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FEI’s Treasurer’s Conference February 27, 2001 “Reg FD -- (Fair Disclosure)”

FEI’s Treasurer’s Conference February 27, 2001 “Reg FD -- (Fair Disclosure)” Presented by: Robert A. Krause Vice President & Treasurer. Company Background.

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FEI’s Treasurer’s Conference February 27, 2001 “Reg FD -- (Fair Disclosure)”

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  1. FEI’s Treasurer’s Conference February 27, 2001 “Reg FD -- (Fair Disclosure)” Presented by: Robert A. Krause Vice President & Treasurer

  2. Company Background • American Axle & Manufacturing Holdings, Inc. is a global Tier I automotive supplier of driveline systems, chassis systems and forged products. • Sales for 2000 were $3.1 billion • IPO was January 29, 1999 • Traded as “AXL” on the NYSE • Met or exceeded consensus estimates for the eight quarters since going public • Established investor web site on “aam.com” • Currently followed by 9 equity analysts

  3. Background • On August 10, 2000 the SEC adopted Regulation FD, a regulation intended to address the SEC’s concern over selective disclosure. • Effective on October 23, 2000. • The regulation requires that whenever (1) an issuer, or person acting on its behalf, (2) discloses material nonpublic information, (3) to certain specified persons, • The issuer must make public disclosure of that information (1) simultaneously (for intentional disclosures) or (2) promptly (for non-intentional disclosures)

  4. Companies Subject to Reg FD • Issuers that have a class of equity securities registered under Section 12 of the Securities Exchange Act of 1934 or are required to file reports under Section 15(d) of the Exchange Act. • Also applies to issues of publicly traded debt.

  5. Persons Impacted • Regulation FD applies to communications by: (1) Senior officials -- any executive officer of director (2) Investor relations professionals (3) Any other persons who regularly communicate with securities market professionals and security holders on behalf of the company (4) Any person directed by a member of senior management to make a disclosure

  6. Specified Recipients of the Communications • The regulation applies to communications made to (1) Brokers or dealers (2) Holders of the company’s securities under circumstances in which it is reasonably foreseeable that the holders will trade on the basis of such information (3) Investment advisers (4) Institutional investment managers (5) Investment companies

  7. Specified Recipients of the Communications • The regulation does not apply to (1) Communications with any person who owes the issuer a duty of trust or confidence, a “temporary insider” (e.g., an attorney; accountant or investment banker) (2) Communications with media and rating agencies EXCEPTION: COMPANIES CAN CHOOSE TO INCLUDE MEDIA (3) Communications in connection with registered public offerings (other than a shelf registration)

  8. Specified Recipients of the Communications (continued) • The regulation does not apply to (4) Communications with parties who have expressly agreed to keep information confidential (a) Agreement can be written or oral (b) Used in M&A and private placement contexts (5) Communications with government agencies (6) Ordinary-course business communications with customers and suppliers

  9. Materiality Standards • The SEC declined to set a bright-line standard of materiality but instead relied on existing case law and recent SEC guidance • Existing case law and recent SEC guidance defines information as material if (1) “there is a substantial likelihood that a reasonable shareholder would consider it important in making an investment decision” and (2) “a substantial likelihood that [it] would have been viewed by the reasonable investor as having significantly altered the total mix of information made available”

  10. Materiality Standards (cont.) • The SEC’s non-exhaustive list of possible material items includes: (1) Earnings information (2) Mergers, acquisitions, tenders, JV’s or changes in assets (3) New products or discoveries, or developments regarding customers or suppliers (e.g., the acquisition or loss of a contract) (4) Changes in auditors (5) Events regarding the issuer’s securities (6) Bankruptcies or receiverships

  11. Material Standards (cont.) • “Guidance” on earnings estimates is “likely” material (1) The SEC stated that nonpublic information that the company’s anticipated earnings will be higher than, lower than, or even the same as what analysts have been forecasting, whether communicated expressly or through indirect guidance likely will violate Reg FD (2) Nonmaterial information may be provided even if, unbeknownst to the issuer, it enables the analyst to complete a “mosaic” of information that, taken together, is material.

  12. Timing of Public Disclosure • Intentional disclosure of material nonpublic information (1) The person making the disclosure knew, or was reckless in not knowing, that the information disclosed was material and nonpublic (2) Requires simultaneous public disclosure of the same information • Non-intentional disclosure of material nonpublic info (1) Any disclosure of material, nonpublic information that was not made intentionally (2) Requires prompt public disclosure after knowledge of the non-intentional disclosure (3) “Prompt” means as soon as practical but no later than 24 hours or prior to beginning of next trading day

  13. Methods of Making Dislosures • “Filing” the information under Item 5 of Form 8-K. • “Furnishing” the information under Item 9 of Form 8-K • Any other method (or combination of methods) reasonably designed to provide “broad, non-exclusionary distribution” of the information to the public. • A press release distributed through a widely circulated news or wire service • Conference call open to the general public either by personal attendance, telephonic access or Internet webcasting • Website posting alone is not sufficient, however, filing or furnishing in a Form 8-K is

  14. Practical Considerations for Issuers Day-to-Day Communications • Designate a limited number of people who are authorized to make disclosures or field inquiries from analysts, investors or the media • Try to script responses as much as possible • Consider written guidelines to set forth policies designed to ensure compliance • Schedule sessions with senior officers at which the rules are reviewed and discussed • Put more guidance-type information in quarterly releases and less information on individual calls

  15. Practical Considerations Analyst/Investor Conferences • Hosting and participation in analyst/investor conferences (1) Provide a press release prior to the conference disclosing the information (2) Indicate in the press release that the information will be discussed (3) Furnish the information to be presented on a Form 8-K, if potentially material • Consider opening all conference calls to a broader audience - even if on a listen-only mode • Continue to comply with the “Safe Harbor” for forward looking statements • Try to script as much as possible

  16. Forward-Looking Information Sample disclosure: “This presentation contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performances and may involve significant risks and uncertainties. Actual results may vary materially from those forward-looking statements as a result of any number of factors, many of which are beyond the control of management”

  17. Practical Considerations for Analyst Meetings / One-on-Ones • Issuers may continue to host analyst one-on-ones • Try to anticipate and script questions and answers • Consider always having two or more officials of the company involved since these sessions, by definition, are not open to the public • Consider whether certain questions should no longer be handled on a one-on-one basis • Consider similar precautions as discussed with conferences • If the same questions are received repeatedly and issuers decline to answer, they should consider a press release and Form 8-K so they can answer

  18. Practical Considerations for Analyst Meetings / One-on-Ones (cont). • One-on-one meetings will continue to be an important venue for discussing information such as company’s: (1) Long-term strategy (2) History (3) Mission & goals (4) Strength and depth of management & philosophy (5) Competitive advantages and disadvantages (6) Previously disclosed material & non-material info. (7) Earnings guidance based on previously released information

  19. Practical Considerations for Reviewing Analyst Reports • The company should not “entangle” itself in analysts’ reports • The company may correct factual errors pertaining to historical, public information • Do not comment on the financial model or projections

  20. FEI Survey Results Fair Disclosure Practices

  21. FEI Survey Results • Will the final rules cause your company to change practices or behave differently with the analyst and investor communities ? (1) NY City CFO Council: 78% said YES (2) Chicago CFO Council: 70% said YES (3) FEI - CCF Comm.: 75% said YES • What will be the effect on your company’s participation in analyst meetings and one-on-one meetings? (1) NY City CFO Council: 85% will hold meetings (2) Chicago CFO Council: 85% will hold meetings (3) FEI - CCF Comm.: 87.5% will hold meetings

  22. FEI Survey Results • What will be the effect on your company’s use of conference calls and/or webcasts ? (1) NY City CFO Council: 56.8% no change - open to public 40.5% will open to public 2.7% will discontinue calls (2) Chicago CFO Council: 61% no change - open to public 39% will open to public

  23. FEI Survey Results • Will the company be more or less likely to provide guidance as to future results in the wake of Reg FD ? (1) NY City CFO Council: 52% said LESS LIKELY 45% said NO CHANGE 3% said MORE LIKELY (2) Chicago CFO Council: 50% said LESS LIKELY 40% said NO CHANGE 10% said MORE LIKELY (3) FEI - CCF Comm.: 62.5% said LESS LIKELY 37.5% said NO CHANGE

  24. FEI Survey Results • Do you anticipate greater involvement from legal experts in the IR process in analyzing what information is “material” and how to disclose it ? (1) NY City CFO Council: 46% said YES 22% said TOO EARLY TO TELL 12% said DO NOT DISCUSS FUTURE DATA 10% said NO (2) Chicago CFO Council: 48% said YES 43% said TOO EARLY TO TELL 5% said DO NOT DISCUSS FUTURE DATA 5% said NO

  25. AAM I.R. Practices • AAM holds quarterly earnings calls -- open to public and also webcast. Postings via wire-services prior to event. • AAM will hold other calls/webcasts upon material events • AAM treats communications with analysts / investors/ press all the same under Reg FD • AAM will participate in Investor Conferences complying with Reg FD • AAM will participate in one-on-one’s complying with Reg FD

  26. AAM WEB SITE Examples

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