September 28, 1989
TO: BOARD OF GOVERNORS NO. 60-89
RE: FY 1989-1990 BUDGET
__________________________________________________________
Enclosed is the proposed budget for the Institute's fiscal
year starting October 1, 1989 which has been reviewed and
approved by the Executive Committee. In preparing the budget
proposal, the following factors have influenced our thinking:
__ The Institute will finish the current fiscal year with a
substantial surplus.
-- The increase in member assets during the past year would
produce a modest increase in dues income for the coming
year at current dues rates.
-- Member, governmental, media and public demand on the
Institute for information and services is expected to
continue at a high level.
-- There will be no let up in the legislative and regulatory
areas and our tax agenda will continue heavy even on the
assumption that there will be favorable results with
respect to Section 67(c).
-- In spite of the generally favorable market conditions this
year, the mood of the industry would not favor a dramatic
expansion of the Institute's activities.
Consequently, we are presenting a budget designed to
respond to the industry's current needs but are not proposing any
major new programs.
Here is a summary of the major income and expense
categories:
% Change
Budget Estimated Actual
Proposed Actual FY 88-89
FY 88-89 FY 88-89 FY
89-90 FY 89-90
Income (Thousands of Dollars)
Dues: Open-End 11,150 11,902
12,100 1.7%
Closed-End 450 560
700 25.0
UIT 580 524
600 14.5
Associate
Members 160 256
240 - 6.25
Investments 315 657
540 -17.8
ICI Mutual 220 215
220 -2.3
Conferences 974 1,254
1,355 8.05
Publications 465 547
691 26.32
Other 75 103
390 278.6
Total 14,389 16,018
16,836 5.1
Expenses
Administration 8,659 8,936
9,796 9.6
Legal 1,940 2,060
2,120 2.9
Legislative Affairs 1,100 1,350
1,200 -11.1
1990s Project ----- 250
200 -20.0
FY 88-89 Results
Our estimates for FY 1988-1989 show a substantial increase
in income over the amount budgeted in virtually all income
categories. Expenses also exceeded the budget, but by a smaller
amount. Some expense overruns were more than offset by related
revenues which exceeded expectations. We now expect a surplus
for the year of more than $1 million.
Highlights of the FY 1989-1990 Budget Proposal
Personnel. This budget calls for the addition of four and
one-half positions. Two of these positions, a mail room clerk
and a statistical assistant, are justified on the basis of the
cost savings or increased revenue associated with the work they
will be doing. We are moving a large portion of our printing and
mailing function from outside vendors to our mailing facility and
a new mail clerk will be needed to help handle the increased
load. In the research area, a new statistical assistant would
help with the burgeoning workload related in part to the upsurge
in the closed-end funds activity. Another new position would be
for a badly needed operations specialist to aid in the work of
our Operations Department. We are planning to conduct the
transfer agent survey in-house this year and the revenue from
that project should largely offset the cost of this position.
Another position would be designated for a senior level writer to
help produce sophisticated materials distributed by our Public
Information and Marketing Department. We also need a half-time
clerk to free a secretarial position from the responsibilities of
clipping the daily press which has become a substantial job as
coverage of the industry has exploded in recent years.
Rent. In February the Institute subleased additional space
on the fifth floor of our building. The period of free rent
expires in November, accounting for part of our rent increase.
The other element in the rent increase is the built-in step-up
included in our original lease for the sixth floor space. We are
still paying rent at a rate somewhat below the market for prime
space.
Printing, Mailing and Postage. We will be doing more of
our printing and mailing in-house in an effort to control costs
and improve control. Our electronic publishing system will also
allow us to save substantially on pre-publication costs of
preparing published materials.
Legal. Outside legal fees are expected to remain at
approximately their current level although we expect to
reallocate some resources away from the 12b-1 matter to the
formulation of legislative recommendations under the 1990s
Project. Tax matters will continue to occupy a great deal of
time, especially capital gains proposals, efforts to revive the
IRA, and modifications of the short-short rule. Investment
adviser and blue sky activities are expected to continue at their
present levels.
Legislative Affairs. Glass Steagall repeal, capital gains
and other tax proposals, and the SEC's investment adviser SRO
recommendations will absorb any resources left idle due to the
final repeal of Section 67(c).
Operations. In addition to the annual transfer agent
study, a self-financing survey of custodian costs is planned.
The first two parts of the Quality of Service Survey will be
finished with the assistance of the Public Information &
Marketing and Research staff. Workshops to instruct members how
to use the SEC's new EDGAR system are also planned.
Research. The Research Committee is asking the staff to
proceed on five major projects, a larger agenda than we have the
capacity to execute. Studies we hope to conclude in the coming
fiscal year include 1) a survey of money management attitudes and
behavior in the "baby boom" generation, 2) a study of the small
pension plan market, including 403(b) and 401(k) plans; and 3) a
study of the IRA rollover market.
Public Information and Marketing. Most activities are
projected to continue at their current levels. We will
reallocate some resources away from film distribution toward a
new consumer education activity. Up to four new booklets,
including one on "How to Read a Prospectus" and another
explaining tax treatment of mutual funds are planned.
Conferences. In addition to the annual General Membership
Meeting and the SEC Procedures, Operations, and Tax and
Accounting Conferences, we will sponsor the bi-annual Mutual Fund
Training Conference and a new international conference on legal
and marketing issues next year. We are also planning a free
orientation conference for new ICI members and potential members,
and plan a series of workshops to assist members in expanding
their use of FUNDS.
Capital Expenditures. Principal expenditures will be for
modest lease hold improvements and furnishings for our new fifth
floor space and for enhancements to our in-house computer system.
Total capital expenditures are planned at $147,900.
Planned Surplus. In keeping with the Executive Committee's
decision two years ago, we are continuing to build reserves
towards the goal of 50% of annual budget. Expected reserves at
the conclusion of FY 1989-1990 will be about $4,800,000 or
approximately 30% of next year's budget.
David Silver
President