August 25, 2004

Via E-mail and International Airmail

Mr. Pierre Delsaux
Head of Unit
DG MARKT G3
European Commission
B-1049
Brussels, Belgium

Dear Mr. Delsaux:

The Investment Company Institute appreciates the opportunity to comment on the draft Commission Recommendation on Fostering an Appropriate Regime for the Remuneration of Directors (Draft Recommendation), which we understand that the Commission expects to adopt in early autumn 2004. The Institute is the national association of the US investment company industry.¹ Our members manage approximately 1,000 US funds (with over $569 billion in assets) that have a global or international focus, and many of these global and international funds invest in Europe. Moreover, many of our members manage investment companies and pension funds outside the United States, including mutual funds domiciled in the European Union that are sold under the EU UCITS Directive. Our comments reflect their experiences both investing and managing assets in the European Union.

We believe that the Draft Recommendation would promote an appropriate regulatory framework for the remuneration of directors, and we fully support the Commission's work in this area. We also applaud the Commission for revising the Draft Recommendation to reflect comments received on the Commission's prior consultation paper and were particularly pleased to see that several concerns of the investment management industry have been addressed. We would like to highlight two areas in which we would encourage the Commission to go further.

First, the Commission has revised the recommendation with respect to the form through which Member States should respond to the Commission's recommendations. In the previous draft, the Commission intended to invite Member States to take necessary regulatory measures to ensure that listed companies comply with all of the Commission's provisions. In the current draft, the Commission has revised its recommendation and invites Member States to take "appropriate measures." As we mentioned in our letter of April 2004, we support encouraging Member States to incorporate the recommendation into their regulatory regimes.² We believe that, to promote a truly pan-European securities market, it is important for investors to be able to rely on a minimum level of transparency with respect to directors' remuneration of EU-listed companies. The invitation in the prior draft did not require Member States to adopt regulatory measures to implement the Commission's recommendation, and the new draft would not encourage Members States to take regulatory action. We are concerned that this change in the recommendation would make it less likely that Member States will incorporate the recommendation into their regulatory regime. We continue to believe that regulatory measures in all Member States are important in ensuring a minimal level of transparency in the area of directors' remuneration.

Second, it is still unclear from the Draft Recommendation whether all the relevant information about the remuneration of directors (including the remuneration policy or significant changes to the policy) would be provided in connection with an annual meeting in all EU Member States.³ We believe that it would be important for shareholders to receive this information shortly before the annual meeting of shareholders, especially if the remuneration policy is included as a separate item on the meeting agenda and the remuneration statement is submitted to shareholders for an advisory vote.

We appreciate the opportunity to comment on the Draft Recommendation. If you have any questions on the matters discussed above, please contact me at (202) 326-5826 or at podesta@ici.org or Jennifer S. Choi at (202) 326-5810 or at jchoi@ici.org.

Sincerely,

Mary S. Podesta
Senior Counsel

cc: Jean-Yves Muyelle
Dominique Thienpont

1 Our membership includes 8,605 open-end investment companies ("mutual funds"), 630 closed-end investment companies, 135 exchange-traded funds, and 5 sponsors of unit investment trusts. Our mutual fund members have assets in excess of $7.49 trillion, accounting for approximately 95% of total industry assets. Individual owners represented by ICI member firms number 86.6 million as of mid 2003, representing 50.6 million households.

2 Letter to Gianluigi Campogrande, European Commission, from Mary S. Podesta, Investment Company Institute, on April 12, 2004.

3 The Draft Recommendation states that "where a resolution is tabled in accordance with article 6 paragraph 1 . . . an information notice in connection with the resolution should be made available to shareholders." We assume that the Draft Recommendation is referring to resolutions tabled pursuant to article 7 paragraph 1 regarding the schemes under which directors are remunerated in shares, share options or any other right to acquire shares or to be remunerated on the basis of share price movements.