Subject: Mutual Fund Prospectus Content
     
     
May 29, 1997
     
#1:  the performance claims of mutual funds should meet strict standards 
and be judged on a level playing field.  Otherwise, all will become 
smoke and mirrors about snake oil, and the SEC, in my opinion, will have 
failed to exercise its public responsibility.  The President and 
Congress are emphasizing that each individual must become more 
responsible for her and his own financial well-being and security in 
retirement.  In most cases this requires each person to become an 
individual investor in stocks and bonds.  In most situations, mutual 
funds are an appropriate and efficient method of investing either all or 
most of the typical individual's savings for best future gain throughout 
a lifetime.
     
An SEC role in supporting these Presidential and Congressional goals is 
to protect the public from misleading, inflated, and just plain false 
claims made by mutual funds in any way to include advertising and in 
each prospectus.  [Of course, the SEC must also police how mutual funds 
handle the public's money entrusted to them, and attend to a host of 
other matters, too, but that's a different subject.]     
     
        --I am against allowing performance claims which the owning public
could never have enjoyed ("prebirth" records or fund manager performance 
in some other fund, investment vehicle or arena).  I'm very proud of the 
way I have managed my family's investments and influenced my friends to 
do equally well.  But, should that record have any bearing on how I'll 
manage a hundred million dollars for the profit of share holders, 
myself, and my employers in the face of competition within and without a 
new enterprise I might undertake?  I certainly don't think so!  Besides, 
were I to claim +44% annually for the past fifty months (according to 
Aunt Lizzy, Cousin Arthur, friend Mike and my dog's informal IRA), how 
could anyone really check?  
     
        --Equally bad are "similar to" claims made by private money managers
who now want to claim such credit as a reason they'll do well in the 
public sector.  Even the SEC will be unable to evaluate such claims, 
given their wide interpretation.  An apple is like an orange if one is 
evaluating fruit salad, but rarely otherwise.
     
#2:  given the emphasis being placed by our President and Congress on 
each individual to invest responsibly, the SEC must become more 
sensitive to the ways in which ordinary citizens evaluate matters. Since 
these people pay most of the taxes and are the source of most of the 
profits this would have seemed obvious all along.  Given the renewed 
emphasis on public participation, it's REALLY imperative now.
     
        --Does the manager put his money where he mouth is?  Does s/he or they
invest personal savings in the fund being touted as a good (or the best) 
place for the savings of others?  
     
It's an absolutely fair question deserving a straight forward, accurate 
answer that is subject to verification and notice when that answer 
changes in a significant way.  What's "significant"?  How about if any 
manager's investment changes by more than 25%, up or down.  A 
responsive, responsible answer would be: "It's a hedge fund, and 
although it sometimes makes good money for the rich and/or brave, it's 
too risky for me at this stage in my investing life!"  Also a good 
answer would be the one I heard given by a Vanguard manager who 
described placing all his personal investments including his children's 
college savings, in a couple of index funds, one domestic and one 
international.
     
[I am willing to be accountable for my opinions, in appropriate public 
and private arenas, if required to make them count in SEC 
deliberations.  But, I would appreciate whatever privacy you can afford 
my views without discounting them from your deliberations, since I am a 
retired individual investor who has never worked in the financial 
profession nor sold anything connected thereto.  I am writing as a 
private citizen, not representing anyone but myself.  I am retired from 
25 years as a military officer and 17+ years as an industrial manager.]
     
For cc addressee:  please pass this to Roger Lowenstein.
     
Roy R. Krebs
307 Yoakum Parkway 814
Alexandria, Virginia 22304-4021
(703) 751-8891
e-mail:  krebs@moon.jic.com