[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1089 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 1089

   To require the Securities and Exchange Commission to require the 
    improved disclosure of after-tax returns regarding mutual fund 
                  performance, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 11, 1999

    Mr. Gillmor (for himself, Mr. Oxley, Mr. Markey, Mr. Towns, Mr. 
 Whitfield, Mr. Largent, Mr. Waxman, Mr. Deal of Georgia, Mr. Burr of 
   North Carolina, Mr. Tauzin, and Mr. Hall of Texas) 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 after-tax returns regarding 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 
1999''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Taxes can be the single biggest cost associated with 
        mutual funds. The average stock fund investor has lost up to 3 
        percentage points of return every year to taxes.
            (2) The average portfolio turnover rate for an actively 
        managed (nonindex) 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.
            (3) If a fund's performance is based mostly on short-term 
        gains, investors can lose a significant part of their return to 
        taxes.
            (4) Performance figures that investment companies generally 
        disclose to their shareholders are net of fees and expenses, 
        but not taxes, and therefore do not represent the impact taxes 
        have on an investor's return.
            (5) This disclosure focuses on how much money investors 
        made before taxes, and not on how much money investors actually 
        got to keep.
            (6) 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.
            (7) While the investment company prospectus details the 
        average annual portfolio turnover rate, the prospectus may not 
        expressly 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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