August 15, 1989
TO: UNIT INVESTMENT TRUST COMMITTEE NO. 52-89
RE: UPDATE ON PERFORMANCE NUMBERS
__________________________________________________________
Yesterday, several unit trust sponsors met with the SEC
staff on the issue of performance numbers. As a result of the
discussions at the meeting, certain changes were made to the
staff's position on disclosure in prospectuses of new unit
trusts.
(1) For trusts with an average portfolio maturity of 15
years or more (computed to stated maturity, as opposed to call),
if estimated current return is within 40 basis points of both an
average yield to maturity (such as the Nuveen formula) and
internal rate of return, the trust can include both estimated
current return and average yield. (For trusts with an average
maturity of less than 15 years, the "test" remains 25 basis
points.) The staff will continue to discuss on a case-by-case
basis trusts that fail to meet the tests.
(2) Every prospectus will be required to disclose that an
investor can receive a statement of cash flows on request.
(3) Every sponsor is required to supply a statement of cash
flows to the staff supplementally with respect to each new
series. For series going effective under Rule 487, the statement
can be supplied promptly thereafter.
(4) The industry was requested to submit a yield formula
that takes into account the effects of premium and discount bonds
and the impact of delays in payments to unit holders by December
7. (The Nuveen formula apparently does not reflect delays in
payment.)
The meeting of the yield subcommittee originally scheduled
for August 21 has been postponed and will be rescheduled shortly.
We will send you a notice of the meeting when rescheduled.
Craig S. Tyle
Assistant General Counsel