More than 1,000 fund executives gathered at San Diego's Hyatt Regency this week for the Investment Company Institute's Tax and Accounting Conference. Key subjects at the conference included topics such as how to calculate after-tax returns for funds and a host of regulatory issues. The meeting also including a plethora of networking (and golfing) opportunities as structured time ran from before 8 a.m. to just the early afternoon each day.

Much of the time in the general session was spent covering the subject of calculating after-tax returns for funds. This issue is an outgrowth of the Mutual Fund Tax Awareness Act of 1999 introduced into the House of Representatives by Representative Gillmor last March.

The Act directs the SEC to require "improved methods of disclosing in investment company prospectuses and annual reports the after-tax effects of portfolio turnover on investment company returns to shareholders" within one year of the Act's passage. (The Act has not yet passed into law).

Unfortunately, the panel -- which included the ICI's Keith Lawson, Susan Nash from the SEC's Division of Investment Management, Joel Dickson of the Vanguard Group, David Jones from Fidelity Management & Research, and Robert Zack of OppenheimerFunds -- came to no more common ground than that the requirement is hellishly complex.

For starter, there are two forms of after-tax returns (pre-liquidation and post-liquidation depending on whether the investor has sold his or her shares). In addition there is the plethora of Federal tax rates (and their changing levels over time which effects historical performance). This leaves aside the issue of State, local, and other levies.

Oppenheimer's Zack drove the point home for the audience with the pithiest comment of the day. "Notice in the men's room that urinals are now at different heights -- not all people have the same needs," he quipped to the audience delight.

Obviously opposed to the concept, he added that to his knowledge Oppenheimer has "never had request from clients or brokers for the after-tax information."

Nash conceded that "all of us would acknowledge that you are not going to get a number that is right for all investors."

She added that the Commission is looking at exempting funds in retirement plan from this calculation and is asking whether this information is useful enough and relevant enough to everyone.

Dickson pointed out that it would be "not uncontroversial" to exclude retirement plans and variable annuities from the requirement since distributions from these plans are taxed at the highest income rate.

Jones rebutted by saying that most retirement investors liquidate the fund but not the plan, thereby deferring the tax beyond the period of investment in the fund. He also noted that 54% of fund assets are now in retirement plans such as IRAs and 401ks.

He noted that the requirement would also place fund companies in a tricky no-win situation of telling investors: "Here is an after-tax return. We are required to show it to you. Please don't look at it."

Zack gave voice to what may be the underlying cause for opposition to the requirement by the fund industry: "Our friends in the brokerage, banking and insurance industries are not being asked to submit themselves to a similar requirement. We are being placed in a worse environment," he lamented.

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Overheard at the conference. Marketers at Deutsche Asset Management are being disappointed in their plans to tout the combined fund families of Deutsche Bank and Bankers Trust. The bank was unable to combine the families as quickly as the marketers would have liked due to the required 75-day filing period and the need to hold shareholder meetings for all of the funds before they are officially joined. Deutsche's marketers had wanted to distributed new literature with the new year. According to one of the Deutsche's lawyers at the conference the marketing department's wish is not in the cards. 

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