SAN DIEGO, Calif. - Mutual fund companies are being compelled to give investors more information than they want or need and requirements could become more onerous, according to industry executives and some regulators.

Executives and regulators aired their views at the Investment Company Institute's tax and accounting conference here last week.

The ICI and the Securities and Exchange Commission are currently reviewing, and leaning towards opposing, a proposed law that would require funds to disclose to investors, twice a year, how much they would pay in taxes if they were to sell their shares. The bill, the Mutual Fund Tax Awareness Act of 1999, introduced March 1 by Rep. Paul Gillmore (R-Ohio), would also require companies to disclose the effect of taxes incurred through portfolio turnover, on returns. Currently, funds are not required to make any disclosures in this regard.

Conference speakers said they could see merit to reporting after-tax consequences of holdings turnover on a portfolio. However, the speakers saw more problems than benefits in disclosing to investors how much they would pay in taxes if they were to sell shares.

Reporting shareholders' mutual fund taxes cannot be standardized because of different federal tax brackets, said Susan Nash, senior assistant director of the SEC's division of investment management. And, even if a calculation could be made, it could not include state taxes because each state has its own tax structure, she said.

"It's hard to prescribe a standardized method and one that's understandable for the investor," she said. Given these difficulties, the SEC is questioning whether an after-tax return number is so hard to pin down that it would be meaningless, she said.

More importantly, after-tax return figures would mislead investors whose money is in tax-deferred defined contribution accounts or in annuity funds, she said.

The SEC is currently not scheduled to review the bill but plans to do so after it has addressed corporate governance, Nash said.

"Rep. Gillmore's bill is based on a bad premise because there is no one right way to do this, no correct methodology," said Robert Zack, senior vice president and associate general counsel of OppenheimerFunds of New York. "This action is also fraught with folly because taxes change greatly from year to year . . . and why single out the mutual fund industry and not the banking, brokerage or advisory industries? If Congress singles us out, it leaves us at a distinct competitive disadvantage."

"No [tax-impact] methodology has been developed yet," David Jones, vice president of Fidelity Management and Research Company of Boston. "This is all still new." Fidelity provides after-tax information only for a few tax-efficient funds that it sells and in those cases, always uses the highest federal tax rate of 39.6 percent in making the calculations, he said.

Even if fund companies could offer investors individualized after-tax calculators on their web sites, no one would use them, Zack said.

"Our brokers, dealers and shareholders never have asked" about the tax consequences of their holdings, he said. In the worst-case scenario, "We'll tell investors: Here's an after-tax return," said Jones. "We are required to show it to you. Please don't look at it.'"

While industry executives expect to oppose the tax-disclosure measure, they also hope the SEC will simplify accounting rules for annual and semi-annual reports, conference speakers said.

The SEC is currently leaning towards amending Regulation S-X, Article 12.2, of the Investment Company Act to permit fund companies to list only those investments representing one percent or more of total holdings, said Brian Bullard, assistant chief accountant of the SEC's division of investment management. Currently, fund companies are required to list all holdings in their annual and semi-annual reports.

"This will save a tremendous amount of money now being spent on printing reports and make it easier for shareholders to read and understand them," said Joseph Grainger, a partner with Ernst & Young of New York. Marie Karpinski, vice president and treasurer of Legg Mason Funds of Baltimore, Md., said an amendment to Article 12.2 would be particularly beneficial for index funds or funds with Ginnie Mae or international holdings because these funds' lists of holdings can go on for "pages and pages."

In addition, the SEC is looking into reducing accounting requirements for complex products such as master/feeder funds, clones, multi-class funds and funds of funds, Bullard said.

"In a 1998 CFO letter, we discussed master/feeder funds and said that feeders needed masters' audited statements," Bullard said. "But we would now like to see if they could submit fewer financial statements and we are doing the same for funds of funds."

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