporations' affairs, it uses its position solely in the interests of the estate or trust involved. The tables which appear subsequently in this Report show that (aside from such situations) the combined holdings of the estates and trusts administered by the Bank do not approach anything like control of any corporation. Voting of Proxies: The Bank recognizes its responsibility in voting proxies for shares in trust accounts. Only those shares which the Bank holds as sole trustee with complete investment discretion are voted. Proxies held in custody or agency accounts or where there is shared control (such as a co-trustee) are forwarded to the customer or co-trustee to be voted by him. A special proxy review committee of senior officers thoroughly reviews all proxy material and shareholder proposals. Available to this committee is the objective factual material provided by the Investor Responsibility Research Center, Inc. which analyzes shareholder positions in corporate voting. The recommendations of the proxy review committee are submitted to senior management of the Trust and Investment Bank. 37-733 O 74 pt. 3 26 VI-INVESTMENT STATISTICS The following tables summarize the largest stock holdings in the Trust and Investment Bank: The first table shows our fifty largest equity holdings. The holdings of the Personal Group and of the Corporate and Institutional Group are also presented separately because they are governed by, and represent, different investment considerations. In estates and trusts, and in investment management accounts of individuals, the individual circumstances of each, the impact of taxes upon changes in investments and, very frequently, particular provisions in wills and trusts, necessarily have a bearing upon investment decisions. These factors are usually not present in the corporate and institutional funds, especially those which are exempt from income and capital gains taxes. Because of this, the Commingled Funds which are managed by the Corporate and Institutional Group and which are used as investment mediums for tax-exempt pension and other employee benefit trusts are most representative of the Bank's investment policies unaffected by tax and other considerations, and while not indicative of the performance of any single employee benefit fund, the investment performance records of the commingled funds are separately shown. 1 Where the Bank has sole investment control, proxies on this stock are not voted. Where the control is shared or rests in others, proxies are referred to cotrustees or others with investment control without recommendation. Of these shares 169,254 are held in the Chemical Bank Profit Sharing Plan. Proxies for these shares are voted by the employee-participants. 2 Of these shares 1,130,644 are held in the Uniroyal Savings Plan. Proxies for these shares are voted by the employeeparticipants. 3 Of these shares 644,250 are held in the Goodrich Employees Savings and Stock Purchase Plan. Proxies for these shares are voted by the employee-participants. Where the Bank has sole investment control, proxies on this stock are not voted. Where the control is shared or rests in others, proxies are referred to cotrustees or others with investment control without recommendation. Hon. LEE METCALF, WILMINGTON TRUST CO., Wilmington, Del., March 15, 1974. Chairman, Subcommittee on Government Operations, DEAR SENATOR METCALF: Your letter of March 11, 1974 to Mr. W. W. Geddes has been referred to me for reply. We have not published and are not planning to publish a report dealing with our Trust Department's investments as of the end of 1973. Sincerely yours, W. D. MERTZ, Senior Vice President. SECURITY PACIFIC NATIONAL BANK, Hon. LEE METCALF, U.S. Senate, Committee on Government Operations, DEAR SENATOR METCALF: Mr. Larkin referred your letter of March 11 to me for reply, as I am the officer in charge of our Fiduciary Services Group. We have not published nor do we have plans to publish a report on our Trust Department investments with respect to the year ended 1973. Sincerely, ROBERT L. HUNT, Executive Vice President. WELLS FARGO BANK, San Francisco, Calif., March 19, 1974. Hon. LEE MEtcalf, Washington, D.C. DEAR SENATOR METCALF: This is in response to your letter to our President, Richard P. Cooley inquiring as to whether or not we have published a report dealing with the activities of our Trust Division. We have not published such a report but have been giving serious consideration to doing so. Should we conclude to prepare such a report we will be sure to send you a copy. Sincerely yours, Hon. LEE METCALF, Senate Office Building, Washington, D.C. DEAR SENATOR METCALF: Thank you for your letter of March 11. If we publish a listing of our Trust Department holdings, I will be happy to see that you get a copy. Sincerely, W. B. EAGLESON, Jr., |