ICI Strongly Supports Changes to Fund of Fund Investment Rules

Washington, DC, December 5, 2003 - The Institute strongly supports new proposed SEC rules and rule amendments that would both enhance the ability of investment companies to invest in shares of other investment companies under fund-of-fund arrangements and increase disclosure of expenses in these arrangements.

Background
The SEC has proposed three new rules relating to fund of fund investments that would codify and expand upon a number of exemptive orders the SEC has issued that permit funds to invest in other funds. The SEC is also proposing amendments to Forms N-1A, N-2, N-3, N-4, and N-6 that will require funds of funds to disclose in their prospectuses the expenses of acquired funds, which investors in a fund of funds will bear indirectly.

ICI Position
The Institute strongly supports the SEC's proposals and, in a recent comment letter, states that the proposals will benefit funds and their shareholders. The Institute recommends that, in order to provide greater flexibility to funds to meet their investment objectives, proposed Rule 12d1-2 should be revised to permit acquiring funds to obtain shares of an acquired fund using an in-kind transfer of securities and that such transactions be exempt from the "for-cash" requirement.

The Institute also recommends that the SEC amend Rule 17d-1 to permit joint transactions by funds and fund affiliates where the funds participate on terms not different from those applicable to any affiliated participants.

Related Links
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