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In preparing for April 15 (many happy returns, everyone!), I contacted one of my mutual-fund companies to ask if they would be mailing their 1099's soon. And their reply was, our fund had neither dividends nor capital gains this year, so we won't be sending 1099's.

Well, this is the first time that has happened to me. And while I'm not troubled (about the fund's performance), I am curious:
* capital gains would be generated by sales of individual stocks,
and I guess the fund manager feels his/her picks have further room
to appreciate so didn't sell any;
* dividends would be generated if any individual stocks issued
dividends (in excess of the fund's expenses?).

It's the latter one that causes me concern: the fund's style is large blend, so what are the chances that none of its individual large-cap stocks paid any dividends this past year?
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Greetings,

And their reply was, our fund had neither dividends nor capital gains this year, so we won't be sending 1099's.

I think this should be restated a little. The fund has neither net investment income to distribute nor net realized capital gains thus there isn't any distribution made.

Well, this is the first time that has happened to me. And while I'm not troubled (about the fund's performance), I am curious:
* capital gains would be generated by sales of individual stocks,
and I guess the fund manager feels his/her picks have further room
to appreciate so didn't sell any;


Not necessarily. The fund may have offset any capital gains with losses or used loss carryovers so that there weren't any net realized gains to distribute. What was the status of the fund in previous years?

* dividends would be generated if any individual stocks issued
dividends (in excess of the fund's expenses?).


It is possible if the fund has a growth tilt for it to have a very low yield that may result in there being no net investment income to distribute. If the fund's expenses are say 1.4% and the yield on the holdings is 1% then you aren't going to have anything pass through.

It's the latter one that causes me concern: the fund's style is large blend, so what are the chances that none of its individual large-cap stocks paid any dividends this past year?

What is the expense ratio on the fund? This is likely the big question since if it is up there that would explain it. Don't forget the fund could hold a mix of growth and value stocks so that it is a considered a blend but it avoids high-yielding stocks and thus could hold some of the big Nasdaq stocks as well as say Berkshire Hathaway to balance that out.

Don't forget that you didn't tell us the name of the fund and so it isn't like I could look up that fund's news to see if there is an explanation there.

HTH,
JB
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Thanks, I hadn't realized--oops, wrong term to use in a discussion of capital gains, eh?--understood those subtleties.

The fund is Legg Mason Value, which does have a high expense e.r. (1.7%). And now I notice it didn't pay any income or gains last year either, which I hadn't noticed then because I did get a 1099 from them for the Opportunity Trust fund.
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Greetings,

Now that I have a name of the fund I could look at the prospectus and notice that on page 41 of http://www.leggmason.com/funds/ourfunds/prosp/equity_prosp.pdf that there aren't distributions for 2004 or 2003. Along the bottom is the assets in the fund which could be used as a guide to see if the fund had redemptions while it was down, e.g. the 25.5% drop in assets from 2002 to 2003 while the fund's total return was down only 18.29% would suggest some redemptions at least to my mind. This would allow the fund to book capital losses if the shares sold were at a loss which are then used against future capital gains when the fund sells stocks at a gain.

Regards,
JB
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