As fiduciaries with a long-term investment horizon, CalSTRS is committed to exercising its proxy authority over portfolio investments.

Fiscal year 2010-2011 Proxy Vote Summary

Election of Directors

Times Voted: 17,179 ( 58%, 42%)

CalSTRS accounts for each individual director as a separate proposal instead of as a slate.

CalSTRS will vote in favor of a director unless the proxy statement shows circumstances contrary to policy. Circumstances contrary to policy may include:

• Potential conflict of interest due to other directorships or employment.
• Providing legal or investment banking advice.
• Poor board meeting attendance (less than 75 percent).

Selection of Auditors

Times Voted: 2,819 ( 91%, 9%)

CalSTRS will vote in favor of the independent auditors recommended by management unless the auditor provides services that run contrary to CalSTRS policy.

Such services may include:

• Consulting.
• Information system design and implementation.
• Investment banking support.
• Excessive non-audit fees (greater than 30% of the total fees billed).

Compensation Plans (Stock Option Plans, Employee Stock Purchase Plans, etc.)

Times Voted: 1,264 ( 49%, 51%)

Companies provide a variety of compensation plans for executives, employees, and non-employee directors. Many of these plans provide for the issuance of long-term incentives to attract, reward, and retain key employees.

Advisory Vote on Compensation

Times Voted: 2,350 ( 77%, 23%)

More commonly known as Say-on-Pay, these are periodic votes that provide shareholders the opportunity to ratify the compensation of the executives named in the proxy. CalSTRS votes on these proposals on a case-by-case basis. It should be noted that the "Against" votes detailed below are the instances where companies had instituted Say-on-Pay and shareholders voted down the management proposal to approve the plans.

Approve Merger/Acquisition—Management

Times Voted: 151 ( 93%, 7%)

CalSTRS evaluates mergers and acquisitions on a case-by-case basis using a total portfolio view.

Corporate Actions/Corporate Governance

Times Voted: 627 ( 67%, 23%)

CalSTRS votes on these proposals on a case-by-case basis.

Including actions related to:

• Spin-offs
• Incorporation
• Stock issuance
• Stock splits

Miscellaneous Issues—Management

Time Voted: 571 ( 47%, 53%)

These issues are voted on a case-by-case basis.

CalSTRS will vote in favor of other miscellaneous business recommended by management unless the issue to be voted on is contrary to policy. See the Teachers' Retirement Board Policy Manual, Attachment B.

Shareholder Proposals

Times Voted: 475 ( 70%, 30%)

Shareholder proposals are voted on a case-by-case basis. CalSTRS votes on a variety of shareholder proposals.

Votes on proposals include:

• Removing classified boards of directors.
• Requiring an independent board chairman of directors.
• Eliminating poison pills.
• Tying compensation plans to company performance.
• Requiring shareholder approval for large severance packages.

CalSTRS corporate governance policies including proxy voting are included in the Teachers' Retirement Board Policy Manual, Section 600.

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