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January 15, 2009
TO: ACCOUNTING/TREASURERS MEMBERS No. 6-09CHIEF COMPLIANCE OFFICER COMMITTEE No. 1-09
CLOSED-END INVESTMENT COMPANY MEMBERS No. 3-09
OPERATIONS MEMBERS No. 2-09
PRIMARY CONTACTS - MEMBER COMPLEX No. 1-09
SEC RULES MEMBERS No. 5-09
SMALL FUNDS MEMBERS No. 4-09 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 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, 2008. Pearl Meyer & Partners, 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. If your firm is interested in participating, please complete and return the attached Survey Agreement.
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, regulators, legislators 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;
- mandatory retirement, board self-assessment, and share ownership practices;
- use of independent counsel, consultants and dedicated staff;
- demographic information including age, professional background, and length of service;
- types of benefits and services provided to directors; and
- the structure, type, and amount of trustee compensation, including retainers, committee fees, meeting fees, and total compensation. To facilitate analysis and comparison, compensation data will be provided based on assets served (e.g., less than $1 billion, $1–$3 billion, $3–$5 billion, etc.) and the number of funds served (e.g., 1–5 funds, 6 –10 funds, etc.).
In addition, ICI will provide opportunity for participants to request customized analyses of Study data. Study participants may request a report describing compensation and practices for a participant-specified peer group. Further, the Institute has developed a regression analysis that can be used to analyze compensation. These opportunities for customized analyses will be available to Study participants shortly after the release of the Study summary report.
Participation Fee
In light of current economic conditions, the Institute has carefully considered the consultants and processes used to conduct the Study. As a result of this review, we have identified cost savings enabling us to reduce the participation fee associated with the Study. The participation fee schedule below reflects reductions of 15%-20% relative to the previous Study. The Study will continue to cover the same range of director practices and compensation information captured in previous studies.
As noted above, aggregate industry-level director practices data may be released to support 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, 2009. 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, 2008 and the subsequent survey that will collect compensation data for the year ended December 31, 2009.
Total Assets of Open-end, Closed-end, Variable Insurance, and ETFs in Complex (as of 12/31/08) Participation Fee ICI Member Non-ICI Member Over $30 billion $2,650 $5,300 $20 - $30 billion $2,300 $4,600 $10 - $20 billion $1,950 $3,900 $5 - $10 billion $1,500 $3,000 $3 - $5 billion $1,150 $2,300 $1 - $3 billion $725 $1,450 Under $1 billion $400 $800
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.
Timetable
Fund complexes have until February 6, 2009 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. 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 6. 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
ICI/IDC DIRECTORS PRACTICES STUDY SURVEY AGREEMENT
Fund Complex Name:
Please Check as Appropriate:
Yes, my complex will participate [ ] No, my complex will not participate [ ]
By agreeing to submit data and participate in the ICI/IDC Directors Practices Study, the above named fund complex (“Complex”) agrees that the information contained in the Study (including the Study questionnaire and aggregate results) is the proprietary, confidential, and copyrighted property of the Investment Company Institute. The Complex agrees that the Study and its contents may be shared with the Complex’s employees, its agents and its fund directors, so long as (i) the Complex’s employees and any such agents or directors are subject to contractual or other obligations in the normal course of their work or business to keep information confidential and (ii) the Complex, its employees and any such agents or directors do not disclose, publish, or otherwise share the Study with other persons without the prior written authorization of the Investment Company Institute. Notwithstanding anything to the contrary, ICI may from time to time share the aggregated Study results with third parties it deems appropriate.
Name Signature Authorizing Contact: (will receive summary report results) Name: Phone: Company: Fax: Address: Email: Survey Completion Contact: (responsible for completion of survey questionnaire) Name: Phone: Company: Fax: Address: Email: