Subject: File No. S7-03-04
From: john a bailey, cfa
Affiliation: self

June 14, 2006


This is a very simple situation. Mutual fund managers work for the investors, not really for the management companies. Investor interest requires boards with their entire interest tied to the investors. As mutual co-op type organizations, it is absurd for a fund sponsor to maintain any measure of control over the fund that is not specifically ordered by vote of the mutual membership. Your rule making should be to expand and support the power of the vote of the membership. The measure of your effectiveness should be the frequency with which management companies are fired, especially from their so-called "own fund family" funds.

By way of context, the industry extracts some 2 to 3 percentage points in fee and cost from the membership. This is likely 40% to 50% of the expected return on US equities in general over the next ten to fifteen years. An investor could therefore suffer a reduction in return over the period, or he could voluntarily hand over 40% to 50% of his money up front in exchange for a zero cost average return fund, with the two situation being economically equivalent.

Investors are being reamed by the industry, and they need your help.