If the experience one shareholder communications company has had in convincing fund companies to begin offering shareholder documents electronically is indicative of industry attitudes overall, it would appear mutual funds would rather use the post office.

One year ago, New River, an investor communications company of Andover, Mass., and DST Systems, the back office services company of Denver, developed the Informa Alliance, a network of companies that collaborated to offer the fund industry the most comprehensive electronic delivery product on the market, according to the two companies.

The Informa platform, as the product is called, can electronically deliver all SEC fund filings in addition to annual statements, tax documents and trade confirmations, according to Craig LeClair, executive vice president at New River.

Even though delivering documents via the Internet could cut the costs of document delivery by more than half, selling shareholders and fund companies on the idea of electronic delivery has been extremely difficult, he said.

Use of the product has fallen significantly short of the alliance's goals, LeClair said. The firm plans to announce soon that one million investors have consented to receive their documents electronically, significantly short of the five million consents the firm had hoped it would collect by this time, he said.

"We have been very disappointed with the rate of adoption," he said.

Fund companies are more concerned with generating new business and as a result, cost saving measures like electronic delivery of documents is a secondary concern, he said.

The combined client base of DST and New River represents approximately 50 percent of retail mutual fund assets, according to New River. But a year after developing the Informa platform, only six to eight fund companies use the product and those firms are mainly using the service to offer statements online, LeClair said.

Nvest of Boston is the only exception, he said. It began offering electronic delivery of its SEC documents and account statements to investors last May and has received 1,326 consents, representing a little under one percent of its shareholder base, said Suzanne Billante, vice president of electronic commerce for the firm. The firm has marketed the service to encourage investors to switch from paper, using telephone campaigns and advertising the service in the company's newsletter, she said.

In order to pass savings on to investors, at least five percent of its investors would have to begin receiving fund documents electronically, she said. The challenge lies in changing investors' preference for paper, she said.

Adding the technology needed to offer investors electronic documents is not that expensive and provides immediate cost benefits, said Steven K. Miyao, senior vice president of kasina, an electronic commerce consultant in New York. Printing and postage costs for 100,000 shareholders are approximately $390,000, Miyao said. Using electronic delivery, those costs would amount to only $180,000, he said.

Van Kampen Investments of Chicago began offering prospectuses, shareholder reports and other regulatory mailings electronically late last month. Van Kampen, which distributes its funds through intermediaries, is marketing the new service by making its wholesalers aware of the new option as well as through a direct mail campaign targeting individual investors, said Steve Messinger, director of electronic commerce for Van Kampen.

"From a unit cost standpoint, you are looking at a greater than 50 percent reduction in costs and these mailings add up on a year over year basis," Messinger said. "So we look at this as step one in a program of building greater electronic linkages with shareholders and also our advisors."

Van Kampen electronically delivers its documents through Automatic Data Processing of Roseland, N.J. The firm chose ADP because of its ability to offer both print and electronic delivery of documents at a competitive price, Messinger said. Using ADP's service, Van Kampen will be able to electronically deliver regulatory documents including prospectuses and other SEC documents, he said. However, Van Kampen will still have to mail annual and quarterly statements, trade confirmations and tax documents because ADP does not have the capability of delivering these documents electronically, he said.

Van Kampen wants to convert 25 percent of its shareholders to electronic delivery by year's end, Messinger said. If it can reach that goal, the company will be able to realize approximately $1 million in savings annually, but 25 percent conversion is not an easy goal to reach, he said.

"I think there is still a significant hurdle to get over in convincing [investors] to come to the website, sign up for the service and get off the paper," he said. Van Kampen did not make a significant investment in adding electronic delivery and the company should be able to recoup its costs with significantly less than 25 percent conversion, Messinger said.

Shareholders will immediately benefit from the savings because Van Kampen will lower the operating expenses as it generates savings, Messinger said.

"I'm not going to portray that this is going to be a huge savings if we don't reach our goal, but that's all the more reason to push hard to get there," he said.

The move is part of an overall strategy to direct investors to the firm's website for a variety of reasons that would otherwise tie up a customer service representative, Messinger said.

"We would rather have shareholders come online to check their balances, to do exchanges, redemptions and additional purchases because it translates directly to a savings for them," he said.

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