Mutual Fund

LARRY WYSOCKI, a biologist from Denver, relies on "gut instincts" rather than classic investment knowledge. When Wysocki received the Vanguard Group's 58-page proxy recently, his gut told him something was amiss. Among the seven proposals the proxy asks shareholders to vote on are requests to change the status of several large funds to "non4diversified" and to give management the power to change the benchmarks used as the foundation for several big index funds. "I don't know what it all means," says Wysocki.

While the public has been focused on legislation that could wipe out the marriage penalty and end the estate tax, a lesser known tax bill has been introduced that would be a windfall to virtually everyone who owns mutual funds. Introduced late last month by the Joint Economic Council, the Mutual Fund Shareholders Tax Relief bill not only serves to get fund owners cheering, but it points out some of the lunacy of the way people pay taxes on funds now. Essentially, this bill would allow fund owners to exclude up to $3,000 in capital gains per person (so $6,000 for a married couple)

Mutual fund investors brace yourselves: You might be in your biggest tax bite since 2000. Around this time each year, funds pass on dividends and capital gains earned on the sale of securities to investors. This year's distributions are expected to be exceptionally high, partly due to the volatile stock market. "This will be one of the worst [years] we have seen on record in terms of the tax bill," says Tom Roseen, senior research analyst with Lipper Inc. Roseen estimates that this year's tax tab will be close to that of 2000, when fund investors in taxable accounts paid $33.1 billion in taxes on capital gains and dividends.

"I am interested in purchasing a very diversified bond mutual fund," a Florida reader writes."I want to find a fund that has some of everything, including intermediate- and long-term bonds, corporate and government, high-grades, as well as some lower-rated, and both foreign and domestic."My stockbroker does not seem to be aware of such a diversified bond fund. Would you know of any like this?"He doesn't explain why he's interested in such a fund, but it's a good guess that he has a couple of reasons:* He wants to be invested in all these sectors of the bond market but doesn't want to bother finding suitable funds concentrated in each sector, deciding how much to invest in each fund to maximize his return, changing the allocations when desirable and doing all the paperwork.

The nation's top-performing mutual fund for the year that ended in March got there by investing in small regional banks, and the fund's director said yesterday that he expects continuing solid returns for the next few years at least."

BOSTON -- The number of U.S. mutual fund companies requesting protective lines of credit from banks is up about 50 percent from a year ago, according to bank officials."

WASHINGTON -- Elaine Garzarelli is closing down her tiny mutual fund, ending a brief foray into money management for small investors.The well-known institutional money manager asked her board of directors earlier last week to close the Garzarelli Balanced Fund and liquidate its $2 million in assets. The board unanimously agreed, and the liquidation is effective Dec. 10.The fund generated a 22.3 percent return between March 31 -- its date of inception -- and Monday, according to a letter Garzarelli sent to fund shareholders.

Here's a scary fact: Investors, most of them not knowing exactly what they are investing in, pour billions of dollars into mutual funds each month. Now, some in the mutual fund industry are trying to change that.Fidelity Investments, the nation's largest mutual fund company, last week rolled out a rewritten and redesigned sales document for its high-profile Magellan stock fund, the first in a series of revamped prospectuses that the firm will release over the next 18 months for its more than 100 funds.

Legg Mason Inc., a Baltimore-based financial-services company, lured away this month one of the top officers of its rival, mutual fund manager T. Rowe Price Associates Inc. Now Legg is looking to horn in on Price's main turf: mutual funds.When Legg Mason hired Edward A. Taber III, who headed Price's fixed-income and taxable-bond divisions, his charge was to run the company's money-management business. Yesterday, Legg Mason Chairman and President Raymond A. Mason said the company will add to its mutual fund offerings with at least two HTC new funds this year, perhaps as many as five.

T. Rowe Price Associates Inc. yesterday introduced a new equity mutual fund that invests in stocks of midsized companies that are out of favor with the market.The fund is called the T. Rowe Price Mid-Cap Value Fund. It invests primarily in companies with market capitalizations ranging from $300 million to $5 billion.Mid-Cap Value is managed by Greg McCrickard, 38, who also manages T. Rowe Price's OTC Fund, which invests in small companies. The OTC Fund returned 13.85 percent in the first six months of the year and 32.9 percent for the 12 months ended June 30.McCrickard said the Mid-Cap Value Fund offers investors the "financial stability of larger companies and the higher growth potential of smaller firms."