[Federal Register Volume 59, Number 26 (Tuesday, February 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2829]


[[Page Unknown]]

[Federal Register: February 8, 1994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20049; 812-8516]

 

Pilgrim Institutional Trust, et al.; Application

February 1, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (``Act'').

-----------------------------------------------------------------------

APPLICANTS: Pilgrim Institutional Trust (formerly, Pilgrim State Tax-
Free Trust (the ``Trust'')), Pilgrim Magnacap Fund, Pilgrim GNMA Fund, 
Pilgrim Global Investment Series (on behalf of Pilgrim Short-Term 
Multi-Market Income Fund and Pilgrim Short-Term Multi-Market Income 
Fund II), Pilgrim Corporate Utilities Fund, and Pilgrim Strategic 
Investment Series (on behalf of Pilgrim High Yield Trust) (collectively 
with the Trust, the ``Existing Pilgrim Funds''); Pilgrim Management 
Corporation (the ``Adviser''); and Pilgrim Distributors Corp. (the 
``Distributor'').

RELEVANT ACT SECTIONS: Amended order requested under section 6(c) for 
exemptions from sections 2(a)(32), 2(a)(35), 18(f), 18(g), 18(i), 
22(c), and 22(d) of the Act and rule 22c-1 thereunder.

SUMMARY OF APPLICATION: Applicants previously received relief 
permitting the Trust and the Existing Pilgrim Funds to issue two 
classes of shares, and permitting the Trust to assess and, under 
certain circumstances, waive a contingent deferred sales charge 
(``CDSC'') on one of those classes (the ``Prior Order'').\1\ In 
addition, the Existing Pilgrim Funds previously received exemptive 
relief to assess and waive a CDSC under certain circumstances.\2\ 
Applicants request an amendment of the previous orders to permit 
applicants (a) to issue and sell multiple classes of shares 
representing interests in the same portfolio of investments, and (b) to 
assess and waive a CDSC on certain redemptions of shares not already 
covered by the previous orders. Applicants request that any relief 
granted pursuant to this application also apply to any open-end 
management investment company, including any series thereof, for which 
the Adviser or the Distributor may in the future become, respectively, 
the investment adviser or principal underwriter.\3\ The individual 
series of the Trust and of other registered open-end management 
investment companies that would rely on the requested order are 
referred to collectively, in whole or in part as the context requires, 
as the ``Funds.''

    \1\Investment Company Act Release Nos. 19025 (Oct. 14, 1992) 
(notice) and 19087 (Nov. 10, 1992) (order). The relief requested by 
the application is in addition to that granted by the Prior Order, 
which remains in full force and effect.
    \2\Investment Company Act Release Nos. 17957 (Jan. 24, 1991) 
(notice) and 18007 (Feb. 20, 1991) (order).
    \3\All investment companies relying on any order granted in 
connection with the application will comply with the representations 
and conditions set forth in the application.
---------------------------------------------------------------------------

FILING DATE: The application was filed on July 30, 1993 and amended on 
October 15, 1993 and December 13, 1993. Counsel, on behalf of the 
applicants, has agreed to file a further amendment during the notice 
period to make certain technical changes. This notice reflects the 
changes to be made to the application by such further amendment.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on February 24, 
1994, and should be accompanied by proof of service on the applicants, 
in the form of an affidavit or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549. 
Applicants, 10100 Santa Monica Boulevard, Los Angeles, California 
90067.

FOR FURTHER INFORMATION CONTACT:
Felicia Kung, Senior Attorney at (202) 504-2803 or Elizabeth G. 
Osterman, Branch Chief, at (202) 272-3016 (Division of Investment 
Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. The Trust and the Existing Pilgrim Funds are registered open-end 
management investment companies. The Adviser, a wholly-owned subsidiary 
of Pilgrim Group, Inc., provides investment management services to the 
Trust and the Existing Pilgrim Funds. The Distributor, a wholly-owned 
subsidiary of Pilgrim Group, Inc. and a registered broker/dealer, acts 
as principal underwriter for the Trust and the Existing Pilgrim Funds.
    2. Under the Prior Order, the Existing Pilgrim Funds currently 
offer two classes of shares (``Class A'' shares and ``Class B'' 
shares). Class A (or the ``Front-End Load Option'') shares are subject 
to a front-end sales load and an annual fee of up to .25% of the 
average daily net asset value of such shares under a distribution plan 
adopted under rule 12b-1 of the Act (``12b-1 Plan''). Class B shares 
are subject to a CDSC ranging from 3% to 5% (but which may be higher or 
lower) for a period of up to six years. Class B shares also are subject 
to an annual fee of up to 1% of the average daily net asset value of 
such shares under a 12b-1 Plan. All references to Class A shares and 
Class B shares are to such classes of shares currently offered under 
the Prior Order.
    3. Applicants propose to amend the Prior Order to enable the Funds 
to offer a multiple class distribution system as described below (the 
``Multi-Class System''). Under the Multi-Class System, in addition to 
the Class A and Class B shares, applicants will offer a third class of 
shares (``Class C''). Class C shares would have a higher minimum 
initial purchase amount, and would be subject to a CDSC expected to be 
equal to 1% during the first year after the initial purchase, and no 
CDSC thereafter. Class C shares also would be subject to an annual fee 
of up to 1% of the average daily net asset value of such shares under a 
12b-1 Plan (collectively with Class B, the ``Deferred Option'').
    4. The 1% distribution fee applicable to Deferred Option shares is 
a combination of asset-based sales charges and service fees assessed 
under a 12b-1 Plan. In all cases applicants will comply with Article 
III, Section 26 of the National Association of Securities Dealers, Inc. 
Rules of Fair Practice as it relates to the maximum amount of asset-
based sales charges and service fees that may be imposed. See 
Securities Exchange Act Release No. 30897 (July 7, 1992).
    5. Under the Multi-Class System, applicants also from time to time 
may create one or more additional classes of shares, the terms of which 
may differ from the Class A shares, Class B shares, and Class C shares 
only in the following respects: (a) Each class may bear different fees 
payable under the applicable 12b-1 Plans, or different fees payable 
under a non-rule 12b-1 shareholder services plan (``Shareholder 
Services Plan''), (b) each class may bear different Class Expenses, as 
defined below, (c) each class will vote separately with respect to a 
Fund's 12b-1 Plan, (d) each class may have different exchange 
privileges, and (e) each class may have a different designation. Shares 
of different classes may be sold under different sales arrangements 
(including, for example, subject to a front-end sales charge, a CDSC, 
or no sales load).
    6. Each class of shares of the Funds will bear, pro rata based on 
the relative net asset value of the respective classes, all of the 
expenses of the Funds except that each class will bear different Class 
Expenses and the holders of Deferred Option shares will bear a 
proportionately higher share of the distribution fee than the holders 
of the Front-End Load Option shares. Class Expenses shall be limited 
to: (i) Transfer agency fees (including the incremental cost of 
monitoring a CDSC applicable to a specific class of shares), (ii) 
printing and postage expenses related to preparing and distributing 
materials such as shareholder reports, prospectuses, and proxies to 
current shareholders of a specific class, (iii) SEC and blue sky 
registration fees incurred by a class of shares, (iv) the expenses of 
administrative personnel and services as required to support the 
shareholders of a specific class, (v) litigation or other legal 
expenses relating to a specific class of shares, (vi) trustees'/
directors' fees incurred or expenses incurred as a result of issues 
relating to a specific class of shares, (vii) accounting fees and 
expenses relating to a specific class of shares, and (viii) any other 
incremental expenses subsequently identified that should be properly 
allocated to one class which shall be approved by the SEC pursuant to 
an amended order.
    7. Because of the additional expenses that will be borne solely by 
the Deferred Option shares, the net income attributable to and the 
dividends payable on the Deferred Option shares for financial statement 
reporting purposes is expected to be lower than the net income 
attributable to and the dividends payable on Class A shares. For tax 
purposes, however, the difference between the distribution fees payable 
by Deferred Option shares and the distribution fees payable by Class A 
shares (i.e., up to .75%) is not deductible and will be charged to the 
Deferred Option shares' paid-in-capital. As a result, Deferred Option 
shares will be receiving dividends which in part can be considered 
return of capital under the SEC's financial reporting rules. It is 
therefore expected that the net asset value per share of the multiple 
classes will diverge over time. Assuming no change in existing tax laws 
or relevant interpretations of the SEC's financial reporting rules, any 
Fund that issues two or more classes of shares similarly will 
capitalize rule 12b-1 fees for tax purposes.
    8. The Funds will offer exchange privileges to shareholders in each 
of their classes as described in the application and in each Fund's 
prospectus. All exchanges will comply with section 11(a) of the Act or 
rule 11a-3 thereunder.
    9. The Funds may offer classes of shares to one or more of the 
following five limited categories of investors (``Institutional 
Investors''): (a) Unaffiliated benefit plans such as qualified 
retirement plans, other than individual retirement accounts (``IRA''s) 
and self-employed retirement plans, with total assets in excess of $10 
million or such other amounts as the Funds may establish and with such 
other characteristics as the Funds may establish; (b) tax-exempt 
retirement plans of the Adviser and its affiliates, including the 
retirement plans of the Adviser's affiliated brokers; (c) banks and 
insurance companies purchasing for their own accounts; (d) investment 
companies not affiliated with the Adviser; and (e) endowment funds of 
non-profit organizations. These shares (``Institutional Shares'') may 
be offered under a variation of the Front-End Load Option, the Deferred 
Option or a no-load option, and may be subject to shareholder services 
fees under a Shareholder Services Plan.
    10. In addition, the Funds may offer classes of shares to 
institutions not included in the categories of Institutional Investors, 
such as corporations, foundations, and financial institutions, designed 
to meet the needs of such institutions (``Financial Shares''). Class A, 
Class B, and Class C shares and any future classes of shares which are 
not Institutional Shares or Financial Shares are referred to 
collectively as ``Non-Institutional Shares.''
    11. The unaffiliated benefit plans in category (a) of paragraph 9 
above will have several common features. Such plans will have total 
assets in excess of $10 million or such other amounts as applicants may 
establish, a separate trustee for the plan who is vested with 
investment discretion as to plan assets, certain limitations on the 
ability of plan beneficiaries to access their plan investments without 
incurring adverse tax consequences, and such other characteristics as 
the Funds may establish. Applicants will exclude self-directed plans 
from this category.
    12. The tax-exempt retirement plans in category (b) of paragraph 9 
above will consist of qualified defined contribution plans maintained, 
pursuant to Section 401(a) of the Internal Revenue Code of 1986, as 
amended (the ``Code''), by the Adviser or its affiliates for the 
benefit of employees. Under such plans, the assets are held in trust by 
a trustee and employees have limited pre-retirement access to the 
assets.
    13. The entities included in categories (c), (d), and (e) of 
paragraph 9 above will not be affiliated with the Adviser. These 
offerees will have in common the essential features of substantial 
assets under management and investment decisionmaking by institutional 
management on behalf of the entity with respect to the purchase of 
Institutional Shares of a Fund. Banks and insurance companies typically 
employ professional staff to manage the investment of cash assets, and 
portfolio managers make investment decisions on behalf of investment 
companies. Likewise, an endowment fund of a non-profit organization is 
professionally managed and individual donors to such endowment funds 
exercise no investment discretion on behalf of the endowment fund, nor 
would such an individual donor consider a direct investment in shares 
of a Fund as an investment alternative in lieu of a donation. Thus, no 
possibility exists that an individual investor would be able to use 
these entities as a conduit for individual investing in the 
Institutional Shares.
    14. Only Institutional Investors will be eligible to invest in 
Institutional Shares. All other investors will be eligible to invest 
solely in Non-Institutional Shares and/or Financial Shares. There will 
be no overlap between the investors eligible to invest in Institutional 
Shares and investors eligible to invest in Non-Institutional Shares and 
Financial Shares of any Fund.
    15. Pursuant to the existing orders, applicants may assess and 
under certain circumstances, waive a CDSC on certain redemptions of 
shares. Applicants seek exemptive relief to the extent necessary to 
permit the Funds to assess a CDSC on certain redemptions of any class 
of Deferred Option shares of the Funds, and to waive or reduce the CDSC 
with respect to certain types of redemptions.
    16. The amount of any CDSC will depend on the number of years since 
the investor made the purchase payment from which an amount is being 
redeemed and the net asset value of the shares at the time of 
redemption as set forth in a Fund's prospectus.\4\
---------------------------------------------------------------------------

    \4\Under proposed rule 6c-10 (Investment Company Act Release No. 
16619 (Nov. 2, 19988)), a CDSC payable upon redemption is based on 
the lesser of the amount that represents a specified percentage of 
net asset value of the shares at the time of purchase or the amount 
that represents the same or a lower percentage of the net asset 
value of the shares at the time of redemption.
---------------------------------------------------------------------------

    17. No CDSC will be imposed on (a) redemptions of shares purchased 
more than a specified period prior to their redemption or (b) Deferred 
Option shares derived from reinvestment of distributions. Further, no 
CDSC will be imposed on any amount representing an increase in the 
value of a shareholder's account due to capital appreciation. In 
determining the applicability and rate of any CDSC, it will be assumed 
that a redemption is made first of shares representing capital 
appreciation, next of shares representing reinvestment of dividends and 
capital gain distributions, and finally of shares held by the 
shareholder for the longest period of time.
    18. The Funds request the ability to waive or reduce the CDSC in 
the following instances: (a) On redemptions following the death or 
disability of a shareholder, as defined in Section 72(m)(7) of the 
Code; (b) in connection with mandatory distributions from an IRA or 
other qualified retirement plan; (c) on redemptions pursuant to the 
Funds' right to liquidate accounts or charge an annual small account 
fee; and (d) upon the liquidation or dissolution of a Fund. If the 
Funds waive or reduce the CDSC, such waiver or reduction will be 
uniformly applied to all offerees in the class specified.
    19. If a Fund discontinues any waiver described above, the 
disclosure in the Fund's prospectus will be appropriately revised. Any 
Deferred Option shares purchased prior to the termination of such 
waiver would be able to have the CDSC waived as provided in such Fund's 
prospectus at the time of the purchase of such shares.

Applicants' Legal Analysis

    1. Applicants request an exemptive order to the extent that the 
proposed issuance and sale of multiple classes of shares representing 
interests in the Funds might be deemed: (a) To result in the issuance 
of a ``senior security'' within the meaning of section 18(g) and thus 
be prohibited by section 18(f)(1); and (b) to violate the equal voting 
provisions of section 18(i).
    2. Applicants believe that the proposed Multi-Class System would 
better enable the Funds to meet the competitive demands of today's 
financial services industry. Applicants assert that the proposed 
arrangement would permit the Funds to facilitate both the distribution 
of their securities and provide investors with a broader choice as to 
the method of purchasing shares without assuming excessive accounting 
and bookkeeping costs or unnecessary investment risks. Moreover, 
applicants state that owners of shares may be relieved under the Multi-
Class System of a portion of the fixed costs normally associated with 
mutual funds since such costs would, potentially, be spread over a 
greater number of shares than would otherwise be the case.
    3. Applicants believe that the proposed Multi-Class System does not 
raise any of the legislative concerns that section 18 of the Act was 
designed to address. The Multi-Class System will not increase the 
speculative character of the shares of the Funds. The proposed 
arrangement does not involve borrowing, nor will it affect the Funds' 
existing assets or reserves.

Applicants' Conditions

    Applicants agree that any order of the SEC granting the requested 
relief shall be subject to the following conditions:
    1. Each class of shares will represent interests in the same 
portfolio of investments of a Fund, and be identical in all respects, 
except as set forth below. The only differences among the classes of 
shares of the same Fund will relate solely to: (a) the differences in 
the distribution fees payable by a Fund to the Distributor attributable 
to each class pursuant to the 12b-1 Plans adopted and proposed to be 
adopted by the Fund, or differences in fees payable by each class under 
a Shareholder Services Plan that may be adopted and operated in the 
future in the manner prescribed by condition 16 below; (b) each class 
may bear different Class Expenses which shall be limited to: (i) 
Transfer agency fees (including the incremental cost of monitoring a 
CDSC applicable to a specific class of shares), (ii) printing and 
postage expenses related to preparing and distributing materials such 
as shareholder reports, prospectuses, and proxies to current 
shareholders of a specific class, (iii) SEC and blue sky registration 
fees incurred by a class of shares, (iv) the expenses of administrative 
personnel and services as required to support the shareholders of a 
specific class, (v) litigation or other legal expenses relating to a 
specific class of share, (vi) trustees'/directors' fees or expenses 
incurred as a result of issues relating to a specific class of shares, 
(vii) accounting fees and expenses relating to a specific class of 
shares, and (viii) any other incremental expenses subsequently 
identified that should be properly allocated to one class which shall 
be approved by the SEC pursuant to an amended order; (c) each class 
will vote separately with respect to a Fund's 12b-1 Plan; (d) each 
class may have different exchange privileges; and (e) the designation 
of each class of shares of a Fund.
    2. The initial determination of the Class Expenses that will be 
allocated to a particular class and any subsequent changes thereto will 
be reviewed and approved by a vote of the Board of Trustees, including 
a majority of the Trustees which are not interested persons of the 
Fund. Any person authorized to direct the allocation and disposition of 
monies paid or payable by the Fund to meet Class Expenses shall provide 
to the Board of Trustees, and the Trustees shall review, at least 
quarterly, a written report of the amounts so expended and the purposes 
for which such expenditures were made.
    3. The Trustees of each of the Funds, including a majority of the 
independent Trustees, will approve the subsequent creation of any 
additional class of shares. The minutes of the meetings of the Trustees 
of the Fund regarding the deliberations of the Trustees with respect to 
the approval necessary to implement the Multi-Class system will reflect 
in detail the reasons for the Trustees' determination that the proposed 
Multi-Class System is in the best interests of both the Funds and their 
respective shareholders.
    4. On an ongoing basis, the Trustees of the Funds, pursuant to 
their fiduciary responsibilities under the Act and otherwise, will 
monitor each Fund for the existence of any material conflicts of 
interest among any outstanding classes of shares. The Trustees, 
including a majority of the independent Trustees, shall take such 
action as is reasonably necessary to eliminate any such conflicts that 
may develop. The Adviser and the Distributor will be responsible for 
reporting any potential or existing conflicts to the Trustees. If a 
conflict arises, the Adviser and the Distributor at their own costs 
will remedy such conflict up to and including establishing a new 
registered management investment company.
    5. The Trustees of the Funds will receive quarterly and annual 
statements concerning distribution and shareholder servicing 
expenditures complying with paragraph (b)(3)(ii) of rule 12b-1, as it 
may be amended from time to time. In the statements, only expenditures 
properly attributable to the sale or service of a particular class of 
shares will be used to justify any distribution or service fee charged 
to that class. Expenditures not related to the sale or service of a 
particular class will not be presented to the Trustees to justify any 
fee attributable to that class. The statements, including the 
allocations upon which they are based, will be subject to the review 
and approval of the independent Trustees in the exercise of their 
fiduciary duties.
    6. Dividends paid by a Fund with respect to each class of its 
shares, to the extent any dividends are paid, will be calculated in the 
same manner, at the same time, on the same day, and will be in the same 
amount, except that distribution and service payments relating to any 
particular class of shares will be borne exclusively by that class and 
except that any Class Expenses will be borne exclusively by the 
applicable classes of shares.
    7. The methodology and procedures for calculating the net asset 
value and dividends and distributions of the various classes and the 
proper allocation of expenses among the various classes have been 
reviewed by an expert (the ``Expert''). The Expert has rendered a 
report to the applicants, which has been provided to the staff of the 
SEC, stating that such methodology and procedures are adequate to 
ensure that such calculations and allocations will be made in an 
appropriate manner. On an ongoing basis, the Expert, or an appropriate 
substitute Expert, will monitor the manner in which the calculations 
and allocations are being made and, based upon such review, will render 
at least annually a report to the Funds that the calculations and 
allocations are being made properly. The reports of the Expert shall be 
filed as part of the periodic reports filed with the SEC pursuant to 
sections 39(a) and 30(b)(1) of the Act. The work papers of the Expert 
with respect to such reports, following request by the Funds (which the 
Funds agree to make), will be available for inspection by the SEC staff 
upon the written request to the Fund for such work papers by a senior 
member of the Division of Investment Management or of a Regional Office 
of the SEC, limited to the Director, an Associate Director, the Chief 
Accountant, the Chief Financial Analyst, an Assistant Director and any 
Regional Administrators or Associate and Assistant Administrators. The 
initial report of the Expert is a ``report on policies and procedures 
placed in operation,'' and the ongoing reports will be ``reports on the 
policies and procedures placed in operation and test of operating 
effectiveness'' as defined and described in SAS No. 70 of the American 
Institute of Certified Public Accountants (the ``AICPA''), as it may be 
amended from time to time, or in similar auditing standards as may be 
adopted by the AICPA from time to time.
    8. Applicants have adequate facilities in place to ensure 
implementation of the methodology and procedures for calculating the 
net asset value and dividends and distributions of the various classes 
of shares and the proper allocation of expenses among such classes of 
shares, and this representation has been concurred with by the Expert 
in the initial report referred to in condition 7 above and will be 
concurred with by the Expert, or an appropriate substitute Expert, on 
an ongoing basis at least annually in the ongoing reports referred to 
in condition 7 above. Applicants will take immediate corrective 
measures if this representation is not concurred in by the Expert or 
appropriate substitute Expert.
    9. The prospectus for each Fund will contain a statement to the 
effect that a salesperson and any other person entitled to receive 
compensation for selling or servicing Fund shares may receive different 
compensation with respect to one particular class of shares over 
another in the Fund.
    10. The Distributor will adopt compliance standards as to when 
shares of each class may appropriately be sold to particular investors. 
Applicants will require all persons selling shares of a Fund to agree 
to conform to such standards. Such compliance standards will require 
that all investors eligible to purchase Institutional Shares will be 
sold only Institutional Shares, and all investors eligible to purchase 
Non-Institutional Shares or Financial Shares will be sold only Non-
Institutional Shares or Financial Shares.
    11. The conditions pursuant to which the exemptive order is granted 
and the duties and responsibilities of the Trustees of the Funds with 
respect to the Multi-Class System will be set forth in guidelines which 
will be furnished to the Trustees.
    12. Each Fund will disclose the respective expenses, performance 
data, distribution arrangements, services, fees, sales loads, deferred 
sales loads, and exchange privileges applicable to each class of shares 
other than Institutional Shares in every prospectus, regardless of 
whether all classes of shares are offered through each prospectus. 
Institutional Shares will be offered solely pursuant to a separate 
prospectus. The prospectus for Institutional Shares will disclose the 
existence of the Fund's other classes, and the prospectus for the 
Fund's other classes will disclose the existence of Institutional 
Shares and will identify the persons eligible to purchase Institutional 
Shares. Each Fund will disclose the respective expenses and performance 
data applicable to each class of shares in every shareholder report. 
The shareholder reports will contain, in the statement of assets and 
liabilities and statement of operations, information related to the 
Fund as a whole generally and not on a per class basis. Each Fund's per 
share data, however, will be prepared on a per class basis with respect 
to all classes of shares of such Fund. To the extent any advertisement 
or sales literature describes the expenses or performance data 
applicable to any class of shares, it will also disclose the respective 
expenses and/or performance data applicable to all classes of shares, 
except Institutional Shares. Advertising materials reflecting the 
expenses or performance data for Institutional Shares will be available 
only to those persons eligible to purchase Institutional Shares. The 
information provided by applicants for publication in any newspaper or 
similar listing of a Fund's net asset value and public offering price 
will present each class of shares, except Institutional Shares, 
separately.
    13. Applicants acknowledge that the grant of the exemptive order 
requested by the application will not imply SEC approval, 
authorization, or acquiescence in any particular level of payments that 
the Funds may make pursuant to their 12b-1 Plans or any Shareholder 
Services Plans in reliance on the exemptive order.
    14. Applicants will comply with the provisions of proposed rule 6c-
10 under the Act (see Investment Company Act Release No. 16619 (Nov. 2, 
1988)), as such rule is currently proposed and as it may be reproposed, 
adopted or amended.
    15. Applicants will comply with section 19(a) and rule 19a-1 under 
the Act, including the provisions requiring dividend payments that 
include a return of capital to be accompanied by a written statement 
clearly indicating that investors are receiving a return of capital and 
identifying what portion of the payment is a return of capital.
    16. If in the future any investment company adopts a shareholder 
services plan that is not a 12b-1 Plan, such shareholder services plan 
will be adopted and operated in accordance with the procedures set 
forth in rule 12b-1 (b) through (f) as if the expenditures made 
thereunder were subject to rule 12b-1, except that shareholders need 
not enjoy the voting rights specified in rule 12b-1.

    For the SEC, by the Division of Investment Management under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2829 Filed 2-7-94; 8:45 am]
BILLING CODE 8010-01-M