companies, their portfolio companies and the securities markets, which the redemption power in such companies creates . . .".

Multifund, seeking to avoid the slightest possibility of any influence over other mutual funds, has provided in its Prospectus that we will not vote any shares that it holds except in the same proportion that all of the other shareholders vote their shares, thereby having no influence over management. The power to redeem the 3% of the shares of other mutual funds (or 5% of specialized funds) "in steps", as required by the Prospectus, could not create any problem of control. The mere possibility of a company losing a customer who represents 3% of its income would hardly make that company subservient to the customer. There are many companies and firms of lawyers, accountants, architects, etc. who have several customers and clients from whom they receive far more than 3% of their annual income, and yet such customers and clients do not exercise dominion or control over those companies. SEC does not request in the proposed legislation, to prohibit the purchase of 3%, or even far larger amounts of mutual fund shares by any other investor, such as pension funds, profit sharing trusts, insurance companies, and bank administered trust funds. Why then should a mutual fund be singled out as the sole prohibited buyer?

The 1.5% sales commission which Multifund offers will not be enough to induce registered representatives and other salesmen to solicit the general public. Its shares will only be bought by the sophisticated and knowledgeable investor who will learn of it by advertising or by word of mouth, and who will then evaluate it and buy it on what he believes are its merits. Multifund, fully adhering to the principe of "caveat vendor", clearly and simply states at page 1 of its Prospectus the extra expenses which Multifund entails, and we can assume those expenses will be emphasized by unfriendly salesmen who are seeking to sell fund shares on which they will be paid a higher commission.

We suggest that neither SEC nor Congress should deprive a sophisticated investor of the right to entrust his money to those fiduciaries he chooses in his own best interest, uninfluenced by pressure of a salesman, bank, or any other person.

We believe that the shares of Multifund will be particularly attractive to foreign investors, and to that extent such sales will aid our adverse “balance of payments", and should be encouraged-not prohibited.

We also urge that Congress should not knowingly grant a valuable monopoly to foreign Funds of Mutual Funds and to foreign investors, thus unfairly penalizing Americans by depriving us of the right to compete against foreigners by engaging in this business, and by depriving American investors of the right to buy shares of such funds operating under American law, and requiring them to buy such shares, if they want them, surreptitiously while traveling abroad.

EXHIBIT I.—From Fundscope, July 1967, pages 10 and 19

Liquidating value, ranked by periods-Average mutual fund results of a $10,000 investment:

Liquidating Value: Results of a $10,000 investment, all distributions reinvested. By comparison $10,000 deposited in a 5% savings account compounded quarterly would amount to: $16,436 in 10 years; $21,072 in 15 years; $27,015 in 20 years.

INDIVIDUAL PERIODS

Ten-Year Periods. Within the past quarter century (since January 1, 1942) there were sixteen 10-year periods (see page 30). Assuming an initial outright $10,000 investment at start of each period, no fund at end of any ten-year period would have been liquidated for less than $10,000.

Taking a composite average of the 138 funds in the 10-year table, the worst of all 10-year periods was 1957-1966, when average cash-in value at end of that 10-year period was $21,348.

The 16-period average cash-in value for all funds in all 10-year periods is $28,784. This is the cash-in value of an assumed initial $10,000 investment, with all distributions from investment income and from realized capital gains reinvested, and after deducting all costs including commissions.

The best of all 10-year periods was 1949-1958, when average cash-in value for all funds was $39,242.

Results for individual funds ranged from a low of $10,835 to a high of $77,539 in the various ten-year periods (reflecting the tremendous variation among mutual funds).

Minus $10,000 investment equals profit of $11,348, or 113.48% for 10 years, or 11.35% average per year.

Similarly $10,000 investment equals profit of $18,784, or 187.84% for 10 years, or 18.78% average per year.

Similarly $10,000 investment equals profit of $18,784, or 187.84% for 10 years, or 29.24% average per year.

EXHIBIT II.-Fundscope March 1967

Of 259 mutual funds, no fewer than 126 (about 50% of the total) made the top 25 in at least one of the years 1959 through 1966 (count is made from the alphabetical list of 259 mutual funds that starts on page 26).

Here is the list of funds that made the top 25 for gain in one or more of the eight years 1959 to 1966.

From the above list of 102 mutual funds that made the top 25 for gain in at least one of the eight years 1959 through 1966, we find that not one fund was among the top 25 in all eight years. Nor did any single fund hit the top 25 in seven of the eight years.

One fund, Fidelity Capital, hit the top 25 in six of the eight years.

Five funds made the top 25 in five of the eight years: Colonial Equities, Fairfield, Fidelity Trend, Ivest Fund and Over-The-Counter Securities Fund.

Nine funds made the top 25 in four of the eight years: Amer Investors, Convertible Growth, Morton Growth, Oppenheimer, Revere, Samson, 20th Century Growth and Value Line Special Situations Fund.

Six funds made the top 25 in three out of the eight years: Channing Special, Investors Research, Knickerbocker Growth, Penn Square, Putnam Growth and Scudder Special.

A total of 24 funds made the top 25 in two of the eight years. The remainder, 57 funds out of 102, hit the top 25 in just one of the eight years.

The statistics would seem to indicate that if in any given year you are to own a top 25 fund for that year, then you must invest in a "package" of funds rather than concentrate your investment in one single fund.

EXHIBIT III

Senator MCINTYRE. Mr Anthony R. Tyrone was not able to appear as scheduled today and has submitted his statement for the record. (The prepared statement of Mr. Tyrone follows:)

STATEMENT OF ANTHONY R. TYRONE

Mr. Chairman and members of the committee, my name is Anthony R. Tyrone and and I am Chairman of the Board and President of Hamilton Management Corporation, the distributor of Hamilton Funds, Inc., of which I am President. Hamilton Management Corporation is the sponsor of contractual plans for the accumulation of shares of this mutual fund and is a member of the Association of Mutual Fund Plan Sponsors. I have been engaged in the mutual fund business continuously for the past seventeen years and I am a director of the Association of Mutual Fund Plan Sponsors.

The Association has already submitted to you an extensive written and oral presentation which I think effectively shows that the recommendation of the S.E.C. to abolish the front-end load and thus do away with the contractual plan business is totally without merit. This proposal represents an abandonment of the Commission's responsibilities as a regulatory agency.

I think almost everyone will agree that mutual funds are a desirable form of investment. They offer the investor a combination of expert management and portfolio diversification in equities. They offer the investor an opportunity to protect himself against inflation and to participate in the growth of our economy. Nobody will deny, either, that as former Postmaster General Day indicated is the case with life insurance, very few people come off the street into a brokerage house or call a salesman on their own initiative to purchase mutual funds. Shares of mutual funds must be sold, not bought. That is why the no-load funds still only represent a relatively small percent of the business.

The contractual plan is a means by which shares of mutual funds can be offered to investors of moderate means who are interested in investing relatively small sums of money on a regular basis, or to investors with greater means who are interested in a regular savings program but who require the discipline which is imposed by the front-end load feature of the contractual plan. Because the handling of periodic payments of small sums of money over extended periods of time involves heavy initial costs of distribution and administration and because salesmen must devote a considerable amount of time to making a sale, the front-end load is necessary-and even with the front-end load, plan sponsors still lose money carrying most accounts on the books during the first year of a plan.

There are many distinctive features offered by contractual plans-they can be started for as little as $20 and continued with payments of as little as $10 each month, while purchases of mutual fund shares pursuant to so-called voluntary plans usually require much larger payments. The investor can reinvest his capital gains dividends and ordinary income dividends without additional sales charge, whereas many so-called voluntary plans only permit capital gains dividends to be reinvested without sales charge but impose a sales charge on reinvestment of ordinary income dividends.

Finally, and most significantly, in my experience, the front-end load by itself is a very positive feature of the contractual plan. It encourages the investor to continue his payments and to save and invest systematically. The tremendous popularity of the contractual plan is evidenced by the fact that some 30% of the approximately 32 million shareholders at the end of 1965 were holders of contractual plans. This is no surprise in view of the unique benefits the contractual plan offers and the highly profitable results which have been achieved for the large majority of investors.

The S.E.C. has now asked you to abolish the front-end load. In any man's language, this means denying to a significant segment of the investing public the unique advantages afforded by the contractual plan and the interest in equities which underlie it. These people are investors of moderate means who will not invest in mutual funds unless the benefits of such investment are described to them by salesmen and who would not otherwise invest on a monthly or other periodic basis the relatively small sums that they have available for investment.