Austin American-Statesman from Austin, Texas • 30

H(ilii ill iin I jnil.n 'I i Wfiwiiwyi r'l" piiy i i i pn-iyi yMnyy i I .11,11,,, C10 Austin American-Statesman Sunday, July 30, 1989 Load commission eats into profitability of bond mutual fund Investor's guide Bill Doyle down even though the market has turned around and is almost back to where it was before the crash. A. "Almost" is the correct qualifying word. The stock market, as measured by the Dow Jones and other averages, still hasn't returned to the record high it reached in August 1987. Nevertheless, if your If interest rates continue to decline, bond mutual funds should do well.

If you own a bond fund that hasn't moved higher lately, you can blame that on dumb fund management and think about switching. Q. We are a couple in our 80s who paid less federal income tax before tax "reform" bumped us into the 28 percent tax bracket. We need to convert maturing certificates of deposit into non-taxable income to reduce our Medicare catastrophic coverage tax. Are closed-end municipal bond funds appropriate for us? A.

That type of fund technically a closed-end investment com along to fund shareholders as dividends, also tax-free. By investing in such a fund, you would reduce your taxable income and your Medicare surtax. However, just as is the case with direct tax-free interest received from direct ownership of municipal bonds, you would have to include those tax-free dividends in the cal- culation to determine if part of your Social Security benefits is taxable. Nonetheless, you would prob- ably save a bit in taxes. Let's hope you are aware that the value of closed-end fund shares can rise or fall.

Unlike CDs, they carry risk. Send questions to Bill Doyle, King Features, 235 E. 45th New -York, 10017. No personal replies. mutual funds invest in stocks and have stayed down with no recovery fund managers are doing poor jobs.

Could be time for you to think about moving your investments elsewhere. Most mutual funds holding bonds as investments went into tailspins when interest rates headed up early in 1988. Many still haven't come back to their former levels. reinvested dividends. The commission charge on a $12,000 investment is 7.75 percent.

That load comes right off the top. So when you paid $15.62 a share, you bought shares with net asset value the actual dollars and cents value behind each share of $14.41. As I write this, that fund's per share net asset value is $14.99. That's higher than it was at the time of your purchase. However, it's still below the $15.62 you paid because of the commission load.

It would be wrong to call your investment "bad." But the numbers show it's far from "good." That's the unhappy story of all too many mutual funds with loads most of which goes to salesmen. I suggest you talk to your insurance agent again and insist on getting a full explanation of how the fund operates. He got the lion's share of the commission you paid. Make him work for it. Q.

The last week in June was a bad one for the stock market. Yet the Sunday paper showed my bond mutual fund went up 12 points to 14.98. How can this be explained? A. First off, the fund did not go up 12 points. Its asset value per share rose 12 cents to $14.98 that week.

Q. My wife and I had $12,000 of paid-up life insurance, on which our agent said we were getting very low interest. He told us to cash our policies and put the money into a bond mutual fund managed by his insurance company. We bought into the fund at $15.62 per share. Each month, we receive a statement showing we own more shares.

I do not understand why. Can you explain? Also, is this a good investment? A. It's obvious that you are reinvesting your dividends leaving them with the mutual fund to purchase more shares. If you don't need income, that's a sensible thing to do. The fund you named in your letter uses the money you and other shareholders paid to invest in bonds mostly high-grade corporate bonds.

The fund collects the interest those bonds pay and, after deducting its operating expenses, passes that money along to shareholders as monthly dividends. As you reinvest your dividends, the number of shares you own naturally increases. That fund is a "load" fund, with a commission charge on the purchase of new shares but not on That was not the least bit unusual for mutual funds holding bonds as investments. The market values of bonds and mutual funds holding bonds go in the opposite direction of interest rates. Interest rates eased that week, as they have been doing for the past few months, sending bond prices higher.

That has boosted the values of bond mutual fund shares. Q. A few years ago, I invested in two mutual funds. When the market "crash" came, the values of my fund shares naturally went down. I could understand that.

What I don't understand is why the values of my fund shares stay pany holds municipal bonds. It collects tax-free interest from those bonds and passes that money quicks 3CtS I 1 mmm Tirai 1 Full-day, hands-on training allows you to be productive quickly using today's advanced sottware. Students learn in Novell network environment with the latest network versions of popular applications. Coke technicians solve zero-gravity problem of dispenser in space PC Literacy Hard Disc Mgt. Novell System Manaoer Novell Advanced Sys.

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89 percent of adults who have attended college read a combination of at least one dally and one Sunday issue of the Austin American-Statesman. Source: 1988 Austin Market Report by the National Bureau of Standards concluded that the machine did not work. Newman protested that the bureau erred in its testing, but the Appeals Court dismissed this on the grounds that he did not make any objections until the results were in. Joel Martz, a New York entrepreneur, has patented a bandage that is watertight, highly elastic and yet still lets air through to the wound. Martz noted that hospitals and clinics already use bandages with similar characteristics but said the new product would be much easier for people to use at home.

Much like bandages now on the market, the new wound dressing uses a thin, transparent membrane made of polyurethane or similar materials. The difference, Martz said, is that the membrane in his bandage is embedded in an elastic fabric made of composite materials. The fabric effectively protects the membrane, allowing it to be much thin YJ Austin PC beaming Center vJi 6300 BridaeDoint Parkwav Suite 150 Austin. Texas 78730 (512)338-4499 Quick Facts Is a program of information on the Austin market. A new Quick Fact will appear every Sunday for 52 weeks.

If you need to know more about advertising in the Austin American-Statesman, call 445-3742 for Retail or 445-3527 for Classified. NOVELL Tlie Quest For The Best From IBM? WASHINGTON Some of the patents granted this week: American corporations often are criticized for thinking only about short-term profits, but in at least one way the Coca-Cola Co. is plan- -ning far ahead. Technicians there have patented a soft-drink dispensing machine for outer space, which they hope will be used aboard the planned space station. Coke had previously developed its "space can," a single-serving drink container astronauts took aboard the space shuttle in 1985.

The new machine, which the company said is still in development, would dispense a selection of chilled drinks. The patent says the dispenser overcomes the problems of operating without gravity, which makes liquids difficult to handle, and employs a novel cooling system that consumes as little energy as possible. The soft drinks would be stored at room temperature in 5-gallon containers lined with collapsible plastic bags. A drink would be selected by pressing a button on a control panel. The machine, using pistons powered by pressurized carbon dioxide, would then pump liquid from the storage container to a drinking container.

To save power, the dispenser would only chill the liquid as it was about to be consumed. As the soft drink passed from the storage container to the drinking can, it would flow past cooling coils that would chill it, one drink at a time. Two Coca-Cola researchers, Arthur Rudick and William Credle, received patent 4,848,418. Joseph Newman, the indefatigable inventor who contends that he has developed a machine that produces more energy than it consumes, lost what may be his last bid to get a patent. Almost 10 years ago, the Patent and Trademark Office rejected the invention as a "perpetual motion machine" that violates the fundamental laws of physics.

But he persisted, arguing his case in repeated courtroom confrontations and gaining media attention. This month, however, the Court of Appeals for the Federal Circuit, the appeals court specializing in patent law rejected Newman's pleas. His only recourse now is the Supreme Court, and Newman said this week he plans to appeal. The Appeals Court noted that Newman had convinced many people that his invention works. At one point, a court-appointed special master concluded there was "overwhelming evidence" that the machine produced more energy than it consumed, and the Patent Office was ordered to re-examine the issue.

But a subsequent test conducted if ner and more breathable than conventional bandages. In addition, it is flexible enough to be worn even on elbows without losing its grip. Martz hopes to market the bandages through his company, Laivan a chemical manufacturer in Hicksville, N.Y. Martz received patent 4,846,164. Richard Adler, an inventor in New York City, has patented a lock for homes and cars that can be re-keyed in seconds without help from a locksmith.

Adler said the lock would be useful for many situations. People who lose their key could simply switch to a different one and not worry about the original falling into the hands of burglars. The lock also could be useful for people who give keys to workers temporarily and worry about unauthorized copies being made. Adler said hotels already use re-keyable locks but said these are generally a different size from standard household locks and can be opened by anyone who knows how to rekey them. The new invention, by contrast, can only be opened with one of three particular keys.

The device is made from a standard pin-tumbler lock, which has a cylinder with pins that line up when the correct key is inserted. Adler added two cylinders in concentric circles around the original. The three lock combinations correspond to whether the lock is set to require one, two or all three cylinders to line up. Adler and Paul Morris, an industrial designer, received patent 4,850,210. To get a copy of a patent, send patent number and $1.50 to the Patent and Trademark Office, Washington, D.C., 20231.

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