May 7, 1992
TO: UNIT INVESTMENT TRUST COMMITTEE NO. 25-92
RE: DRAFT RESPONSE TO SEC STAFF LETTER PROPOSING MODIFICATIONS
TO ELTR FORMULA
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Attached for your review is a draft response to the April
10, 1992 letter from the staff of the Division of Investment
Management proposing modifications to the Institute's proposed
estimated long-term return ("ELTR") formula for unit investment
trusts. (See Memorandum to Unit Investment Trust Committee No.
22-92, dated April 15, 1992.) As previously indicated, the
staff's letter proposes revisions designed to reflect the fact
that a UIT investor does not receive the amount of his sales
charge back when his principal is returned at the end of the
trust's life.
The attached letter states that the staff's proposed
approach is flawed because it would eliminate investors' ability
to compare two similar investment vehicles: mutual funds and
unit investment trusts. It further notes that if the staff's
revised ELTR formula were adopted, unit investment trusts
unfairly and inappropriately would be placed at a competitive
disadvantage.
The letter reiterates the Institute's view that despite the
fact that unit investment trusts, unlike mutual funds, have a
stated maturity, in actuality both products have indeterminate
holding periods. For this reason, in the Institute's view, sales
charges should receive the same treatment in both cases in
connection with computing long-term performance.
If you have any comments on the attached draft response to
the staff, please call me at (202) 955-3514 by Friday, May 15.
Frances M. Stadler
Assistant General Counsel
Attachment