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






                                                 Union Calendar No. 297
106th CONGRESS
  2d Session
                                H. R. 1089

                          [Report No. 106-547]

   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

                             March 27, 2000

       Additional sponsors: Mr. Cox and Mr. Barrett of Wisconsin

                             March 27, 2000

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 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,

<DELETED>SECTION 1. SHORT TITLE.</DELETED>

<DELETED>    This Act may be cited as the ``Mutual Fund Tax Awareness 
Act of 1999''.</DELETED>

<DELETED>SEC. 2. FINDINGS.</DELETED>

<DELETED>    The Congress finds the following:</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (3) If a fund's performance is based mostly on 
        short-term gains, investors can lose a significant part of 
        their return to taxes.</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (5) This disclosure focuses on how much money 
        investors made before taxes, and not on how much money 
        investors actually got to keep.</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (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.</DELETED>

<DELETED>SEC. 3. IMPROVEMENTS IN DISCLOSURE REQUIREMENTS.</DELETED>

<DELETED>    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.</DELETED>

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Mutual Fund Tax Awareness Act of 
2000''.

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 mutual funds 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 the effect of taxes on mutual 
        fund performance 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 mutual fund 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 18 months after the date of enactment of this Act, the 
Securities and Exchange Commission shall revise regulations under the 
Securities Act of 1933 and the Investment Company Act of 1940 to 
require, consistent with the protection of investors and the public 
interest, improved disclosure in investment company prospectuses or 
annual reports of after-tax returns to investors.
                                     





                                                 Union Calendar No. 297

106th CONGRESS

  2d Session

                               H. R. 1089

                          [Report No. 106-547]

_______________________________________________________________________

                                 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.

_______________________________________________________________________

                             March 27, 2000

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed