The Securities and Exchange Commission (SEC) is expected to vote this coming Wednesday, January 22,2003 on a proposal to require mutual funds to disclose how they vote the proxies of the corporations whose stock they invested in and hold for their clients. I urge the SEC to require full disclosure.

While Treasurer at my previous employer, the investment office, which for over 40 years internally managed the company's pension, endowment and 403B assets, carefully voted on each and every proxy issue. The philosophy and the guidelines were for public disclosure. There was no requirement for individual proxy voting disclosure but it is a good idea whose time has come. There should be full disclosure to all clients/beneficiaries on how the trustees/investment management companies/etc. are actually voting the proxy issues. How else are the clients to receive the end result of their right as the true shareholder/beneficiary?

As we have recently read in select newspapers, the CEO's of Fidelity and Vanguard have publicly opposed the SEC's disclosure rules. They seem to argue the point that proxy voting would be politicized. They also feel that somehow this disclosure ruling would not advance the financial interests of their clients. I disagree.

Select proxy votes can be politicized whether the ruling for disclosure exists or not. That is the fact of life and is where open debate is good. The recent fiasco with the Hewlett Packard merger proxy was a real example of undue pressure and coercion. The debate was good but the "change your initial proxy vote from a nay to a yea at the last minute" by one major investment management company was politics at its worst. Investors should question whether such a vote could ever be in their financial interest.

It is good to say that an investment management firm/mutual fund company basic duty is to advance the financial interests of their clients. I believe that disclosure of proxy voting truly advances the clients interests in both a financial sense and a corporate governance responsibility sense. Let us also remember that the Department of Labor approximately ten years ago ruled that proxy voting no longer had to only consider the price of the stock but could take into consideration other issues that were important on a long term basis. So if disclosure of proxy voting furthers the corporate governance responsibility issue, as it does (furthering full disclosure accomplishes this), clients should not only be for it but should demand it.

As I have great respect for Mr. Brennan and Johnson and their companies trying to compete in a ruthless environment, I suggest to lessen the pressure from outside entities during the proxy voting season if this ruling should pass, that they urge the SEC that proxy voting disclosure occurs once a year, say September end, after the voting season is over. This allows the internal process to be less politicized and allows their boards/trustees time to review the year's proxy vote adherence to their proxy policy guidelines, which is solely their responsibility.

Full disclosure simply puts the proxy voters, trustees, boards, corporations and the clients/beneficiaries on the same wavelength and advances the cause of corporate governance. Let's move forward and urge the SEC to do what it already senses is right for the individual shareowner and for corporate governance.

Patricia A. Small, Treasurer
Emeritus of the University of California

KCM Investment Advisors