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Dear Shareholder:
Compliance with US PATRIOT Act: In the wake of the September 11th terrorist attack on the World Trade Center in New York, Congress passed the US PATRIOT Act requiring compliance by all financial institutions, including mutual funds. The purpose of this act is to identify terrorist money and other illegal money laundering. The likelihood of a family of single-state tax-exempt funds like us ever encountering a terrorist is small, but we are going to have to comply as fully as any of the larger funds, or banks and bank affiliates.
The effect on you, as a shareholder, will be small. Most noticeable will be how you are permitted to make future deposits to your account. For years we have refused to accept currency, since that was already subject to heavy regulation. But now Treasury Department regulations have created a category of “cash equivalents” which include postal money orders and bank cashier checks. Only a few of you have ever sent us a money order, but we often receive cashier checks when folks cash out a bank CD. We would ask you to simply send us your personal check in the future (as 99.9% of you do already) when you want to add to your account. In both cases you will save yourself the expense of purchasing the money order or cashier’s check and your personal check will be given credit to buy shares just as fast as these other methods of payment.
Web access to your account? One commonly asked question is “when will we provide web direct access to your account”? We review this possibility almost annually and we continue to feel that the cost to the fund far outweighs the benefits provided to a very small number of interested shareholders. The problem rests in the fact that we have to create a “firewall” to prevent hackers from getting into our system and destroying our accounting records. In order to provide that protection, we have to create another enormous file completely outside our accounting system and “dump” information into this file daily. That requires expensive equipment and expensive software to keep it all working. The one-time bill for equipment and the ongoing software fees are a big number.
I personally use a self developed Excel program on which I have kept a running share balance and price history of my fund accounts for years. This involves entering the last transaction each time a statement comes. All I have to do is look up today’s price and enter it to get today’s account balance in dollars. I would be glad to E-mail a template of this to any shareholder who requests it. You can start with your present share balance and go forward from there, or if you are willing to work, you can enter every transaction from the time you opened the account. Then you will have a correct average cost per share as well.
Custodian Accounts: If you have a custodian account for a minor you must, as Custodian, instruct us to transfer the account to the minor at the time that minor reaches majority. Majority age will be 18 or 21, depending upon your state of residence. And here is the shocker. Under the Uniform Gift to Minors Act, the minor can’t get the shares transferred to him/her unless and until the Custodian issues those transfer instructions.
In the event a custodian has died, his/her Executor can act in this capacity after probate. A lot of Grandparents elect to register shares this way, appointing themselves custodian on, say, an education account. This is often a good choice, but be forewarned that transfer to the child at majority age is NOT automatic.
Broker Advice Revisited: Several months ago I talked about possible conflicts of interest in connection with advice from a broker who is paid by commission or sales loads. I ended it with a little four line poem. This has inspired shareholder Bill Watson to take up pen and respond:
Charles Schwab’s advertisements have been so hard on brokers of late that I feel it is time to give them a boost. The great preponderance of brokers and financial advisors I know are honorable men and women. But as an investor, you must pay attention to how they are going to be paid, because they represent the person that pays them.
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