The Janus Overseas Fund has been terminated today with the assets being reallocated to the International Stock Option as follows:
| American Century International Discovery | 28% |
| American Century International Growth | 23% |
| First Eagle Overseas | 12% |
| Longleaf International | 12% |
| Templeton Instl. Foreign Equities | 25% |
| Total | 100% |
Termination was due to one and three year under-performance and recent manager changes for the Janus Overseas Fund.
Manager Name Change
Effective 4/18/03, the name of Berger Small Cap Value Institutional Shares will become Janus Small Cap Value Institutional Shares.
Traders and Transfer Fees
“New Trading Rules”
The Directed Account Plan continues to experience a high level of trading activity, which could be detrimental to the Plan in a number of ways. First, excessive trading is expensive to the option in which the trade is being made, and therefore, costly to everyone in that option. To support daily trading, the end of the day price is given to the participant, even though the actual trade to support this asset transfer is completed at market opening the next day. Any gap in pricing the next day is absorbed by the Plan’s option and everyone in that option as a cost, in addition to the usual transaction expense.
In 2002, the following trading activity was experienced, which could be considered excessive.
| 2002 | 2002 | |
| Option | Average Size | Trading Volume |
| Value Option | $ 125 million | $ 589 million |
| Equity Index | $ 97 million | $ 537 million |
| Growth Option | $ 91 million | $ 271 million |
| Diversified Small Company | $ 108 million | $ 639 million |
The total commission for the above activity was over six million dollars. Obviously, less unnecessary activity would result in lower costs to the Plan.
A high level of trading activity related commission costs is not the only problem. Large, frequent transactions require a high level of cash to be carried for liquidity to meet the trades. Stable Value assets that could be invested in a longer term fixed income product with higher returns need to be carried in shorter term products with less return to provide liquidity for the high level of trading activity. The traders effect all DAP option returns.
The Directed Account Plan’s Board of Directors resolved at it’s First Quarter 2003 meeting to adjust the Plan’s transfer fee policy in an attempt to discourage unnecessary trading without restricting normal trades for the majority of participants.
Effective July 1, 2003, all trades in excess of twelve per year will be charged a $500.00 transfer fee. The number of trades will be counted from January 1, 2003. The International Option will continue to carry an additional 1% redemption fee for short-term trades of less than 30 days. The proceeds of all transfer fees will be used to reduce the expenses of all plan participants. In 2002, $266,000 was collected and used for Plan expenses.
Rebalancing your portfolio is an important part of the investment process. Twelve free trades a year should be sufficient for that purpose. The Board of Director’s objective is to not restrict your ability to trade or rebalance, but to discourage excessive trading which is not in the best interest of Plan participants.
Twelve free trades a year. Excess trades will be charged a fee of $500.00 per trade over twelve. This new policy will go into effect July 1, 2003.