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Dear Mr. Katz: Mayer, Brown, Rowe & Maw submits these comments to the Securities and Exchange Commission (the "Commission") regarding the proposed amendments to Forms N-1, N-2, N-3 and N-CSR under the Investment Company Act of 1940, as amended (the "1940 Act") to require disclosure of investment company proxy voting policies and voting records (the "Proxy Disclosure Proposals"). As counsel to many groups of trustees or directors of investment companies who are not "interested persons" of the funds or their investment advisers or distributors ("Independent Board Members"), we must emphasize that Independent Board Members, as watchdogs for their funds, do pay attention to the funds' proxy voting arrangements in order to assure that their own and the advisers' fiduciary responsibilities are being fulfilled. Consequently, they would support a revision to the Commission's initiative that would encourage the Independent Board Members' role in the proxy voting process. Under such circumstances they would support disclosure about the proxy voting procedures used by their funds, including making available to the public the funds' or the adviser's proxy voting policies. However, incorporating that information into the Statement of Additional Information suggests disproportionate importance to these policies compared to, for example, the Code of Ethics pursuant to Section 17(j) of the 1940 Act. We believe that disclosure of such policies should parallel the form of disclosure adopted in existing Commission rules for the Code. The Independent Board Members we represent believe that, as with other conflicts of interest that the Commission relies upon Independent Board Members to address, they are capable of discharging all necessary oversight, without politicizing the process through disclosing every single proxy vote and every deviation from policy, thereby encouraging special interest groups to lobby regarding particular votes. Even more than the costs of fulfilling the proposed disclosure obligations contemplated by the Proxy Disclosure Proposals, funds would be saddled with the costs of dealing with shareholders expressing concerns particular to themselves and not related to the investment returns of the fund generally. The form letter comments to the Proxy Voting Proposals demonstrate the ways in which individual proxy votes may become subject to campaigns relating to social issues, in this particular case the issue of "transparency." Notwithstanding the hopes of the proponents of detailed proxy voting disclosure, issues on which funds' portfolio companies seek shareholder approval are not such as would have prevented the corporate frauds of which shareholders, including mutual funds, legitimately complain. Shareholders are not generally asked to approve officer compensation packages or particular acquisitions or dispositions of subsidiaries or derivative securities. A fund is unlikely to own shares in a portfolio company unless its adviser believes in the ability of the company's management to increase shareholder value, which is, of course, the concern that Independent Board Members have the responsibility to assure remains preeminent. Even in such circumstances, existing policies provide for voting against management on particular issues, particularly those in which the interests of management are not fully consistent with that of shareholders. The Proxy Voting Proposals appropriately raise the issue of conflicts of interest involved in proxy voting. Investment advisers, or their affiliates, may have relationships with portfolio companies besides those as representative of their investing clients. Advisers should be required to disclose such conflicts to Independent Board Members and the funds could be required to make disclosure regarding the ways in which the Independent Board Members attend to such conflicts. In our view that would be preferable to mandating that every vote be publicly reported, whether a conflict is present or not. It would achieve the purposes sought to be accomplished by the current Proxy Voting Proposals at lower cost and with more attention to the potential abuses about which the Commission and the shareholders seek to establish protections. We thank you for permitting us to present our views on this matter. If you have any questions or comments, please do not hesitate to contact Ronald M. Feiman at (202) 506-2673, rfeiman@mayerbrownrowe.com, David M. Butowsky at (212) 506-2580, dbutowsky@mayerbrownrowe.com, or Stuart M. Strauss at (212) 506-2695, sstrauss@mayerbrownrowe.com.
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