FAQ's

Q: Does DCM have any rights or responsibilities for the voting of proxies?

DCM shall have no rights or responsibilities for the voting of the proxies with respect to Client’s Portfolio, unless DCM is required to do so by the Employment Retirement Income Security Act (ERISA).

Q: How much income should I plan on withdrawing from my investments each year after I retire?

A: Most DCM clients living off of their retirement assets take income equal to about 5% of the principal value each year. This amount, when invested in the DCM Endowment management style, allows clients to take only the dividends and interest, leaving their principal in tact and able to grow as a hedge against inflation. The companies owned in this management style increase their dividends each year causing the income to grow and pushing the principal value higher.

Q: How many clients is each portfolio manager assigned?

A: At present, each portfolio manager is assigned a maximum of 100 clients.

Q: What types of clients does DCM serve?

A: DCM provides portfolio management to individuals seeking to live well in retirement, as well as foundations, charitable organizations, corporations and partnerships, and pension and profit sharing plans.

Q: How frequent is asset turnover in your accounts?

A: When we purchase a security, our goal is to hold it for the long term. While this is ultimately determined by economic and market conditions, DCM portfolios are not subject to a large amount of trading activity. The Rising Income Equity management style typically sees a turnover of about 20% annually, while the Blue Chip Growth style sees 30 to 35% each year.

Q: If I decide to hire DCM to manage a portion of my assets, will I own individual securities or will my funds be co-mingled with those of other DCM clients?

A: All DCM clients own their own individual securities.

Q: If I became a DCM client, would you immediately sell all of my existing holdings?

A: No. DCM treats every client individually. This includes the transition from the investments a client holds prior to joining DCM to one of DCM’s management style. The transition includes holding existing securities while they continue to perform well and attempting to minimize taxes created by transactions. Additionally, if there are securities a client wants to hold for particular reasons, DCM will honor those wishes, track the securities for tax purposes, and not charge for supervising them (except in cases where extraordinary work may be involved).

Q: Does DCM do anything to help manage Capital Gains Taxes?

A: Because of the low turnover in accounts due to a long-term investment strategy, there will naturally be fewer capital gains taken. However, DCM considers the capital gains implications in every sale of securities for each individual account holder. This is particularly true when clients first transition to DCM from an outside institution. In addition, where instructions about timing of capital gains in a calendar year are given, DCM will always honor those requests.

Q: How quickly and easily can I get money out of my account with DCM?

A: If there is available cash in the account, funds can be accessed in one of three ways:

• Funds can be wired into individual checking accounts same day as request if received by 10:00 a.m. Central Standard Time (CST). Your individual bank may impose a wire transfer fee for such transactions. • A check can be issued through regular mail if the request is received by 12:00 noon. Central Standard Time (CST). • A check can be sent through overnight express for an additional charge quoted at the time of request.

If cash is not available in the account, funds can be accessed in one of two ways:

• A security can be sold, and funds will become available on the fourth business day after the sale. • If funds are needed sooner, and Margin has been established on an account, a client can access up to 50% of their total assets immediately.

Q: How much are DCM’s fees?

A: Our fee schedule is designed to be competitive and fair. We choose not to publish our fee schedule on a public forum like this website. We would, however, happily share that with you if you would call us. Please contact Randy Alsman at 800-321-7442 or 812-421-3208. The minimum annual Management Fee charged by DCM for Investment Management is $7500. This may be waived under special circumstances by the President of the firm. No one at DCM receives commissions for any transactions. Ninety-five percent of all clients choose our One Fee program available through TD Ameritrade, Inc. Broker-Dealers are suggested for clients based upon overall cost, convenience, and specific needs of each client. Fees are billed quarterly in advance for a percentage of assets under management. In certain circumstances, all fees and account minimums may be negotiable. The fee charged will not be provided on the basis of a share of capital gains or upon capital appreciation of the funds or any portion of the funds of an advisory client (SEC Rule 205 (a)(1)). Even though DCM rarely uses mutual funds for its clients, all fees paid to DCM for investment advisory services are separate from the fees and expenses charged to shareholders of mutual funds. A complete explanation of these expenses charged by the mutual fund is contained in each mutual fund’s prospectus.

Q: How have DCM’s investments performed?

A: We will gladly share a detailed record of DCM’s investment performance with any clients or prospective clients who would like to contact us. To see that report, please contact Rick Roop at 800-321-7442 or 812-421-3205.

Q: What does DCM consider as its niche in the spectrum of investment advisors and managers?

A: DCM is a Registered Investment Advisor, sometimes referred to as a Money Manager. We develop investment strategies around our clients’ goals – living well in retirement, passing assets on to the next generation, funding philanthropic organizations. These needs of our clients, not a desire to sell any particular product or investment, have shaped the way we invest. Therefore, DCM cannot be slotted into any particular classification of investment managers. Our overriding belief in companies that pay generous and increasing dividends makes us look like what the investment industry might call “Value Managers.” But, important differences exist between DCM and value investors. If you would like to contact us, we’d be more than happy to discuss those advantages with you. We do not consider ourselves financial advisors as it relates to developing an overall financial game plan for our clients. From time to time, we are asked to evaluate investments beyond stocks and bonds and other matters indirectly related to investments. In the majority of these cases, the client is referred to professionals with whom we have long-standing relationships and who specialize in the financial issue in question. What sets DCM apart is the high level of personalized investment management service. Members of our staff are encouraged to spend as much time with each client and portfolio as needed or desired by the client. Portfolios are never managed en masse. Decisions are always made one portfolio at a time.

Q: How can a client cancel an agreement with DCM?

A: A client agreement may be canceled at any time, by either party, for any reason upon written notice, which shall be effective at the end of the calendar quarter in which the notice is received.

Q: Does DCM consider itself an equity or fixed income oriented manager?

A: We employ a risk and rewards style of management. We have spent approximately equal amounts of time over the years studying both stocks and bonds. Because of this, our investment orientation is dictated first by the wishes of our clients, and secondly, by where we believe we can achieve the greatest rewards with the least risk.

Q: In which types of securities does DCM specialize? And which receive the most emphasis?

A: We emphasize the stocks and bonds of large-cap companies which are normally found on one of the principal U.S. exchanges or sold via the Over-the-Counter (OTC) market. Bonds of the United States Government and of municipalities also represent a significant percentage of our assets under management. Other securities listed here are utilized less frequently and then usually meet an individual need or specific request: Commercial Paper, bank CDs, mutual funds, listed option contracts, and certain types of partnerships. DCM uses margin transactions in very special cases, typically at the client’s request. When advantageous to both parties DCM may cross-sell a fixed income security from one client to another.

Q: What are the principal sources of investment information you utilize in formulating your investment strategy?

A: DCM uses quantitative valuation analysis to estimate the intrinsic value of certain securities, as well as, fundamental, technical, and cyclical analysis methods. Decisions on securities to be bought or sold and the amount of securities to be bought and sold are made solely by Greg Donaldson, Mike Hull, Rick Roop and Randy Alsman based upon objectives and parameters spelled out in the Advisory Agreement signed by each client. Each Advisory Agreement identifies a specific Management Style which guides the decision-making for each portfolio. The principal sources used for investment analysis include Reuters News Retrieval, Bloomberg Financial Markets, Value Line, Standard and Poor’s, Investors Business Daily, Argus Research, and a wealth of proprietary research from other securities firms. In addition, we rely heavily on technical analysis (watching where money is moving among all of the alternatives for investors) to guide on us on macro-economic changes.

Q: Does DCM issue any particular publication or periodical subscriptions?

A: DCM will provide to its investment supervisory clients a quarterly macro economic newsletter in which major economic forces and trends in the economy will be discussed. It will include analyses of how these forces and trends will affect stocks, bonds, and interest rates. Special reports will be included as economic and market changes warrant. Presently, no subscription fee is charged for this service; however, DCM may begin charging a fee for its newsletter in the future.

Q: Will you accept an account on which you do not have discretionary authority to make and implement investment decisions?

A: Yes. DCM will act as investment advisor for the Client’s Portfolio, and will advise Client in the area of portfolio allocation and selection of investments. With the Client’s consent DCM will direct the sale, purchase or trade of any assets as it may deem appropriate, and the reinvestment, or holding for reinvestment, of any proceeds of such sales or trades, as DCM may deem advisable, and may issue instructions to brokers, dealers and other agents or custodians. For this service we charge an investment administration fee.

Q: Does DCM do consultation on a fee basis?

A: Yes. Consultation fees are based on a rate of $150.00 per hour and are paid in arrears. About five percent of our clients choose this fee option. Because most clients choose our One Fee program available through TD Ameritrade, we include the following information about TD Ameritrade and our relationship with them below.

Donaldson Capital Management participates in the TD Ameritrade Institutional Program. TD Ameritrade Institutional is a division of TD Ameritrade, Inc., (“TD Ameritrade”) member NYSE/SIPC. TD Ameritrade Institutional uses the clearing services of its affiliate, National Investor Services Corp. (NISC), member NYSE/SIPC. NISC clears and settles monies and securities for TD Ameritrade and other brokerage firms throughout the U.S. It offers to independent investment advisors services which include custody of securities, trade execution, clearance and settlement of transactions. TD Ameritrade, Inc. is an unaffiliated SEC-registered broker-dealer and NASD member. The next paragraph describes additional benefits DCM receives from TD Ameritrade through its participation in the program. Because, DCM participates in TD Ameritrade’s institutional customer program, we may recommend TD Ameritrade to clients for custody and brokerage services. There is no direct link between DCM’s participation in the program and the investment advice it gives to its clients, although DCM receives economic benefits through its participation in the program. These benefits include: receipt of duplicate client confirmations; access to a trading desk serving DCM participants; access to block trading (which provides the ability to aggregate securities transactions for execution and then allocate the appropriate shares to client accounts); the ability to have advisory fees deducted directly from client accounts; access to an electronic communications network for client order entry and account information; access to mutual funds with no transaction fees and to certain institutional money managers; and discounts on compliance, marketing, technology, and practice management products or services provided to advisor by third party vendors. These benefits received by DCM, or its associated persons, do not depend on the amount of brokerage transactions directed to TD Ameritrade. As part of its fiduciary duties to clients, DCM endeavors at all times to put the interests of its clients first. Clients should be aware, however, that the receipt of economic benefits by DCM, or its associated persons, in and of itself creates a potential conflict of interest.

DCM may receive client referrals from TD Ameritrade through its participation in TD Ameritrade AdvisorDirect (the “referral program”). In addition to meeting the minimum eligibility criteria for participation in AdvisorDirect, DCM may have been selected to participate in AdvisorDirect based on the amount and profitability to TD Ameritrade of the assets in, and trades placed for, client accounts maintained with TD Ameritrade. TD Ameritrade is a discount broker-dealer independent of and unaffiliated with DCM and there is no employee or agency relationship between them. TD Ameritrade has established the referral program as a means of referring its brokerage customers and other investors seeking fee-based personal investment management services or financial planning services to independent investment advisors. TD Ameritrade does not supervise DCM and has no responsibility for DCM’s management of client portfolios or DCM’s other advice or services. DCM pays TD Ameritrade an on-going fee for each successful client referral. This fee is usually a percentage (not to exceed 15%) of the advisory fee that the client pays to DCM. DCM will also pay TD Ameritrade this percentage on any advisory fees received by DCM from any of a referred client’s family members, including a spouse, child or any other family member who resides with the referred client and hired DCM on the recommendation of such referred client. DCM will not charge clients referred through AdvisorDirect any fees or costs higher than its standard fee schedule offered to its clients or otherwise pass the referral fee paid to TD Ameritrade to its clients. For information regarding additional or other fees paid directly or indirectly to TD Ameritrade, please refer to the TD Ameritrade AdvisorDirect Disclosure and Acknowledgement Form. DCM’s participation in AdvisorDirect raises potential conflicts of interest. TD Ameritrade will most likely refer clients through AdvisorDirect to investment advisors that encourage their clients to custody their assets at TD Ameritrade and whose client accounts are profitable to TD Ameritrade. Consequently, in order to obtain client referrals from TD Ameritrade, DCM may have an incentive to recommend to clients that the assets under management by DCM be held in custody with TD Ameritrade and to place transactions for client accounts with TD Ameritrade. In addition, DCM has agreed not to solicit clients referred to it through AdvisorDirect to transfer their accounts from TD Ameritrade or to establish brokerage or custody accounts at other custodians, except when its fiduciary duties require doing so. DCM’s participation in AdvisorDirect does not diminish its duty to seek best execution of trades for client accounts. Securities held by TD Ameritrade are automatically insured up to $100 million. Securities may also be held at a bank or an eligible custodian other than TD Ameritrade, provided prompt payment and certificate delivery can be assured. In some instances, additional charges will be incurred when utilizing an outside custodian. Both a DCM portfolio manager and a DCM client service representative serve each client. Communications are free flowing with changes in strategy and results being discussed when appropriate. When requested, duplicate statements and appraisals can be forwarded directly to a client’s broker or financial representative.

Generally, in addition to a broker's ability to provide the "best execution," DCM may also consider the value of "research" or additional brokerage products and services a broker-dealer has provided or may be willing to provide. This is known as paying for those services or products with "soft dollars." Because many of the services or products could be considered to provide a benefit to DCM and, because the "soft dollars" used to acquire them are client assets, DCM could be considered to have a conflict of interest in allocating client brokerage business: DCM could receive valuable benefits by selecting a particular broker or dealer to execute client transactions and the transaction compensation charged by that broker or dealer might not be the lowest compensation the firm might otherwise be able to negotiate. In addition, DCM theoretically could have an incentive to cause clients to engage in more securities transactions than would otherwise be optimal in order to generate brokerage compensation with which to acquire products and services. DCM’s use of soft dollars is intended to comply with the requirements of Section 28(e) of the Securities Exchange Act of 1934. Section 28(e) provides a “safe harbor” for investment managers who use commissions or transaction fees paid by their advised accounts to obtain investment research services that provide lawful and appropriate assistance to the manager in performing investment decision-making responsibilities. As required by Section 28(e), DCM will make a good faith determination that the amount of commission or other fees paid is reasonable in relation to the value of the brokerage and research services provided. That is, before placing orders with a particular broker, DCM has determined, considering all the factors described below, that the compensation to be paid to TD Ameritrade is reasonable in relation to the value of all the brokerage and research products and services provided by TD Ameritrade. In making this determination, we typically consider not only the particular transaction or transactions, and not only the value of brokerage and research services and products to a particular client, but also the value of those services and products in our performance of our overall responsibilities to all of our clients. In some cases, the commissions or other transaction fees charged by a particular broker-dealer for a particular transaction or set of transactions may be greater than the amounts another broker-dealer who did not provide research services or products might charge. In some cases, with a particular client's consent, we may consider a broker-dealer's provision of non-research products and/or services (i.e., products or services that we do not use in making investment decisions or executing transactions for clients). In such cases, however, the products or services involved are used solely for the benefit of the client in whose account the commissions or other fees are incurred. Research and Brokerage Products and Services. "Research" products and services we may receive from broker-dealers may include economic surveys, data, and analyses; financial publications; recommendations or other information about particular companies and industries (through research reports and otherwise); and other products or services (e.g., computer services and equipment, including hardware, software, and data bases) that provide lawful and appropriate assistance to DCM in the performance of its investment decision-making responsibilities. Consistent with Section 28(e), brokerage products and services (beyond traditional execution services) consist primarily of computer services and software that permit us to effect securities transactions and perform functions incidental to transaction execution. We generally use such products and services in the conduct of our investment decision making generally, not just for those accounts whose commissions may be considered to have been used to pay for the products or services. Other Uses and Products. DCM may use some products or services not only as "research" and as brokerage (i.e., to assist in making investment decisions for clients or to perform functions incidental to transaction execution) but for our administrative and other purposes as well. In these instances, we make a reasonable allocation of the cost of the products and services so that only the portion of the cost that is attributable to making investment decisions and executing transactions is paid with commission dollars and we bear the cost of the balance. Our interest in making such an allocation differs from clients' interest, in that we have an incentive to designate as much as possible of the cost as research and brokerage in order to minimize the portion that DCM must pay directly. Amount and Manner of Payment. A broker-dealer through which DCM wishes to use soft dollars may establish "credits" arising out of brokerage business done in the past, which may be used to pay, or reimburse DCM for, specified expenses. In other cases, a broker-dealer may provide or pay for the service or product and suggest a level of future business that would fully compensate it. The actual level of transactional business DCM does with a particular broker dealer during any period may be less than such a suggested level, but may exceed that level and may generate unused soft dollar "credits." Where a client has authorized us to consider a broker-dealer's provision of services outside the Section 28(e) safe harbor, a broker-dealer may generate "credits" based on transactions effected in the past and allow DCM to use such "soft dollars" to acquire services and products provided by third parties. We do not exclude a broker-dealer from receiving business simply because the broker-dealer has not been identified as providing soft dollar research products and services, although we may not be willing to pay the same commission to such broker-dealer as we would have paid had the broker-dealer provided such products and services.