Mutual fund shareholders next year could begin seeing the expenses associated with running their funds decrease by millions of dollars as the result of recent moves by the Securities and Exchange Commission.

A pair of rules, one adopted Nov. 5 and the other proposed on that date, would permit fund companies to send a single copy of key fund documents, such as prospectuses, shareholder reports and proxy statements, to families that now receive multiple identical copies of those mailings. If fund companies widely use the new rules, which the SEC has called the "house-holding" rules, shareholders could save as much as $18 million each year, according to the SEC. Even greater savings are possible, according to the SEC.

Some fund companies already are taking steps to take advantage of the newly-adopted rule that applies to prospectuses and annual reports. Capital Research & Management of Los Angeles, adviser to the American Funds, plans to mail to shareholders, in the coming weeks, notices of its intention to try to eliminate duplicate mailings to members of the same family, said Chuck Freadhoff, a spokesperson for Capital Research.

Under the new SEC rule, shareholders have 60 days after receiving the notices to decide if they want to continue receiving duplicate copies of documents. Shareholders have the option of receiving duplicates, if they wish, under the house-holding rule for prospectuses and reports.

The new rule could save American Fund shareholders $600,000 or more in annual expenses, Capital Research estimated in a letter to the SEC dated Feb. 2, 1998 supporting the house-holding rule. American Funds has approximately 10 million shareholder accounts. The rule permits funds to take advantage of economies of scale as the number of shareholders a fund has, grows, Freadhoff said.

"If we can save that money, it makes a lot of sense," Freadhoff said.

Funds historically have been required to send one copy of key documents, such as prospectuses, annual and semi-annual reports and proxy statements, to each shareholder. In recent years, shareholders in the same family living in the same household have found themselves owning the same funds in various accounts. For example, a husband and wife may own a fund in separate defined contribution accounts or individual retirement accounts. Both receive prospectuses, reports and proxy statements under current rules.

An estimated 77.3 million individuals living in 44.4 million U.S. households owned mutual funds as of Dec. 31, 1998, according to the Investment Company Institute. Although it is unclear how many households have different members of the same family owning the same fund, the SEC estimated that the house-holding rule for shareholder reports and prospectuses would reduce the number of those documents funds mail by 10 percent to 30 percent. There were approximately 206 million mutual fund and money market shareholder accounts in 1998, according to the ICI.

In addition to lowering costs and cutting the waste of paper, eliminating duplicate mailings reduces shareholder annoyance with multiple mailings of the same document, said Robert S. Brennan, senior vice president at Shareholder Communications Corp. of New York, a proxy solicitation firm.

The reduction in expenses from duplicate mailings may be just the beginning of the reduction in costs associated with written communications between a fund company and its shareholders. Automated telephone voting in proxy campaigns, electronic distribution of fund documents and other innovations in communication should further reduce the printing and mailing costs associated with servicing fund shareholders, according to fund industry vendors.

"The shareholder ultimately is going to reap these savings," said Peter Suhr, executive vice president of Alamo Direct of Hauppauge, N.Y., a proxy solicitation firm.

The SEC's Nov. 5 proposal that would permit firms to reduce the number of duplicate proxy statements sent to the same household could further reduce expenses. The SEC made the proposal after those responding to the November 1997 house-holding proposal for prospectuses and reports recommended the idea of house-holding be expanded to include proxy statements. The SEC did not offer an estimate of the savings for the proxy proposal.

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