From: Schierloh, Lee B [PVTC] [mailto:lee.b.schierloh@smithbarney.com]
Sent: Thursday, June 24, 2004 11:21 AM
To: 'chairmanoffice@sec.gov'
Subject: Fund Governance



Dear Chairman Donaldson,

Once again I find myself questioning the role of government in day to day
business affairs. Maybe it goes deeper than this to include the concept of
"free enterprise"
in general. At what point does a regulatory body begin over-stepping its
bounds and start regulating in the "name
of regulating"? 

The recent SEC vote on fund governance smacks of this.

Having faithfully served my constituency- "my clients" for
the last eighteen years, I find it hard to see how their interests are
"best" being served by negatively impacting their fund performance. In
forcing independent directors
on the fund industry you in many cases increase their
cost of doing business and take fund management away
from the task of managing fund assets-their prime purpose
for being.

Numerous studies have shown that fund performance is
negatively impacted by independent boards. It makes sense. Who has a greater
incentive to push for better performance? A vested director or an
independent. Ironically, or not, funds with vested directors have lower
fees on average. Maybe they want better pricing and 
performance too.

Call my argument simplistic and naive, I'm just trying to get the best
performance I can get for my clients. If that occurs on a more regularly
basis with independent boards and directors, I'm all for it. But its not the
case. The facts dispel the rationale for making these changes time and time
again.

Unfortunately for us dog soldiers the generals got it wrong again. 


Yours Truly,
Lee B. Schierloh


P.S.
I hope you take no offense to my position on this issue, as I hold you in
very high regard.


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