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Opportunities Arise with Summary Prospectus

With more than nine in 10 shareholders reporting Internet access, the SEC's summary prospectus rule represents more than just an opportunity to provide an easier-to-understand document. The new rule provides a unique chance to refine the overall shareholder communication model.

The SEC's summary prospectus rule mandates the filing of a summary prospectus beginning January 2010. As firms devise their implementation strategies to meet this date, they can look to use the summary prospectus as a catalyst to revisit their communications goals and objectives. Beyond realizing cost savings, fund companies can increase efficiencies, customize messaging delivered to shareholders and expand communications opportunities.

As the print provider for DST Systems and Boston Financial, which support a significant percentage of fund companies that outsource recordkeeping, we at DST Output recommend the following checklist:

* Get the right people involved early to examine overall shareholder communications strategies. Catalog documents going out, when, and to whom. This likely will uncover opportunities for streamlining communications and delivery.

* Explore opportunities to bring compliance and transactional documents together in a single package, along with customized educational information. Further, pairing this targeted shareholder communications approach with "TransPromo," a marketing technique in which transactional customer communications are combined with customized marketing messages, fund companies can enhance the power of their customer communications.

* Consider methods for increasing adoption of electronic delivery. For example, with any of the current printed documents sent to shareholders, include campaigns to ask for delivery preference, offer incentives to drive adoption, or just introduce the concept of electronic delivery and its benefits to shareholders and the environment.

* Perform a cost-benefit analysis to help guide decisions. This can be as simple as calculating savings from a reduction in printed pages and postage to a more sophisticated ROI analysis. DST Output and other outsourcing vendors are at-the-ready to assist clients with this effort.

In addition to these approaches, DST Output is looking at additional ways to leverage the new rule, such as reforming first-dollar fulfillment and annual delivery practices, as well as adding electronic delivery options, as ways to impact efficiencies and costs.

First-dollar, first opportunity. According to industry sources, $375 million was spent last year on first-dollar fulfillment, which in many instances is comprised of the mailed confirmation of a shareholder's initial investment, followed by a separate mailing of the statutory prospectus, either as a standalone mailing or in a welcome kit. The expense of print production, materials and postage for two separate mailings can be greatly reduced in light of the summary prospectus rule.

A new tactic to consider is single-package delivery. DST Output has seen significant interest in inline-printing of the summary prospectus with the first-dollar confirm, bringing two disparate streams together. The cost-effective package can contain the first-dollar confirm, summary prospectus (with greater prominence) and any welcome or marketing materials.

Annual delivery, yearly savings. Similarly, combining annual mailings can help improve efficiencies. Mailing a booklet-sized annual prospectus incurs considerable printing and postage costs. Implementation of the summary prospectus can dramatically impact expenses, especially postage, when fund companies send three to four pages rather than the typical 40- to 50-page booklet. The smaller summary prospectus also lends itself to consolidation with other shareholder mailings that overlap with the annual delivery timeframe. Fund companies can take advantage of the additional space in the envelope to piggyback these mailings (again, with greater prominence).

Multiple delivery channels, added benefits. Certainly, Internet delivery is a low-cost delivery method, but it is not the only electronic adjunct to print. Offering disclosure documents on CD or DVD is another inexpensive, easy-to-use electronic delivery option. Outsourcers like DST Output can help to manage delivery options not only for summary prospectus, but as part of an overall strategy to integrate and manage individual preferences for all shareholder communications.

It's easy being green. One kind of green translates to another when one considers that, in addition to providing cost savings, the summary prospectus rule is expected to save an estimated 39,000 trees and 128 acres of forest each year. As a print provider, DST Output is committed to water-based ink and more energy-efficient inkjet print technology, delivering clients an even greater opportunity to go green.

The summary prospectus ruling provides an impetus for new ways of delivering on the SEC's objective to simplify disclosure. As firms look for ways to leverage the summary prospectus across all shareholder communications, fund companies need to examine innovative methods available, to realize greater efficiencies and lower costs for what has historically been a relatively inefficient and complex process.

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