[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4822 Introduced in House (IH)]







105th CONGRESS
  2d Session
                                H. R. 4822

   To require the Securities and Exchange Commission to require the 
improved disclosure of tax effects of portfolio transactions on mutual 
               fund performance, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 13, 1998

 Mr. Gillmor (for himself, Mr. Oxley, Mr. Manton, Mr. Deal of Georgia, 
   Mr. Burr of North Carolina, Mr. Hall of Texas, Mr. Whitfield, Mr. 
Largent, Mr. Towns, Mr. Waxman, Mr. Tauzin, and Mr. Shimkus) introduced 
  the following bill; which was referred to the Committee on Commerce

_______________________________________________________________________

                                 A BILL


 
   To require the Securities and Exchange Commission to require the 
improved disclosure of tax effects of portfolio transactions on mutual 
               fund performance, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Mutual Fund Tax Awareness Act of 
1998''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Performance figures that investment companies generally 
        disclose to their shareholders are net of fees and expenses, 
        but not taxes, and thereby fail to take into consideration the 
        impact taxes have on an investor's return.
            (2) The incompleteness of this disclosure with respect to 
        taxes, because it treats investment companies with similar pre-
        tax, but with dissimilar after-tax, returns, presents investors 
        with a false or misleading picture of fund performance.
            (3) Improved disclosure of tax-efficiency would allow 
        shareholders to compare after-tax returns to raw performance, 
        and would permit the investors to determine whether the fund 
        manager tries to minimize tax consequences for shareholders.
            (4) If a fund's performance is based mostly on short-term 
        gains, investors can lose up to one-half of the return to 
        taxes.
            (5) The average portfolio turnover rate for an actively 
        managed (non-index) fund has increased from 30 percent 20 years 
        ago to almost 90 percent today, and average capital gains 
        distributions of growth funds, per share, have more than 
        doubled in the last 10 years.
            (6) While the investment company prospectus details the 
        average annual portfolio turnover rate, the prospectus does not 
        adequately inform shareholders about the impact the portfolio 
        turnover rate has on total returns.

SEC. 3. IMPROVEMENTS IN DISCLOSURE REQUIREMENTS.

    Within 1 year after the date of enactment of this Act, the 
Securities and Exchange Commission shall revise regulations under the 
Investment Company Act of 1940 to require, consistent with the 
protection of investors and the public interest, improved methods of 
disclosing in investment company prospectuses and annual reports the 
after-tax effects of portfolio turnover on investment company returns 
to investors.
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