From: Joseph P. Herbst
Sent: March 7, 2006
Subject: File No. 265-23

Members of the Committee -

I've only read the Executive Summary so far, and have some potential major questions right off the bat. On pages 4-6 of the Report, you try to define "Microcap" and "Smallcap" companies. At best, this is very confusing and at worst it is inaccurate.

1) page 4: It appears that you are trying to "draw some lines" based on Total Aggregate Market Cap. Wouldn't it make more sense or at least be easier to draw the lines based upon Percentiles, with Total Cap in mind. This would make it easier to identify and less "fluid" between periods (i.e., if there is a relative inflow into Large Cap stocks vs. smaller cap during a period of time, several Smallcap companies would move into MicroCap and vice-versa if there was an Relative Outflow from Large Caps). Or at least keep these "Lines" for a couple of years so that companies don't move in and out of size s based upon things somewhat out of their control. This issue is the least of my concerns - it is listed first based upon its page number, but may help explain some of the potential confusion that follows.

2) page 5: The notes in the "Source:" for the chart at the top can't be accurate. It says that "Total Market Capitalization" is $16,891 million. Do you mean $16,891 Billion? Or is this somehow related to the confusion leftover from page 4 noted above?

3) page 6: The first Main Bullet recommends exemptive relief for "microcap co.'s with less than $125 million in annual revenue and to smallcap co.'s with less than $10 million in annual product revenue ...." I can't imagine many, if any, companies that would meet this Smallcap criteria (with Market Cap between $128 and $787 million) and Rev. < $10 million. That would indic ate a Price-to-Revenue Ratio of 12+ X.

Joseph P. Herbst