Accounting of its coveted Certificate of Conformance for Annual Financial Report have been to Texas recipients. (The Council has maintained a very active educational program in this area but claims only a portion of the credit for this outstanding achievement.)

THOSE WHO BENEFIT FROM THE COUNCIL'S ACTIVITIES

All who participate in the market place which the Council serves realize substantial benefits from its activities.

The Community of Municipal Securities Dealers benefits through the maintenance of high standards of business conduct with enhancement of its public image and through improvements in the business climate in which it operates. The Community of Lenders benefits through a timely and reliable flow of information through which it continuously appraises the degree of security which surrounds its $9.5 billion investment in Texas municipals. This process weighs heavily in influencing future borrowing costs. The Community of Borrowers, the approximately 3,000 agencies of state and local government in Texas are the real beneficiaries of the Council's activities. Benefits to the bond dealer and bondholder are passed on to the issuer of the bonds in the form of reduced rate of interest on future borrowings in a manner which can be computed in dollars and cents.

THE DOLLAR BENEFITS OF THE COUNCIL'S ACTIVITIES

It is a well-established and undisputed fact that bonds of state and local government in Texas enjoy a better market than the national average. Consistently, and at any given time, Texas bonds will trade in the market place at yields which are 15 to 20 percentage points below the national average for bonds of comparable security, rating, and maturity.

The new issue volume in Texas municipals is about $1.4 billion annually. Assuming an average maturity of 12 years for $1.4 billion of bonds, an improvement of only 1/10th of 1% in interest rate produces a saving in interest cost of $10.5 million over the life of the issue. A conservative estimate, then, of the monetary value of the activities of the Municipal Advisory Council of Texas to the bond issuing agencies of state and local government in Texas is upwards of $10 million annually.

MUNICIPAL FINANCE

OFFICERS ASSOCIATION

SUITE 512

1730 RHODE ISLAND AVENUE NW WASHINGTON, DC 20036

202 466-2014

CURRENT REPORTING AND DISCLOSURE STAFF WORK PAPER

For Use By

STATE AND LOCAL GOVERNMENTS

Exposure Draft
February 18, 1976

This work paper is designed for use by state and local government in providing information to investors on a continuing basis. It is intended only to suggest information which may be considered of importance by investors. It is not intended to create disclosure requirements or a legal obligation to disclose any or all items of information suggested.

Information such as that suggested has often been released to investors by state and local governments. It has also been given to rating agencies. Such information is commonly found in budget documents, audited financial statements and other easily accessible records. It is suggested that as much accurate information as possible should be furnished so that investors may make informed trading and investment judgments.

Due to the breadth and vagueness of the definitions relied upon by various authorities as to what may be considered to be "material" information, no full statement is possible of all information which should be considered for disclosure. The Supreme Court has stated that "material" information includes all information which "a reasonable investor might [consider] important in the making of [a] decision". This Work Paper,

1

therefore, provides only a general indication of information which may be provided.

B. ADDITIONAL INFORMATION.

This Work Paper suggests disclosure of information that is most likely to be material to investors. It is possible that other information, not suggested herein, may at times be material and in such cases should be provided.

1.

See the Appendix for a brief discussion of the concept of materiality and of the relevant sections of the federal securities acts.

2

In addition to the information suggested, there should be added such further material information as may be necessary so as to make y statements made not misleading under the circumstances.

Care should

be taken to review the financial, historical and other factual information as given so as to determine whether qualifications or additional information should be stated. If reli le information is available

which indicates material changes in trends or other disclosures, such information should be presented.

In

Some sections of this Work Paper are more appropriate for disclosures regarding outstanding general obligation securities. Others are more appropriate for disclosures regarding outstanding revenue securities or regarding outstanding special obligation securities. some cases, a particular security may have characteristics both of a general obligation security and of a revenue security o of a special obligation security. For example, revenue sources from a project or projects or a specific tax may be the primary source of payment and security for an issue of bonds, while additional security is furnished by the general taxing power of the issuer. Under these circumstances, consideration should be given to making the appropriate disclosures suggested as to both types of securities.

C. OMMISSION OF INFORMATION

In some cases certain specific suggested information will not be material under the circumstances. In such instances, there is no need to report the information.

Information need be given only insolar as it is known or reasonably available on a reliable basis. If reliable information is unknown and not

However, non

reasonably available, the information may be omitted.
disclosure of information on grounds that it is not "reasonably" available
should only occur in very unusual circumstances.

Normally, disclosure

should be made of all material information suggested in this Work Paper or
of information of a similar nature which reflects adequately the risk
of investment in the securities.

Information which is available in the issuer's

records or which can be obtained from another source, such as U.S. Government census reports, normally should be obtained, compiled and reported. There should be an appropriate indication of the source of the information, if the source is other than the issuer. Where relevant material information is omitted as not reasonably available, a statement to such effect should be made in the report, together with the reasons for the omission.

D. CONTENTS OF REPORTS

The purpose of a report is to inform investors of the investment merits of outstanding securities and of other matters which an informed investor might consider prior to making a trading or other investment decision. Hence, the information set forth in the report should be presented in a concise, understandable fashion. Material should be set forth in the manner which will give appropriate emphasis to such material in view of its relative importance. Avoid unnecessary and irrelevent details, repetition and unnecessary technical language. Material suggested in particular sections of this Work Paper and appearing elsewhere in the report need not be dupHowever, appropriate cross-references should be used. No

licated.

reference need be made in the report to inapplicable sections of this Work Paper, and, unless a section specifically suggests them, negative answers may be omitted.