June 2, 1994
TO: CLOSED-END FUND COMMITTEE NO. 13-94
RE: NEWSPAPER REPORTING OF CLOSED-END FUND DIVIDENDS
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At the last Committee meeting, several members identified some
problems with the reporting of closed-end fund dividends and,
consequently, yield data in the newspapers. Specifically, members
stated that the data currently reported in the papers, and in
particular The New York Times and The Wall Street Journal, are
inconsistent and that the methods used to report the data are
incorrect.
It is our understanding that The New York Times (which obtains
its data from Tribune Media Services) reports a dividend figure
that is calculated by multiplying the amount of the most recent
payment by the frequency of payments that the fund will make
annually (e.g., a recent dividend payment of 10 cents would be
multiplied by 4 for a fund that declares quarterly dividends and a
40 cent dividend would be reported). This method often misstates
the actual dividends that a fund annually distributes because it
does not take into consideration that the amount of a fund's year-
end dividend payment is usually different than the amount of the
other dividend payments made throughout the year. This occurs
because funds generally do not know the precise amount of ordinary
income they will earn during the year that must be distributed
pursuant to the requirements under Subchapter M of the Internal
Revenue Code.
With respect to the dividend data reported in The Wall Street
Journal, members stated that it often includes net capital gains
distributions.
As discussed at the meeting, the Institute intends to
recommend that the news services modify their methods of reporting
dividend information so that they will be consistent and more
accurate. Several members suggested that newspapers report the
aggregate ordinary dividend payments made by the fund over the
preceding 12 months (i.e., the total amount of dividends
distributed over the preceding 12 months). A footnote would then
need to be added to the tables explaining how the reported dividend
was determined.
In addition to your general comments on this issue, we are
interested in your thoughts on the proposed method for reporting
dividend data described above; whether the dividend data for your
funds has ever been reported incorrectly and, if so, what the
problems were; and whether your firm has had any discussions with
the news services about their methods for reporting dividends.
Please provide me with your comments by June 22, 1994. My direct
number is 202/326-5824 and the fax number is 202/326-5828.
Amy B.R. Lancellotta
Associate Counsel