January 17, 2003

Securities & Exchange Commission

Investment Funds Regulatory Reform

Rebecca,

I've gone through the proposal and generally find it is a step in the right direction. I think the fund industry will have difficulty with it since they are not used to such a level of disclosure. In the long run it is of course in their best interests to change. Based on several years of investor complaints with mutual fund reporting I thought I'd summarize some of our biggest concerns below:

1. independence of fund auditors from parent firm if applicable-this is important as the fund investors are quite distinct from the parent Corporation (e.g. a bank)

2. the lack of specificity of commentary on results-what went right, what went wrong, what's being done directly related to the fund. Too often general comments about the economy are made or some philosophy is presented with no real value to the reader. What unitholders deserve and are often denied is an honest discussion of results of whether the fund kept up with the market and peers.

3. Annual report comparison tables should mandatorily compare pre-tax returns to the applicable Total Return benchmark index and category quartile ratings over the performance measurement periods required by regulation

4. the role of a governance agency to approve financial statements and fee disclosure prior to release does not appear to be covered

5. the unduly long delay in reporting results to unitholders has always been upsetting-given the volatility of markets and the vast improvement in information technology quarterly reporting seems well overdue

6. the need to clearly and plainly disclosed brokerage commissions, current and historical (5 years) in tabular form-ideally these would be part of MER calculation and cited in tabular form along with other financial metrics

7. the confusion caused by fund names that do not closely match holdings and the designated benchmark index-we suggest a minimum of 80 percent of assets be of the character suggested by the fund name

8. News releases, email alerts or special mailings regarding fund mergers, acquisitions, name changes ,changes in fee structure, auditor changes and manager changes to be advised within forty-eight hours

9. delineation of the health of the governance and ethics programs-quantitative metrics at possible

10. formal explanation of any litigation or material conflict of interest breaches

11. disclosure upon request of ethics policy, governance policy and share voting policies

12. disclosure via the Internet of share voting/non-voting and rationale

13. mandatory mailing of Annual reports is a fundamental obligation of fund factories to already information- disadvantaged investors/unitholders. If this cannot be imposed, than as a minimum, any NO RESPONSE should automatically require a mailing.

14. availability upon request of key fund metrics-standard deviation, Beta and Sharpe ratio

15. breakout of dividend and interest income-important for tax purposes and planning

16. Calculation of after-taxfund returns based on median the tax rate or maximum U.S. marginal tax rate. NOTES to annual statements to include dollar amount and percentage of total brokerage commissions paid to related parties and affiliates

17. identification of portfolio manager name(s) and professional credentials and tenure with the fund

18. flagging of conflicted portfolio holdings-conflict can arise because of work performed, such as corporate financing, by parent or affiliated companies over the previous two years. They should be identified by an asterisk. We would of my automatically include any holdings of the publicly traded stock of apparent and/ or affiliated company or subsidiary.

19. the names and contact coordinates (address, telephone number, fax number, email address) of the compliance officer, governance committee members and the lead external auditor should be provided.

20. Despite numerous requests from unitholders, mutual fund companies do not disclose what actions, if any, they are taking on behalf of unitholders via moral suasion, share voting, class actions or otherwise, to recover losses due to fraud that hurts unitholders returns. Specifically, massive losses were incurred by holdings of Worldcom, Enron and Nortel. In the case of Nortel for instance a bank owned fund may also provide banking, advisory and financing/IPO services for Nortel so it's easy to see conflict- of -interest here. Mutual funds have been extremely reluctant to step up to their fiduciary duties as shareholders. Investors have lost billions of dollars via their mutual fund investments. This is an area where better Annual reports could provide useful information.

21. more detailed, visible and highlighted disclosure of trailer fees paid would be an assist to investors who still don't see the potential for conflicted (" linked ") advice and the impact of trailers on the MER of Canadian mutual funds. This has been substantiated by numerous investor surveys. Linked advice can result in the following adverse consequences for the unsuspecting unitholder:

    1. an unhealthy high proportion of your portfolio in mutual funds

    2. the wrong mix of funds as between growth and income

    3. an unduly low level of cash

    4. low performing and/ or unnecessarily high MER funds

    5. potentially higher overall fees (and lower returns) over time when a back- end load fund is chosen over a front or no load fund

    6. reduced returns due to excessively high MER and other fees because of biased fund selection

    7. a higher tax liability due to purchase of a high turnover fund or excessive fund switching

    8. excessive risk for the given return

    9. lack of dollars and cents clarity of the fees paid

    10. inability to exit the fund without penalty