ICI Supports Proposal to Make Auditing Standards Consistent with SEC Rule Changes

Washington, DC, June 25, 2007 - The Institute supports a proposal, issued by the AICPA Investment Companies Expert Panel, that would enable money market funds to omit the schedule of investments from their shareholder reports.

Background
SEC-registered investment companies are required to distribute to shareholders semi-annual financial statements, which must be audited by a registered public accounting firm on an annual basis. These financial statements must include a schedule of investments listing each investment security held by the fund. Such listing must provide the name or title of each security, the principal or share balance, and the value of each investment security at the close of the period.

In February 2004 the SEC modified its shareholder reporting requirements by enabling money market funds to omit the schedule of investments from their annual and semi-annual reports delivered to shareholders. Under the 2004 Rule Changes, money market fund financial statements, including the schedule of investments, continue to be subject to annual audit by a registered public accounting firm.

Despite the amendments, money market funds have not been able to omit the schedule of investments from their shareholder reports. The AICPA Audit and Accounting Guide Investment Companies requires investment company financial statements to include a schedule of investments. As a result, audit firms have been unwilling to provide an unqualified opinion on money market fund financial statements that omit the schedule of investments from the report delivered to shareholders.

ICI Position
The Investment Company Institute strongly supports the AICPA Expert Panel's proposed form of audit opinion and encourages the SEC Regulations Committee to enable auditors to use it so that the intent of the SEC's recent rule changes may be realized. The Institute's letter notes that the types of securities in which money market funds may invest are limited by Rule 2a-7 and as a result, the schedule of investments may not assist an investor in evaluating the fund or distinguishing the performance or risk profile of one money market fund from another. In addition, under SEC reporting requirements, the schedule of investments would be available to shareholders upon request and through the Internet.

In addition, ICI estimates these changes may reduce fund printing and mailing expenses by several million dollars per year. Accordingly, any savings would benefit the fund and its shareholders by reducing fund expenses.

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