New Bill Aims To Increase Fund After-Tax Performance Disclosure

Washington, DC, October 27, 1998 - On October 13, Representative Paul Gillmor (R-OH) introduced H.R. 4822, the "Mutual Fund Tax Awareness Act." The bill was cosponsored by a dozen members of the House Commerce Committee, which has jurisdiction over securities industry issues.

The legislation would direct the Securities and Exchange Commission to issue rulemaking under the Investment Company Act of 1940 to require expanded disclosure in investment company prospectuses and annual reports of the after-tax effects of portfolio turnover on returns to investors.

The legislation finds that, although fund performance is reported net of fees and expenses, the tax effects of the portfolio's activity are generally not disclosed, and that performance disclosure is incomplete without this information. The bill also notes that the portfolio turnover rate for actively managed funds has increased in the past decade, leading to a significant increase in the average capital gains distributions per share.

Representative Gillmor has indicated that he plans to reintroduce this legislation in the next Congress, which convenes in January 1999.