From: James Throckmorton [jt@fosterbryan.com] Sent: Wednesday, February 18, 2004 3:15 PM To: rule-comments@sec.gov Subject: File No. S7-29-03 Comments on Measures to Improve Disclosure of Mutual Fund Transaction Costs 18 February 2004 Jonathan G. Katz Secretary, Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549-0609 Dear SEC Commissioners: Thank you for the opportunity to comment on this important topic. My name is James Throckmorton and I am president of Foster Bryan Ltd., an Atlanta-based independent analysis firm. Foster Bryan provides independent, authoritative research to mutual funds, industrial companies, venture capital firms and others. While not answering all the questions raised in your request for comments, we offer the following: Overall comments: The entire mutual fund expense tracking and disclosure system just seems too complicated and too obtuse. Why doesn't the system simply disclose ALL expenses? What could be more transparent than disclosing ALL expenses? More specific comments: Eliminate the concept of soft dollars completely. If the products and services currently being purchased with soft dollars should be purchased, then why not have their purchase show through to the shareholder? All of us would agree that a well-run mutual fund will need some number of computer terminals, some software, and some research, why not itemize their costs so that each fund's expenditures on various items could be compared? In particular for independent research, we see no reason that independent research cannot be purchased plainly and the costs disclosed openly. Much of the independent research currently being acquired by mutual funds is being purchased using soft dollars from firms that also have trading desks or associations with broker/dealers. We think that separating these two transactions brings clarity and the forces of the free market to bear on both. Mutual fund managers can place their trades with the trading company that offers the best combination of price and service. Separately, mutual fund managers can purchase independent research from those research firms offering the best combination of good analysis, responsiveness and price. Again, all these expenses should be itemized and disclosed. Finally, we are aware that a large percentage (at least 70%) of mutual fund research dollars are spent on research from the large brokerage houses. In our experience, the research from the large brokerage houses is uniformly known as bad research, leading to the question; is this really the purchase of research or another form of commission? A simple disclosure of the dollar amount of research purchased from firms that also sell the company's mutual funds would shine a bright light on this practice. Thank you again for the opportunity to offer our comments James Throckmorton Foster Bryan Ltd jt@fosterbryan.com +1.770.350.9770 Foster Bryan Ltd. Five Concourse Parkway Suite 3000 Atlanta, GA 30328 USA