RESENT DUE TO MISSING PAGES OF ATTACHMENT
January 9, 1990
TO: BOARD OF GOVERNORS NO. 3-90
SEC RULES MEMBERS NO. 2-90
OPERATIONS MEMBERS NO. 2-90
ACCOUNTING/TREASURER MEMBERS NO. 1-90
RE: PROPOSED AMENDMENTS TO MUTUAL FUND REGISTRATION STATEMENT
__________________________________________________________
Attached is the release issued by the SEC proposing
revisions to the Form N-1A, the mutual fund registration
statement. The proposed revisions are outlined below.
Discussion of Fund Performance
The Commission has proposed two alternative amendments to
Form N-1A which would require disclosure about the investment
results achieved by the fund in the prospectus or the annual
report to shareholders.
The first alternative would require management to discuss
and analyze the fund's performance for the prior fiscal year in
relation to its investment objectives. Management would be
required to evaluate the strategies and techniques used to pursue
those objectives and their effects on the fund's total return.
The second alternative proposal would require a comparison
of fund performance (yield in the case of money markets; total
return in all other cases) over time periods of one, five and ten
years to the performance of an "appropriate securities index"
over the same periods.
Both proposals also would require narrative disclosure
about the impact on the fund and its shareholders of any
practices that the fund may use to maintain a certain level of
distribution.
The disclosure requirements under either alternative
proposal could be satisfied by including the disclosure in the
prospectus or in the annual report to shareholders. The proposal
requires that funds satisfy the following conditions if they
elect to put the disclosure in the annual report: (i) a copy of
the annual report must either precede or accompany delivery of
the prospectus; (ii) the required disclosures must be
incorporated by reference into the prospectus; and (iii) the
specified performance information must be filed with the
Commission as an exhibit to the registration statement.
The Commission also has requested comment on an alternative
means of using annual reports to satisfy the disclosure
requirement. Under this alternative, funds would not have to
meet the requirements set forth above. Instead, funds would have
to include a statement in the prospectus that the annual report
contains an explanation of the fund's performance during its most
recent fiscal year, and that it is available upon request.
The release also proposes amendments to related rules to:
(i) permit amendments to prospectuses filed for the purpose of
including or updating the required disclosure about investment
performance to be eligible to become effective immediately upon
filing; (ii) exclude performance information in periodic reports
to shareholders from the currently required updating
requirements; and (iii) require funds to retain specified records
relating to the index comparison that would be required by the
second alternative proposal discussed above.
Disclosure of Portfolio Managers
The Commission is proposing to require mutual funds to
disclose in the prospectus the name and background of all persons
who "significantly contribute to the investment advice relied on
to manage the fund's portfolio." This proposal is identical to
the proposal made by the SEC last summer with respect to closed-
end fund registration statements.
Per Share Table
The proposal includes a number of revisions to the per
share table in the prospectus. Most of the changes are not
substantive, but are merely intended to shorten and simplify the
table. However, the proposal requires that total return be
included in the per share table. The proposed calculation for
reflecting total return differs from the calculation used in
connection with advertising performance data in that sales load
would not be reflected in the total return figure in the per
share table.
Comment Period
The comment period for the proposed revisions to Form N-1A
ends on March 12, 1990. Please provide Craig Tyle or me with
your comments on the proposed revisions by January 31, 1990.
Amy B. Rosenblum
Assistant General Counsel
Attachment