Not long ago, while the markets were soaring, mutual fund investment restrictions were a pain in the neck for portfolio managers. And firms sought to lift restrictions on some of their funds in an attempt to avoid missing out on optimal returns. The current downturn, however, has shown why certain restrictions were in place from the beginning and consequently, firms have slowed efforts to change guidelines.

Over the past couple of years, the number of proxy statements issued to shareholders with proposals to change a fund's investment restrictions has declined. There have been 1,517 such proposals so far this year among the 6,705 funds tracked by Institutional Shareholder Services. That's down more than 15% from the same point in 1999, according to ISS.

Based in Rockville, Md., ISS provides research to institutional investors on the financial implications of proxy proposals, offers guidelines attempting to protect and enhance shareholder returns and serves as a voting agent service for firms that outsource their proxy voting operations.

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