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No. of Recommendations: 17
Apple's CFO listened to what I had to say about our shareholder proposal and the corporate governance issues I raised but he wasn't really interested in working with us to improve the proposal and make it more friendly to the company. I'm not sure anything I told him made it up to Steve or the Board. Consequently, our proposal is still waiting, in its orginal form, for the SEC to decide whether it needs to be included in Apple's proxy or not.

The Books-a-Million CFO, on the other hand, has been very cooperative in working with me on the proposal and relaying my opinions to the rest of his management team and the Board of Directors. After seven phone conversations and assorted emails on a wide range of governance issues I've amended my proposal for that company to be much simpler and more focused, while eliminating many of the statements that management was uncomfortable with. In exchange, I know that my issues are all being considered by management. As a result, there will almost certainly be changes in the way the company relates to shareholders. The only question is how significant the changes will be. (If they aren't significant enough, I can always submit a new proposal next year.)

Here's a copy of the email I'm sending out to the Books-a-Million CFO tomorrow morning (He's leaving it to the Board to decide which of the two directions the company wants to go with for the the Supporting/Opposing statements):

Hi Rick,

Here are the revised shareholder proposal in its latest form and two alternative versions of the supporting statement. I am open to suggestions from the company if it sees a way to improve the proposal.

As I stated over the phone, I think it sends the best message to shareholders if we both issue neutral statements that empower shareholders by asking them what direction they'd like the company to take. My second preference would be for both of us to submit constructive, educational statements to shareholders, mine supporting the proposal and the company's opposing it.


Shareholder Proposal

The Shareholders of Books-a-Million, Inc. (the "Company") hereby request that the Board of Directors adopt a policy attempting to return a portion of company profits to shareholders on a regular basis.

It is up to the Board of Directors to decide whether this can best be done through the use of the Company's share repurchase program, by the declaring quarterly cash dividends or by some other method.

This proposal sets no limits as to the amount of funds to be returned to shareholders. It is up to the Board of Directors to decide what percentages of Company profits should be returned to shareholders based on what they feel is in the best interests of Shareholders.

Management shall have the option to temporarily suspend the return of funds to Shareholders whenever it believes this is in the best interest of the Company and its Shareholders.


Supporting Statement (2nd preference)

During the 1990s, many investors sought to invest in growth stocks, rather than income stocks. During that time, Books-a-Million went through a period of rapid growth, with annual revenues rising from less than 100 million in Fiscal 1993 to over 450 million in Fiscal 2003.

The rapid rise in revenues over the last ten years has not translated to a rise in profits, however. In fact, earnings per share over the last three years have been about half of what they were from 1993 to 1995. Additionally, the company has gone from having cash in the bank to having a large amount of debt, which makes the company vulnerable if economic conditions continue to deteriorate.

Lower profits and increased risk may be the biggest reasons that the price of company stock has fallen significantly in recent years. If the company places a greater emphasis on increasing the profitability of existing stores, rather than on opening up new stores, it is likely that earnings per share and the value of the company's stock will increase. It is also likely that shareholders and the market will reward the Company with a higher valuation if it adopts a policy of returning profits to shareholders by regularly repurchasing shares or paying out a cash dividend.

This proposal is designed to give shareholders an opportunity to communicate their own wishes to management regarding the direction of the Company. If a shareholder prefers to have the Company pursue a strategy of slower growth, with a greater emphasis on profitability and increasing the value of Books-a-Million stock, that shareholder should vote in favor of this proposal.



Shareholder's Statement (1st preference, assuming the company opts for a neutral statement as well)

During the 1990s, many investors sought to invest in growth stocks, rather than income stocks. During that time, Books-a-Million went through a period of rapid growth, with annual revenues rising from less than 100 million in Fiscal 1993 to over 450 million in Fiscal 2003.

Over the past few years, many investors have begun showing a preference for income stocks over growth stocks. This proposal is designed to give shareholders an opportunity to communicate their own wishes to management regarding the direction of the Company. It is designed to do this in a way that places minimal restrictions on Management's and the Board of Directors' ability to run the company's normal operations.

If a shareholder prefers to have the Company pursue a strategy of slower growth, with a greater emphasis on income, that shareholder should vote in favor of this proposal.

If a shareholder prefers to have the Company pursue a more growth oriented strategy, that shareholder should vote against this proposal.

If a shareholder wants to leave such decisions completely up to Management and the Board of Directors, that shareholder should abstain from voting on this proposal.
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