The operational efficiencies created by reorganizing a fund in Maryland or Delaware often come at a cost to shareholders who lose some of the power they may have had under other states' fund governance laws, according to industry lawyers and analysts.

"You can be certain that if fund companies are moving their state incorporation, they are not doing it to promote shareholder interest," said Ted Siedle, a federal securities lawyer and former official with the division of investment management of the Securities and Exchange Commission. "They are doing it to cut costs or dilute the rights of shareholders. Show me one case of a mutual fund company that has done anything strategic like this to enhance shareholder rights. It's unheard of."

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