National Securities Clearing Corporation (NSCC) will be modifying the Mutual Fund Profile Service - Phase II and the Networking System to support the guidelines set forth by the Internal Revenue Service regarding 5 Year Capital Gains for mutual funds. These guidelines implement changes to the capital gains tax rates introduced by the Taxpayer Relief Act of 1997. NSCC is implementing these modifications on November 19, 2001.

The changes to Profile II and to Networking will effect both PC Web and the mainframe applications. The Year-End Tax Reporting feature in the Networking Activity stream and the Capital Gain records in the Networking Dividend stream will be enhanced. For Profile II, the Periodic Distribution Profile will have an additional new value for the Distribution Indicator on the Distribution Declaration Cap Gains record. (See Appendix A for details).

The revised file layouts will be posted to the NSCC web site, formats.nscc.com very shortly for participants to review. Participants are encouraged to test the layout changes prior to the implementation date of November 19, 2001. Beginning November 5, 2001, testing of the new record layouts will be provided in the Participant Services Environment (PSE) region. Participants wishing to test must contact the Enterprise Service Center Participant Test Group (PTG) at (212) 855- 5630. To ensure proper set up for the PSE region, a request must be received by PTG at least three days prior to the date you wish to initiate testing.

Any questions or concerns regarding this Important Notice can be directed to the Mutual Fund Hotline (212-855-8877) or the undersigned at 212-855-5674.

Randy Solomon
Director, Mutual Funds Marketing

1. Mutual Fund Profile Service-Phase II- Periodic Distribution Profile

• A new value of "4" for a 5-Year Capital Gain will be added to the existing "Distribution Indicator" on the DISTRIBUTION DECLARATION CAP GAINS RECORD. The value of "4" should be used when designating a 5-year capital gain associated with a long-term capital gain. The affected fields are located on Profile Type 03 (Distribution Declaration) and Record Type 041 (Distribution Declaration Cap Gains Data).

• The new 5-Year Capital Gain value must be related to a long-term capital gain distribution.

Accordingly, when the "Distribution Indicator" equals 4 (5 Year Capital Gain), the "Gain Indicator" field must show a value of:

0 (Undetermined projected gain),
2 (20% Rate Gain) or
3 (28% Rate Gain).

Note: when the "Distribution Indicator" equals 4 (5-Year Capital Gain), the "Gain Indicator" cannot equal:

1 (Short Term Capital Gain),
4 (Section 1202 Gain) or
5 (Un-recaptured Section 1250 Gain).

2. Networking - Dividend Distributions (DIVIDEND HEADER)

• A new field for "5-Year Capital Gain Rate" will be added to the existing DIVIDEND HEADER record (Record Type 62 = Cap Gain, columns 101-106).

• The system will require that the new 5-Year Capital Gain field be related to a long-term capital gain distribution.

Therefore the "Capital Gain Indicator" must equal:

2 (20% Rate Gain) or
3 (28% Rate Gain),

when the "5-Year Capital Gain Rate" is provided.

The "Capital Gain Indicator" cannot equal:

1 (Short Term Capital Gain),
4 (Section 1202 Gain) or
5 (Un-recaptured Section 1250 Gain),

when the "5-Year Capital Gain Rate" is provided.

• Four distribution records will be modified to accommodate a new field for "5-Year Capital Gain Amount". The affected records are:

• DIVIDEND/CAP GAIN DETAIL RECORD FOR CASH ACCOUNTS NOT SUBJECT TO WITHHOLDING (F63), columns 91-106.

• DIVIDEND/CAP GAIN DETAIL RECORD FOR CASH ACCOUNTS SUBJECT TO WITHHOLDING (F64), columns 91-106

• DIVIDEND/CAP GAIN DETAIL RECORD FOR REINVEST ACCOUNTS NOT SUBJECT TO WITHHOLDING (F65), sequence #2, columns 91-106 (See Note 1 below.)

• DIVIDEND/CAP GAIN DETAIL RECORD FOR REINVEST ACCOUNTS (SUPPLEMENTAL RECORD) (F67), columns 91-106. (See Note 2 below).

Note 1: A second record (Sequence Number 02) has been added to Record Type 65 for the 5Year Capital Gain Amount. For future purposes, an optional Sequence Number field was added to Record Types 61-67, columns 107-108.

Note 2: The F67 is a continuation of the F66 (DIVIDEND/CAP GAIN DETAIL RECORD FOR REINVEST ACCOUNTS SUBJECT TO WITHHOLDING) record. Therefore the F66 will not be modified.

• A new field for "5-Year Capital Gain Rate" will be added to the existing YEAR-END TAX REPORTING - INDIVIDUAL REALLOCATION RECORD.

• The record is part of the Networking Activity stream-Record Type 45 (Year-End Reporting), Sequence Number 02, columns 75-80.

• "5-Year Capital Gain Rate" should be reflected as a percentage of a long-term distribution.