There may come a time when the U.S. Postal Service seems nearly as antiquated to the mutual fund industry as the Pony Express does now.

E-mail and the Internet have the ability to save fund companies enough in printing and mailing costs that fund companies might soon think of the postal service as an artifact of a bygone era.

Financial service companies spend about $10 billion annually on the printing and mailing costs of their fulfillment documents, not including statements and confirmations, according to New River Investor Communications of Andover, Mass. By sending all fulfillment documents to investors electronically, the industry could cut its fulfillment expenses in half, according to Larry C. Renfro, president and chief executive officer of New River.

New River has a lot to gain if the industry moves toward electronic fulfillment. The company, which changed its name from InUnity Corp. in February, helps financial services companies develop electronic communication programs with a variety of products and a consulting practice.

Many mutual fund companies already make their fund prospectuses available to potential investors on their web sites and they are allowing investors to vote proxies online. What most companies are not doing right now is sending so-called "post-sale" fulfillment documents to investors who have already purchased funds. Those documents include annual reports, semi-annual reports and statements of additional information.

For over a year, the Vanguard Group of Valley Forge, Pa. has been giving shareholders the option to receive reports and statements electronically, according to Brian Mattes, a principal at the company. Shareholders with online access can opt to receive either their reports or statements by e-mail. But most investors who opt to receive the reports online are still hesitant to receive statements through the Internet and are choosing to continue receiving them on paper, Mattes said. Vanguard shareholders could save themselves over $40 million in annual postage costs if they all chose to receive mailings electronically, he said. But, he did not know how many people are now opting for electronic delivery of the documents.

The Calvert Group of Bethesda, Md. is now offering shareholders the option of receiving regulatory reports such as prospectuses and annual reports exclusively online. Direct mailings, asking investors to consider getting regulatory reports online, were sent to half of the shareholders with the semi-annual report Aug. 30. The mailing said opting to do so would provide shareholders savings in fund expenses, including postage and paper costs.

Calvert mails shareholders 26 tons worth of regulatory mail annually, said Karen Becker, senior vice president and director of client services with Calvert. Many shareholders at the socially conscious fund group have indicated they want to stop receiving paper, she said.

"We're getting e-mails, thank-you's and positive comments," Becker said. The remaining shareholder base will be contacted later about electronic mail delivery, she said.

Since 1995, Calvert has offered shareholder account access through its web site. But next year, the company plans to offer investors the ability to receive all their statements, which are sent out every quarter through the mail, online.

Meanwhile, New River is working with DST Systems of Kansas City, Mo. to create a new product called Investor Communications Express that will allow financial services companies to send confirmations and statements to shareholders electronically. E*Trade of Menlo Park, Calif. has signed a letter of intent to use the product and will be the first company to do so, according to Renfro.

New River also offers a product called Prospectus Express, which allows companies to provide prospectuses to investors online. Another product called Consent Express enables companies to disseminate and store consent forms. The SEC requires companies to obtain these forms from investors before the companies can send reports and statements to investors online. Current New River clients include E*Trade, Salomon Smith Barney of New York, Dreyfus of New York, Aetna of Hartford and Prudential Insurance of Newark, N.J.

Bowne & Co. of New York, one of the world's largest financial printers, has developed its own electronic fulfillment program and is seeking to develop a business of assisting mutual fund and financial services companies develop electronic mailings. The company is not afraid of losing business as financial services companies move toward electronic fulfillment, said Gary Purnhagen, director of Bowne's Investment Management Company Services division.

"We're positioning ourselves as a total fulfillment provider," Purnhagen said.

Most fund companies should expect that within the first year of adopting an electronic fulfillment system, between five and ten percent of shareholders will choose to receive electronic mailings, Purnhagen said. That percentage should rise incrementally in succeeding years, he said.

Bowne helped Vanguard post its fund prospectuses online as early as 1994, Purnhagen said. He declined to name any of the company's current clients who are interested in electronic fulfillment.

In August, Bowne was one of several companies that invested in an Internet mutual fund web site, called Netstock Direct of Bellevue, Wash., that sells mutual funds directly to consumers. The site also provides investors with prospectuses and marketing materials directly over the Web. In the future, it plans to help the mutual fund industry eliminate paper by providing fulfillment and marketing materials online through its site.

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