Many funds have made the technological leap, allowing fund investors to vote their shares via the Internet in addition to allowing votes in person, by phone, fax and by mail.
AIM Funds of Houston, Texas, American Aadvantage Funds of Kansas City, Mo., American Skandia Trust of Shelton, Conn., Aquila Group of Funds of New York, Colonial Funds of Boston, Evergreen Funds of Charlotte, N.C., Franklin Group of Funds of San Mateo, Calif. and USAA Funds of San Antonio, Texas are all currently offering an Internet voting option for fund shareholders. And more fund advisers, including American Century and Jones & Babson, both of Kansas City, Mo., say they are seriously considering extending proxy voting to the Internet.
There are many reasons fund advisers would want fund shareholders to vote their proxies over the Internet, fund executives say. A major advantage is that it is less costly for fund companies to obtain votes by Internet than by paper ballot or even by telephone. Traditional paper balloting is expensive, according to John Weitzer, senior counsel at Strong Funds in Milwaukee, Wisc. Individual funds that normally pay the costs associated with proxy voting spend roughly 33 cents for every proxy ballot returned, said Weitzer. At Strong, an average proxy vote executed by phone costs far less - about 15 cents, he said. By comparison, each vote cast electronically over the Internet in late 1998 when Strong sought shareholder approval to merge two of its equity funds, cost seven cents, Strong estimates.
That was Strong's first online and telephone voting experience. Now Strong is sold on Internet voting.
"Lower costs mean it's better for the fund," Weitzer said. Thirty-five percent to 40 percent of Strong's shareholders chose to vote via the telephone and 10 percent to 15 percent of votes were made electronically on the Internet. Other fund advisers offering online voting reported similar results.
Internet proxy voting is also fast and the speed of the voting can mean the required vote is obtained without having to hire a proxy solicitor to contact investors directly. According to Weitzer, such follow-up calls to investors can cost as much as $5 each. Since voting by Internet is so easy, shareholders are more likely to vote right away and not have to be prodded.
For the $27.5 billion USAA Funds, a proxy vote now before shareholders is the group's first on the Internet, said Tom Honeycutt, a company spokesperson. USAA decided to venture online when a survey found that 70 percent of its investors were routinely using their computers. The company had to make changes in the funds' by-laws to make it possible to use telephone and Internet voting, said Honeycutt.
Shareholders of all of USAA's 1.1 million accounts will eventually be able to vote their shares of any of the group's 38 funds via mail, phone, in person at the shareholder meeting or via the Internet, Honeycutt said. Fund investors begin the online process at the USAA fund group's web site, then click on the special Internet voting icon. With the click of their mouse, investors are seamlessly connected to a special voting site, www.proxyvote.com, which is the property of the group's proxy solicitor, ADP, a corporate and mutual fund proxy solicitation firm in Edgewood, N.Y. ADP first provided online proxy voting to its clients in the fall of 1997.
"We are changing the way that business is conducted and utilizing technology in the most sophisticated state to provide more efficient and higher quality service," said Mary Ann Butera, senior vice president of sales and marketing at ADP.
In addition to saving time and money by offering online voting, companies are trumpeting their technological prowess.
"Internet voting shows investors they are an adopter of the (online) technology and in tune with the times," Butera said.
Internet voting is not likely to become the sole method for voting fund shares, said industry executives. Nor will Internet voting compel investors to vote who would otherwise ignore their proxy statements. But the experience of Shareholder Communications, a proxy solicitor in New York, suggests that smaller investors are more likely to vote their shares via the Internet, said Rob Brennan, senior vice president of Shareholder Communications Corp., which merged with another proxy firm, Georgeson & Co., in June.
"Any additional method you use to enable people to vote is a plus," Brennan said.
Shareholder Communications offers fund proxy voting at its own proprietary site investors can log onto, www.proxycard.com, when they type in the 12-digit code number imprinted on their proxy materials. Because voting is done directly at the proxy firm's site, the vote is automatically added to the vote tabulation, Brennan said. Electronic confirmations of how an investor voted each proxy proposal can be effortlessly e-mailed back to the voter, said the proxy solicitors.
Instead of sending voters directly to a proxy solicitor's website, fund advisers sometimes choose to offer a special section on their own proprietary home pages which serves to bring traffic and build brand awareness, said Brennan. Once there, online voters can reread the fund's proxy or scan the fund's most recent annual report before voting at the linked voting site. This also allows fund advisers to compile a list of e-mail addresses they can use to send electronic messages or documents back to fund investors.
"It stands to reason that online proxy voting will become an important staple of online customer service as companies provide direct service via the Internet," said Michelle Smith, executive director of the Mutual Fund Education Alliance, a trade group of direct-to-investor fund firms based in Kansas City, Mo.
Online voting has also sparked companies' interests in providing an e-version of fund documents required by regulations such as annual reports and prospectuses. If investors agree to receive their fund documents electronically, fund advisers could save even more money, said Brennan of Shareholder Communications. Funds would then e-mail investors and tell them to pick up the newly-created fund documents at the company's web site. According to ADP's Butera, both Calvert Group of Bethesda, Md. and The One Funds of Columbus, Ohio are developing this capability.
In the future, Calvert will also send e-mailed proxy statements, with accompanying shareholder letters and e-ballots, to investors who have agreed to accept other fund documents electronically, said Karen Becker, senior vice president of client services for Calvert.
