[20777]
January 11, 2007
TO: ACCOUNTING/TREASURERS MEMBERS No. 2-07CHIEF COMPLIANCE OFFICER COMMITTEE No. 1-07
CLOSED-END INVESTMENT COMPANY MEMBERS No. 5-07
OPERATIONS MEMBERS No. 3-07
PRIMARY CONTACTS - MEMBER COMPLEX No. 2-07
SEC RULES MEMBERS No. 6-07
SMALL FUNDS MEMBERS No. 6-07 RE: SIGN-UP PERIOD OPENS FOR ICI/IDC DIRECTORS PRACTICES STUDY
The Investment Company Institute and the Independent Directors Council are committed to providing programs and services that help fund boards, especially independent directors, fulfill their responsibilities to shareholders. As part of this effort, the Institute has conducted studies of director practices since 1996. These studies, which represent some of the most comprehensive surveys to date on investment company directors, returned data to participating fund complexes on both director practices and director compensation.
The Institute, with the assistance of the IDC, plans to conduct its annual Directors Practices Study covering the year ended December 31, 2006. Mercer Human Resource Consulting (“Mercer”), a nationally recognized compensation consulting firm has been retained to assist in performing the Study. We are pleased to invite your organization to participate in the ICI/IDC Directors Practices Study. Please complete and return the attached Survey Agreement designating your willingness to participate in this Study. The Independent Directors Council will inform fund directors of the opportunity to participate in the Study through a separate communication.
Study Objectives
The primary objectives of the Study are: (1) to provide participants with data necessary to make well-informed judgments about trustee practices, including compensation; and (2) to develop a resource that will permit the ICI and the IDC to communicate authoritatively, on the industry’s and directors’ behalf, with media, government and others on these subjects.
Individual company responses to this survey will be held in strict confidence; however, aggregated survey data, including trend analyses, may be released to the media or public officials in order to support ICI and IDC policy initiatives. In particular, we anticipate release of aggregated industry-level director practices information, including analyses of changes in director practices since the inception of this survey, in order to support ICI and IDC programs.
At the conclusion of the data collection and analysis phases of the survey, a summary report of the aggregate survey results will be provided to each participant. The report will present detailed analyses of director practices and compensation, including:
- board and committee meeting practices, including meeting frequency, meeting length, number and types of committees, and relative time spent addressing specific areas of responsibility in board and committee meetings;
- trustee term practices, mandatory retirement practices and term limits;
- use of independent counsel, consultants and dedicated staff;
- demographic information about trustees, including age and professional background;
- types of benefits, perquisites and services provided to directors; and
- the structure, type, and amount of trustee compensation, including retainers, committee fees, meeting fees, and total compensation. Compensation analysis is provided on an industry-wide basis and by complex size (both assets under management and number of funds).
In addition, to provide maximum utility of the survey data, participants may request a report describing compensation and practices for a participant-specified peer group. Concurrent with the delivery of the summary report, participants will be invited to request one such peer group analysis without charge. Additional peer group reports may be requested for a fee of $125 per report. Each participant-specified peer group will be required to consist of at least seven participating fund groups.
Participation Fee
As noted above, aggregate industry-level director practices data may be released to support of ICI and IDC policy initiatives. Director compensation data however, will be provided only to fund groups that participate in the Study. Fund groups that do not participate will not have access to compensation data or peer group reporting.
Fund groups that elect to participate in the current Study will be expected to participate in the subsequent study collecting compensation data for the year ended December 31, 2007. In order to ensure a comprehensive database on director practices, fund groups will not be permitted to participate on an every other year basis (i.e., those years in which only compensation data is collected).
Fund groups that elect to participate in the Study will be charged an asset-based fee intended to cover the Institute’s out-of-pocket costs for performing the Study. The fee rates described below cover participation in both the current survey collecting director practices and compensation data for the year ended December 31, 2006 and the subsequent survey that will collect compensation data for the year ended December 31, 2007.
Total Assets of Open-end, Closed-end and Variable Participation Fee Insurance Funds in Complex (as of 12/31/06) ICI Member Non-ICI Member Over $30 billion $3,100 $6,100 $20 - $30 billion $2,725 $5,350 $10 - $20 billion $2,350 $4,600 $5 - $10 billion $1,800 $3,600 $3 - $ 5 billion $1,400 $2,825 $1 - $ 3 billion $ 900 $1,950 Under $ 1 billion $ 500 $ 1,175
Data Collection
Fund groups that agree to participate in the Study will be required to complete a questionnaire that collects complex level data on board practices and director level compensation data. Participants will enter their questionnaire responses through a web-based application on a secure site. Fund groups will be asked to designate an employee of the management company responsible for completing the Study questionnaire. Participant responses are confidential, although, in accordance with the ICI Survey Agreement, ICI may from time to time share aggregated survey results with third parties as it deems appropriate.
TIMETABLE
Fund complexes have until February 2, 2007 to signify their intention to participate by filling out the attached Survey Agreement and returning it to the Institute. We expect to provide the survey questionnaire to participants in early March. Participants will have approximately one month to complete the survey questionnaire. We expect to deliver summary reports to participants and begin accepting peer-group report requests in August. The summary report detailing Study results will be a copyrighted publication. Participants are expected to keep the Study results confidential in accordance with the Survey Agreement, as the results are intended for use by participants only.
Action Requested
Please return the attached Survey Agreement to the Institute by fax (202/326-8314) or email (smith@ici.org) no later than February 2. Please do not send participation fee payments to the Institute at this time. An invoice will be mailed to participating complexes separately.
Please do not hesitate to contact the undersigned (202/326-5851) or Annette Capretta of the Independent Directors Council (202/371-5436) with any questions regarding this project. We look forward to working with you on the ICI/IDC Directors Practices Study.
Gregory M. Smith
Director - Operations/Compliance & Fund Accounting