ABBREVIATIONS USED ON FIRST NATIONAL BOSTON INTERLOCK CHART

ADL, Arthur D. Little Inc.

Am. Tel & Tel. or A.T. & T., American Telephone & Telegraph Inc. Arkwright Boston, Arkwright Boston Manufacturers Mutual Insurance Co. Boston 5 Cent, Boston Five Cents Savings Bank.

Boston Safe, Boston Safe Deposit & Trust Co.

Breeder Reactor, Breeder Reactor Corp.

Burlington North., Burlington Northern.

Cabot, Cabot Corp.

Comm. Union, Commercial Union Insurance Co.

Dennison, Dennison Manufacturing Co.

The Equitable, The Equitable Life Mortgage & Realty Investors.

Fed. Res. (Boston), The Federal Reserve Bank of Boston.

F.N.B., First National Bank of Boston.

Franklin National, Franklin National Bank.

Georgia Pacific, Georgia Pacific Corp.

Hanna Min., Hanna Mining Corp.

Maine Yankee, Maine Yankee Atomic Power Co.

Marine Midland, Marine Midland National Bank.

Mass. Mut., Massachusetts Mutual Life Insurance Co.

Mass. LNG, Massachusetts Liquified Natural Gas Co.

N. E. Merchants, New England Merchants Bank of Boston and/or New England Merchants Co.

N. E. Mut. New England Mutual Life Insurance Co.

N. E. Tel & Tel, New England Telephone & Telegraph Co.

Pen Cen, Penn. Central Co.

Provident, Provident Institution for Savings

Shawmut, Shawmut Association, (a bank holding company) and/or National Shawmut Bank of Boston.

State St., State Street Bank & Trust Co.

Suffolk Fr., Suffolk Franklin Savings Bank.

U.S.M., United Shoe Machinery Co.

Ver. Yankee, Vermont Yankee Nuclear Power Corp.

Yankee Atomic, Yankee Atomic Electric Co.

Senator METCALF. The committee will be in recess for a few minutes while I also go over to try to make a quorum in the Interior Committee on the other side of the building. I will be back in about 10 minutes. So we will recess for 10 minutes.

[Brief recess.]

Senator METCALF. The subcommittee will be in order. Ten minutes go into more than a half hour which is standard operating procedure in this institution.

We now have the privilege to have Norman Fischer, chairman of the board of Medalist Industries of Milwaukee, Wis., who will be our next witness.

Mr. Fischer has a prepared statement, and if you will go ahead, Mr. Fischer, we will try to handle your testimony as expeditiously as possible. We are delighted to have you here. We are honored to have you before the committee.

STATEMENT OF NORMAN J. FISCHER, CHAIRMAN OF THE BOARD OF MEDALIST INDUSTRIES, INC.

Mr. FISCHER. Thank you, the pleasure is mine.

I want to thank my home Senator, William Proxmire, for interceding on my behalf with these joint Senate subcommittees to hear our story; and I also thank the chairman, Senator Lee Metcalf, and Senator Edmund Muskie for permitting me to appear.

So that we may better understand my concern relative to the registration of securities in the names of nominees, banks, trust and investment bankers, you should know something about what kind of a company Medalist Industries is.

Eighteen years ago last December, 14 of us from all walks of life banded together to form what is today known as Medalist. This company was to be an experiment in corporate diversification in two broad areas of products and markets; namely, industrial and recreational.

It was agreed that the program was to have an infinite lifespan and not become a "promoter's dream" or a "quick buck activity."

Growth was planned through internal development of management, products, and markets, as well as acquisitions. Acquisitions were to be accomplished primarily through the exchange of stock.

Policies were developed so that no individual, group, or clique would control the company. Today our largest shareholder owns less than 5 percent of our stock. I own about 3 percent.

Management does not have control and the board does not have control. Medalist is a co-op of small companies banded together for strength in finances and markets, under a corporate structure which can truly be classified as a public corporation. I don't know of a better example of democratic American free enterprise in action.

Our original goals have been met. Sales have grown from $400,000 to over $85 million and earnings from $10,000 to over $3,250,000. Our family of shareholders has grown from 14 to about 2,600without a public offering of our common stock.

Ownership spread as a result of bequests, gifts, acquisitions, and, of course, normal trading, first more or less under the counter, then over the counter, then the American Stock Exchange, and, hopefully, soon upon attaining 2,000 round-lot shareholders the "big board."

Our products today are about 35 percent industrial and 65 percent leisure. In the face of big name competition in sports like Wilson, Rawlings, and Spaulding, and athletic products, we are making inroads which the individual companies now part of Medalist could not have made on their own.

Today Medalist is No. 1 in athletic uniforms used by professional football and basketball teams. Your Washington Redskins do wear our uniforms from toe to top.

We enjoy about 75 percent of this market. Medalist is generally increasing its share in all other markets it serves, proving that small companies banded together can compete.

Medalist is the leader in the development of safety in equipment for team sports. In a recent series of tests conducted at Wayne State University, Department of Neurosurgery Biochemics Lab, the National Operating Committee on Standards in Athletic Equipment (NOCSAE) developed a procedure for testing football helmets. Various manufacturers submitted a total of 38 helmets. Medalist/Gladiator submitted five. All five were certified safe, including a youth helmet, the only youth helmet certified.

Out of the 38 only 17 passed the test.

None of our helmets are ever sold in the discount stores as toys. We have been the leaders in the safety program.

All of you have been provided with a packet of information which will tell the whole Medalist story and demonstrate that we disclose detailed information to our shareholders far in excess of SEC requirements.

We really want our shareholders to know what has happened, what is happening, and to the best of our knowledge, what is going to happen. We want to furnish them all corporate information except that which may give our competition an unfair edge or advantage. We would rather tell the Medalist story directly because we know it better than all the analysts and investment bankers in the worldsimply because we live it every day.

Forbes, Fortune, and the Wall Street Journal do not have the space or inclination to give adequate and accurate publicity to companies our size or smaller unless something spectacular occurs.

Between now and the end of the year it is our intention to phone every single one of our stockholders and offer to answer any questions they may have over the phone. If we don't have the answers we will follow it up with correspondence. This is one area amongst many, many areas where we are completely frustrated by these what I call ghost shareholders. Somewhere between 15 and 20 percent of our holders we won't be able to call by phone because we don't know who in blazes they are.

I jotted down a few examples of how our efforts to inform and disclose information to shareholders are blunted and made impossible by incognito and blind securities registrations.

March 11, 1974, was the effective voting date for the Medalist annual meeting which was held on April 25, 1974. Proxies, annual reports, and meeting notices were mailed to shareholders on March 26, 1974. About 261,000 shares or 17.7 percent out of a total of 1,474,000 were held in blind name registration at that date. Of that amount, 135,678 shares representing holdings of 52 investment banking firms were in the nominee name, CEDE. Here is what happened to the vote of those 135,000 shares.

At the April 25 shareholders meeting, 33 of 52 responded and voted; 6 responded late and could not be counted, and 13 never responded. Of the shares in CEDE, 55,206 shares or 40.7 percent of the total did not vote either because the investment bankers responded late or not at all.

Last month we wanted to know how close we were to having 2,000 round-lot shareholders. Of course this requires the correspondence with the investment bankers. This is a qualification for our becoming eligible for listing on the New York Stock Exchange.

To obtain this information, on July 12, 1974, I directed a letter by certified mail, return receipt requested, to 50 brokerage houses who owned, according to our stockholder list, and according to the record sent to us from the Depository Trust Co. (CEDE), at least 100 shares of our common stock. I requested information as to the number of round-lot shareholders for whom our stock is held and such stockholder distribution by State. A chart was attached for their convenience in indicating such distribution. We indicated our willingness to pay for any costs involved in obtaining this information for us, and enclosed a stamped self-addressed envelop for their use.

The return receipts from the post office indicated that our correspondence was received by the addressees between July 15 and 19. During the next 3 weeks we received responses from 27 out of the 50 sent out.

On July 30 and 31, my secretary phoned the 23 unresponsive brokers to followup on the status of our inquiry. Only five proxy departments actually recalled our request and indicated the information would be forthcoming to us soon. One of these firms still has not sent us the information and that firm holds the largest percentage of our stock held in street name.

I think you could guess the name of the firm. One of these firms informed us that survey requests do not get any priority.

In at least eight cases, my secretary was told by the proxy department that they had never received our correspondence. When she indicated she had a return receipt, they very disinterestedly indicated that well, that must have been signed by someone in the mail department. When she indicated her astonishment in each case over the fact that mail directed to a proxy department by certified mail was somehow "lost," she met with complete indifference in most cases.

She actually had to say to a couple of people, "Well, don't you think you should check this out and see what happened to our request?" In fact, she had to be very insistent that someone in the firm honor our request for information. She even threatened to call the SEC. This usually works.

In some cases the information was then forthcoming over the telephone or by sending out a duplicate request. In four or five instances where the requested information was gleaned over the phone, it would indicate in some way that there is no great difficulty in gathering such facts, but merely a lack of responsibility on the part of the proxy department or the investment bankers in following up requests for information.

Some phone calls were necessary because they didn't give us what we asked for although it was very clearly stated in the letter. In some cases they gave the recorded number of shares held by State rather than the number of shareholders. In other cases they indicated that no shares were held by them when our records clearly showed such shares registered in their name. They just didn't want to bother. In one case, my secretary was told, after being transferred from one person to another, that she could not get any information on the phone and would simply have to resubmit the request. They simply took no responsibility for any certified mail handled by their offices and were extremely flippant about the whole matter.

At this date we are still awaiting replies from six brokers.

Here is another instance: About 2 years ago, a former Medalist director and the president of one of our operations, retired at the age of 82 due to ill health. He was a particularly good friend of mine. Through the grapevine, word came back that he was mad at Medalist and yours truly. Since he lives near the shores of beautiful Lake Michigan in Ozaukee County in Wisconsin, I took the occasion to drive up to see him.

He said he hadn't received our annual report, interim reports, or any of the other corporate information that we sent out. I think we corresponded with our shareholders at least once a month and gave some salient data that may keep them current.