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The RFP Process Panel Discussion. Carl Hagberg – Carl Hagberg and Associates Kathy Huston – Group Five, Inc. Best Practices for Evaluating Options for Shareholder Services. Identify key issues Identify key contractual terms you have and want Develop a profile of your account
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The RFP ProcessPanel Discussion Carl Hagberg – Carl Hagberg and Associates Kathy Huston – Group Five, Inc.
Best Practices for Evaluating Options for Shareholder Services • Identify key issues • Identify key contractual terms you have and want • Develop a profile of your account • Request pricing proposals in a standard form • Consult with an industry expert
Things to Avoid • Auction bidding on services • RFP’s with more than 10 questions • Doing your evaluation in a vacuum • Doing the evaluation alone
Small Shareholder Buyback and Direct Stock Purchase Plan Analysis
Shareowner Composition • 1.3 Million Shareowners • 1.2 million beneficial owners • 310,000 registered shareowners • 75% held less than 100 shares • Average shares per odd-lot account - 17.3 • 2.3 Billion Shares Outstanding • 1% of the outstanding shares were held by the odd-lot accounts.
Odd-Lot Considerations • Odd-lot accounts represent a significant and recurring expense. • One-third of the odd-lot accounts were not reinvesting • Company’s last odd-lot was in 1988 • Stock price
Program Highlights • Program managed by Georgeson • Shareowners received notification by mail • Correspondence clearly indicated a voluntary program • Thirty day program with a 30 day extension period • Option to sell or round up • 50 shares or 100 shares round up • Sales matched with purchases • Follow up with automated phone calls
Concerns and Results • Board of Directors concerns • Shareowner alienation • Program estimates vs. actual participation • Conservative estimate of 8% on sales, 4% on purchases • Actual participation was 10% on sales, 2% on purchases • More than 70% that sold were in DRP
Costs and Savings • No costs to the Company • Estimated savings of 10% annually in shareowner servicing fees and expenses
Direct Stock Purchase Plan Considerations • Public interest for DSPP • Dated Dividend Reinvestment Plan • Registered Plan vs. Bank Plan • Date of Implementation • Cost Savings
Program Highlights • Purchases • Weekly • Initial investment minimum - $500 • Optional cash investments • Minimum - $50 • Maximum - $250,000 annually • Automatic deductions • 1st or 15th of the month • Sales • Batch order sales • $15.00 plus $0.12/share • Market order sales • $25.00 plus $0.12/share • Fees • Initial investment • $10.00 plus $0.03/share • Optional Cash investments • $3.00 plus $0.03/share • $2.00 plus $0.03/share (ACH) • Reinvestment of Dividend • 5% of the amount reinvested up to a maximum of $2 plus $0.03/share
Concerns and Results Presentation to shareowners Shareowner complaints Estimated savings of 12% annually in shareowner servicing fees and expenses
Results of Survey of Cost Savings Ideas Belinda Massafra Shareholder Services Consulting LLC
Thank You to Responders! • Ken Kaminski – BP Karl Wagner – Merck • Patricia Tai – Chevron Bette Jo Rozsa – AEP • Dru Cessac – AT&T Dianne Perry – Xcel Energy • Mark Gereb – Verizon Bernadette Maffei – Comcast • Kim McKiernan – The Walt Disney Company
Transfer Agent Account Fees • Perform database clean up to reduce number of accounts*: • Sweep fractional shares monthly. • Perform account consolidations on some regular basis. *May also reduce printing and mailing costs. • Negotiate a reduced fee for “inactive” accounts with the fee adjusted monthly. • Reduce number of small accounts with an odd lot program.
Out-of-Pocket Costs Envelopes • Eliminate return envelopes in mailings. • Use back of envelopes to promote your shareholder website. Certificates • Eliminate certificates or use print on demand. • Consider charging for certificates.
Out-of-Pocket Costs Documents/Brochures/Forms • Use print on demand instead of keeping an inventory. • Be sure copies are available on your website.
Out-of-Pocket Costs Postage and Printing • Be sure you are receiving all available postal discounts. • Promote use of TA website to shareholder for self help andstatement/document delivery. • Provide incentive for shareholder to use Internet delivery. • Combine mailings when possible (e.g., last dividend w/1099).
Out-of-Pocket Costs Postage and Printing • Use top and back of check or statement to communicate and educate shareholders on services available online. • Promote ACH deposit of dividends – safer and possibly faster. • Don’t mail ACH advices. They can check their bank accounts. • Go to an annual dividend.
Dividend Reinvestment and Direct Stock Purchase Plans • Calculate the cost/benefit of your dividend reinvestment plan. Does upper management still support it? • Change Plan terms so participants cover some or all of the costs.
Dividend Cash • Negotiate with TA to receive interest on cash balance related to un-cashed dividend checks. • Alternatively, use a zero balance account that pays as checks are presented.
Shareholder Communications -- Newsletters • Eliminate print quarterly newsletter. • Put electronic version online if management thinks one is still necessary. • Mail print version with the dividend check(s) to save postage.
Proxy Process • Use Notice and Access to reduce print and postage costs. • Consider stratified mailing if concerned about vote. • Promote e-delivery of documents. • Use householding to reduce number of packages.
Annual Meeting • Make it a business meeting without elaborate food and give aways. • Hold meeting in corporate headquarters or town to reduce travel expenses. • Hold a “virtual meeting” – Example: Intel