[Federal Register Volume 59, Number 47 (Thursday, March 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5477]


[[Page Unknown]]

[Federal Register: March 10, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20111; 812-8648]

 

Composite Bond & Stock Fund, Inc., et al.; Notice of Application

March 3, 1994.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

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

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Applicants: Composite Bond & Stock Fund, Inc., Composite Growth Fund, 
Inc., Composite Northwest 50 Fund Inc., Composite U.S. Government 
Securities, Inc., Composite Income Fund, Inc., Composite Tax-Exempt 
Bond Fund, Inc., Composite Cash Management Company (the ``Existing 
Funds''), Composite Research & Management Co. (the ``Adviser''), and 
Murphey Favre, Inc. (the ``Distributor'') on their own behalf and on 
behalf of any other registered open-end management investment companies 
which the Adviser may in the future serve as the investment adviser or 
which the Distributor may in the future serve as the distributor that 
are in the ``same group of investment companies,'' as defined in rule 
11a-3 under the Act (together with the Existing Funds, the ``Funds'').

Relevant Act Sections: Exemption requested pursuant to section 6(c) 
from sections 2(a)(32), 2(a)(35), 18(f), 18(g), 18(i), 22(c), 22(d) of 
the Act and from rule 22c-1 thereunder.

Summary of Application: Applicants seek an order to permit the Funds: 
(i) To issue and sell two classes of securities representing interests 
in the same investment portfolio and (ii) to assess and, under certain 
circumstances, waive or defer a CDSC on certain redemptions of their 
shares.

FILING DATE: The application was filed on October 25, 1993 and amended 
on January 6, 1994. In a letter dated March 2, 1994, applicants' 
counsel has stated that an amendment, the substance of which is 
incorporated herein, will be filed during the notice period.

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 Commission by 5:30 p.m., on March 
28, 1994 and should be accompanied by proof of service on 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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretarty, SEC, 450 Fifth Street NW., Washington, DC 20549. 
Applicants, 601 West Riverside Avenue, Spokane, WA 99201-0694.

FOR FURTHER INFORMATION CONTACT:
James M. Curtis, Senior Counsel, at (202) 504-2406, or Barry D. Miller, 
Senior Special Counsel, at (202) 272-3018 (Office of Investment Company 
Regulation, Division of Investment Management).

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

Applicants' Representations

    1. Each Existing Fund is an open-end management investment company 
registered under the Act. Composite Cash Management Company is the only 
Existing Fund which currently has multiple series.
    2. The Adviser, a wholly-owned, indirect subsidiary of Washington 
Mutual Savings Bank, is registered with the Commission as an investment 
adviser and provides investment advisory and management services to 
each of the Existing Funds. Each Existing Fund has entered into a 
management agreement with the Adviser.
    3. The Distributor is a wholly-owned, indirect subsidiary of 
Washington Mutual Savings Bank. Each Existing Fund has entered into a 
distribution contract pursuant to which the Distributor acts as the 
distributor for the Funds. Each Existing Fund currently reimburses the 
Distributor for expenses incurred in connection with the distribution 
of its shares pursuant to a plan adopted by the Existing Fund in 
accordance with rule 12b-1 under the Act (a ``12b-1 Plan''). Murphey 
Favre Securities Services, Inc., a wholly-owned indirect subsidiary of 
Washington Mutual Savings Bank, provides transfer agent and related 
services to each Existing Fund.
    4. Each Existing Fund currently has only one class of shares. 
Shares of each Existing Fund except Composite Cash Management Company 
are currently sold at net asset value plus a sales load calculated as a 
percentage of the offering price. Composite Cash Management Company is 
a money market fund and its shares currently are sold at net asset 
value with no front-end sales load.
    5. The Directors of each Existing Fund, including all the members 
of the Board of Directors who are not interested persons of that Fund 
as defined in section 2(a)(19) of the Act (``Disinterested 
Directors''), have approved the establishment of a multiple class 
distribution system (the ``Multiple Class Distribution System''). The 
Multiple Class Distribution System will enable a Fund to offer 
investors the option of purchasing shares in one of two alternative 
manners: (i) Subject to a conventional front-end sales load and a 
separate 12b-1 Plan for that class (``Class A shares'') or (ii) subject 
to no front-end sales load, but subject to a separate 12b-1 Plan for 
that class with expected higher 12b-1 Plan fees and a CDSC (``Class B 
shares'').
    6. The Multiple Class Distribution System will be implemented by 
having the Funds create and issue two classes of shares, with the 
currently authorized shares of each Existing Fund being redesignated as 
Class A shares. The actual creation and issuance of multiple classes of 
shares will be made on a Fund-by-Fund basis. Each class of a Fund will 
represent interests in the same portfolio of investments of such Fund. 
Each class of a Fund will be identical except that: (i) Each class will 
be subject to a different 12b-1 Plan and may pay different 12b-1 Plan 
fees pursuant thereto; (ii) each class will bear different Class 
Expenses (as defined below); (iii) each class will vote separately as a 
class with respect to the 12b-1 Plan for that class except as provided 
in condition 15 below; (iv) each class will have different exchange 
privileges; (v) only Class B will have a conversion feature; and (vi) 
each class will bear a different name or designation.
    7. Investors purchasing Class A shares of the Funds other than 
Composite Cash Management Company will do so at net asset value plus a 
front-end sales load. The front-end sales load charges, volume 
discounts and waivers for Class A shares of each Existing Fund are 
initially expected to remain the same as currently in existence for 
that Existing Fund. Class A shares of each Fund will also pay 12b-1 
Plan fees pursuant to the 12b-1 Plan for that class (the ``Class A 
Distribution Plan'').
    8. Investors purchasing Class B shares will do so at net asset 
value without the imposition of a front-end sales load. Class B shares 
will pay an asset-based distribution charge pursuant to a 12b-1 Plan 
for that class at an annual rate not to exceed 0.75% per annum of the 
average daily net asset value of the Class B shares (the ``Class B 
Distribution Plan'') and a service fee of 0.25% per annum.\1\ In 
addition, a redemption of Class B shares made within a specified period 
of their purchase generally will be subject to a CDSC imposed by the 
Distributor. The CDSC will decrease over the applicable CDSC period, so 
that redemptions of shares held after that period will not be subject 
to a CDSC. The Class B alternative is designated to permit the investor 
to purchase Class B shares without the assessment of a front-end sales 
load and at the same time permit the Distributor to pay financial 
intermediaries (typically broker-dealers) selling shares of each Fund a 
commission on the sale of Class B shares.
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    \1\The term ``service fee'' has the meaning given that term in 
Article III, Section 26(d)(9) of the Rules of Fair Practice of the 
National Association of Securities Dealers, Inc. (``NASD'') (NASD 
Manual, CCH 2176). Applicants will comply with the provisions of 
Section 26(d).
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    9. Under the Multiple Class Distribution System, a Fund's Board of 
Directors, acting in its sole discretion, could determine that any of 
certain expenses attributable to the shares of a particular class 
(``Class Expenses'') would be borne by the class to which they are 
attributable. In addition to 12b-1 Plan fees, Class Expenses borne by a 
class of shares will be limited solely to: (a) Transfer agency fees 
attributable to a particular class; (b) printing and postage expenses 
related to preparing and distributing to a particular class materials 
such as shareholder reports, prospectuses and proxy statements; (c) 
state and federal registration fees incurred by a specific class of 
shares; and (d) legal expenses relating to a particular class of 
shares.
    10. Under the Multiple Class Distribution System, expenses that 
were attributable to a particular series of a Fund, but not to a 
particular class thereof, would be borne by each class on the basis of 
the aggregate net assets of such class.
    11. Because of the varying 12b-1 Plan fees and Class Expenses that 
could be borne by each class of shares, the net income of (and 
dividends payable with respect to) each class could be different from 
the net income of (and dividend payable with respect to) the other 
class of shares of a Fund. Dividends, however, paid to each class of 
shares in a Fund would be declared and paid on the same days and at the 
same times and, except as noted with respect to the varying 12b-1 Plan 
fees and Class Expenses, would be determined and paid in the same 
manner.
    12. Under the Multiple Class Distribution System, Class A shares of 
a Fund will be exchangeable for (i) Class A shares of the other Funds 
or (ii) shares of any Fund which offers only one class of shares 
(provided such Fund does not impose a CDSC), on the basis of relative 
net asset value per share, plus any applicable front-end sales charge. 
Class B shares of a Fund will be exchangeable for: (i) Class B shares 
of the other Funds or (ii) shares of any Fund which offers only one 
class (and which imposes a CDSC), on the basis of relative net asset 
value per share, without the payment of any CDSC that might otherwise 
be due on redemption of the Class B shares being exchanged. The 
exchange privileges applicable to each of the classes of shares will 
comply with rule 11a-3 under the Act.
    13. The CDSC will not be imposed on redemptions of: (a) Shares 
which were purchased more than six years (the ``CDSC Period'') prior to 
their redemption, or (b) Class B Shares derived from reinvestment of 
distributions. Furthermore, no CDSC will be imposed on an amount which 
represents an increase in the value of the shareholder's account 
resulting from capital appreciation above the amount paid for shares 
purchased during the CDSC Period. In determining the applicability and 
rate of a CDSC, it will be assumed that a redemption is made first of 
any shares that were not subject to a CDSC and then of other shares in 
the order purchased.
    14. Applicants reserve the right to change from time to time the 
CDSC and CDSC Period for any Fund. The CDSC Period, however, will not 
exceed six years. In all cases, however, any change in the terms of a 
CDSC would be reflected in the affected Fund's prospectus. In addition, 
such changes would not affect shares that had already been issued 
unless the change resulted in terms more favorable to the holders of 
such shares.
    15. Under the proposed CDSC arrangement, the CDSC will be 
accompanied by a conversion feature. Under this conversion feature, 
after the expiration of a specified conversion period, Class B shares 
automatically convert at their net asset value into Class A shares. For 
purposes of the conversion of Class B shares to Class A shares, all 
Class B shares in a shareholder's Fund account that were purchased 
through reinvestment of dividends and other distributions paid in 
respect of Class B shares (and that have not converted) would be 
considered to be held in a separate sub-account. Each time any Class B 
shares in the shareholder's Fund account convert, an equal pro rata 
portion of shares then in the sub-account also would convert and would 
no longer be considered held in the sub-account. The portion would be 
determined by the ratio that the shareholder's Class B shares being 
converted bears to the shareholder's total Class B shares subject to 
the conversion feature.
    16. Under the proposed CDSC arrangement, any conversion of Class B 
shares would be subject to the continuing availability of an opinion of 
counsel or a private letter ruling from the Internal Revenue Service to 
the effect that the conversion of shares did not constitute a taxable 
event under federal income tax law. Conversion of Class B shares to 
Class A shares might be suspended if such a opinion or ruling were no 
longer available.
    17. The Funds may waive the CDSC on redemptions of Class B shares: 
(i) Following the death or disability of a shareholder, (ii) in 
connection with certain distributions from an IRA or other retirement 
plan,\2\ (iii) pursuant to the Funds' systematic withdrawal plan but 
limited to 12% annually of the initial value of the account at the date 
upon which the plan was established, and (iv) effected pursuant to the 
right of the Fund to liquidate a shareholder's account.
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    \2\The charge may be waived for any total or partial redemption 
in connection with a lump-sum or other distribution from an 
Individual Retirement Account (``IRA''), a custodial account 
maintained pursuant to Internal Revenue Code of 1986, as amended 
(``IRC'') section 403(b)(7), or a qualified pension or profit 
sharing plan (``Retirement Plans'') following retirement or, in the 
case of an IRA or Keogh Plan or custodial account pursuant to IRC 
section 403(b)(7), after attaining age 59\1/2\. The charge also may 
be waived on any redemption which results from a tax-free return of 
an excess contribution pursuant to section 408(d) (4) or (5) of the 
IRC, the return of excess deferral amounts pursuant to IRC section 
401(k)(8) or 402(g)(2), or from the death or disability of the 
employee. In sum, the CDSC may be waived on redemptions of Class B 
shares which constitute Retirement Plan distributions which are 
permitted to be made without penalty pursuant to the IRC, other than 
tax-free rollovers or transfers of assets.
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    18. The Funds may defer the CDSC on a redemption of Class B shares 
of a Fund which is followed by a reinvestment of Class B shares of such 
Fund or another Fund within 120 days after the redemption. The deferral 
will be effected by reimbursement of the CDSC previously paid, with the 
reimbursement being made by credit to the shareholder's account and 
being paid by the Distributor. The Class B shares acquired upon such 
reinvestment will remain subject to the CDSC applicable to the redeemed 
shares. In computing the holding period of the Class B shares acquired 
upon such reinvestment for purposes of the CDSC arrangement and the 
conversion feature, the holding period of the redeemed shares will be 
``tacked'' to the holding period of the acquired shares.
    19. All front-end sales loads, asset-based sales charges, and CDSCs 
of each Fund will comply with Article III, section 26(d) of the Rules 
of Fair Practice of the NASD.

Applicants' Legal Analysis

    1. Applicants request an exemptive order to the extent that the 
proposed issuance and sale of Class A and Class B shares representing 
interests in the Funds might be deemed: (i) To result in the issuance 
of a ``senior security'' within the meaning of section 18(g) of the Act 
and thus be prohibited by section 18(f)(1) of the Act and (ii) to 
violate the equal voting provisions of section 18(i) of the Act. The 
creation of multiple classes of shares may result in shares of a class 
having ``priority over [another] class as to * * * payment of 
dividends'' and having unequal voting rights, because under the 
proposed arrangement: (1) The holders of different classes would pay 
different fees pursuant to different 12b-1 Plans and different Class 
Expenses and (2) each class would vote separately with respect to its 
12b-1 Plan.
    2. Moreover, owners of each class of shares may be relieved under 
the Multiple Class Distribution System of a portion of the fixed costs 
normally associated with investing in mutual funds since the costs 
would, potentially, be spread over a greater number of shares than they 
would be otherwise. Similarly, if sales increase because of the 
addition of Class B shares, the owners of each class of shares could 
expect to enjoy, under the proposed arrangement, lower effective 
investment management fee rates than they would enjoy if the 
arrangement were not implemented. Therefore, in order to achieve these 
potential benefits and obviate the risks associated with the creation 
of a separate series for each new class of shares, the Funds propose to 
establish the Multiple Class Distribution System.
    3. Applicants believe that the proposed allocation of expenses and 
voting rights relating to the 12b-1 Plans in the manner described above 
is equitable and would not discriminate against either group of 
shareholders. Moreover, the possibility that the interests of the two 
classes of shares will ever conflict would be remote. The rights and 
privileges of each class are substantially identical and the interests 
of each class of shareholders are adequately protected by the 
requirements of rule 12b-1, including the requirement that the 12b-1 
Plan be approved and continued on an annual basis by the Directors of 
each Fund, including the Disinterested Directors.
    4. The abuses that section 18 of the Act is intended to redress are 
set forth in section 1(b) of the Act which declares ``that the national 
public interest and the interest of investors are adversely affected * 
* * (7) when investment companies by excessive borrowing and the 
issuance of excessive amounts of senior securities increase unduly the 
speculative character of their junior securities; or (8) when 
investment companies operate without adequate assets or reserves.'' The 
Multiple Class Distribution System described in the application does 
not involve borrowings and does not affect the Fund's existing assets 
or reserves. Nor will the proposed arrangement increase the speculative 
character of the shares of the Funds, since all shares will participate 
pro rata in all of each Fund's income and expenses (with the exception 
of the differing 12b-1 Plan fees and expenses).
    5. Each class of shares will be redeemable at all times. No class 
of shares will have any preference or priority over the other class in 
each Fund. No class will have distribution or liquidation preferences 
with respect to particular assets, nor any right to require that lapsed 
dividends be paid before dividends are declared on the other class, nor 
any protection by a reserve or other account. The similarities and, 
with respect to the 12b-1 Plans and associated voting rights and the 
exchange privileges, dissimilarities, of the Class A and Class B 
shares, will be fully disclosed in each Fund's prospectus. Investors 
will not be given misleading impressions as to the safety or risk of 
any class of shares and the nature of the Class A and Class B shares 
will not be rendered speculative.

Applicants' Conditions

    Applicants agree that the order of the Commission 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 various 
classes of a Fund will relate solely to: (a) The different payments 
pursuant to the different 12b-1 Plans of each class; (b) the different 
Class Expenses, which will be limited to: (i) Transfer agency fees 
attributable to a particular class; (ii) printing and postage expenses 
related to preparing and distributing to a particular class materials 
such as shareholder reports, prospectuses, and proxy statements; (iii) 
state and federal registration fees incurred by a particular class; and 
(iv) legal expenses relating to a particular class; (c) the separate 
class voting rights of each class with respect to the 12b-1 Plans 
except as provided in condition 15 below, (d) the different exchange 
privileges of each class; (e) only Class B will have a conversion 
feature; and (f) the different name or designation of each class of 
shares of the Funds. Any additional expenses not specifically 
identified above that are subsequently identified and determined to be 
properly allocated to one class of shares shall not be so allocated 
until approved by the Commission.
    2. The Directors of each Fund, including a majority of the 
Disinterested Directors of the Fund, shall have approved the Multiple 
Class Distribution System. The minutes of the meetings of the Directors 
of each Fund regarding the deliberations of the Directors with respect 
to the approvals necessary to implement the Multiple Class Distribution 
System will reflect in detail the reasons for the Directors' 
determination that the proposed Multiple Class Distribution System is 
in the best interests of Fund and its shareholders.
    3. The initial determination of the Class Expenses that will be 
applied to a class of shares and any subsequent changes thereto will be 
reviewed and approved by votes of the Directors of each Fund, including 
a majority of the Disinterested Directors 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 
Directors, and the Directors shall review, at least quarterly, a 
written report of the amount so expended and the purposes for which 
such expenditures were made.
    4. On an ongoing basis, the Directors of each Fund, pursuant to 
their fiduciary responsibilities under the Act and otherwise, will 
monitor the Fund for the existence of any material conflicts among the 
interests of the various classes of shares. The Directors, including a 
majority of the Disinterested Directors of the Fund 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 Directors. If a 
conflict arises, the Adviser and the Distributor at their own cost will 
remedy such conflict up to and including establishing a new registered 
management investment company.
    5. The Directors of each Fund will receive quarterly and annually 
Statements concerning distribution and shareholders 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 servicing of a particular class of 
shares will be used to support the 12b-1 fee charged to shareholders of 
that class of shares. Expenditures not related to the sale or servicing 
of a particular class will not be presented to the Directors to justify 
any fee attributable to that class of shares. The Statements, including 
the allocations upon which they are based, will be subject to the 
review and approval of the Disinterested Directors in the exercise of 
their fiduciary duties.
    6. Dividends paid by a Fund with respect to each class of 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 12b-1 Plan fee payments and Class Expenses relating to each 
respective class of shares will be borne exclusively by that class.
    7. The methodology and procedures for calculating the net asset 
value and dividends and distribution of the various classes and the 
proper allocation of income and expenses among such classes have been 
reviewed by an expert (the ``Expert'') who has rendered a report to 
Applicants, which has been provided to the staff of the Commission, 
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 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 Commission pursuant to Section 30(a) 
and 30(b)(1) of the 1940 Act. The work papers of the Expert with 
respect to such reports, following the request by the Funds (which each 
Fund agrees to provide), will be available for inspection by the 
Commission staff upon the written request for such work papers by a 
senior member of the Division of Investment Management, limited to the 
Director, an Associate Director, the Chief Accountant, the Chief 
Financial Analyst, an Assistant Director and any Regional Administrator 
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 policies and procedures 
placed in operation and tests of operating effectiveness'' as defined 
and described in SAS No. 70 of 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. The applicants have adequate facilities in place to ensure 
implementation of the methodology and procedures for calculating the 
net asset value and dividends and distributions among the classes of 
shares and the proper allocation of income and 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. The applicants agree to take 
immediate corrective measures if this representation is not concurred 
in by the Expert or appropriate substitute Expert.
    9. The prospectus of each Fund will contain a statement to the 
effect that a salespersons 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 to assist 
registered representatives in determining when Class A and Class B 
shares may be sold to particular investors. The applicants will require 
all persons selling shares of the Fund to agree to conform to such 
standards.
    11. The conditions pursuant to which the exemptive order is granted 
and the duties and responsibilities of the Directors of each Fund with 
respect to the Multiple Class Distribution System will be set forth in 
guidelines that will be furnished to the Directors.
    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 
in every prospectus, regardless of whether all classes of shares are 
offered through each prospectus. Each Fund will disclose the respective 
expenses and performance data applicable to all classes 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 
of performance data applicable to Class A or Class B, it will disclose 
the expenses and/or performance data applicable to all classes of 
shares. The information provided by applicants for publication in any 
newspaper or similar listing of the Fund's net asset value and public 
offering price will separately present Class A and Class B shares.
    13. The applicants acknowledge that the grant of the exemptive 
order requested by the application will not imply Commission approval, 
authorization, or acquiescence in any particular level of payments that 
the Fund may make pursuant to their 12b-1 Plans in reliance on the 
exemptive order.
    14. Class B shares will convert into Class A shares on the basis of 
the relative net asset values to the two classes, without the 
imposition of any sales load, fee, or other charge. After conversion, 
the converted shares will be subject to an asset-based sales charge 
and/or service fee (as those terms are defined in Article III, Section 
26 of the NASD's Rules of Fair Practice), if any, that in the aggregate 
are lower than the asset-based sales charge and service fee to which 
they were subject prior to the conversion.
    15. If a Fund implements any amendment to its 12b-1 plan (or, if 
presented to shareholders, adopts or implements any amendment of a non-
rule 12b-1 shareholder services plan) that would increase materially 
the amount that may be borne by the Class A shares under the plan, 
existing Class B shares will stop converting into Class A unless the 
Class B shareholders, voting separately as a class, approve the 
proposal. The Directors shall take such action as is necessary to 
ensure that existing Class B shares are exchanged or converted into a 
new class of shares (``New Class A''), identical in all material 
respects to Class A as it existed prior to implementation of the 
proposal, no later than the date such shares previously were scheduled 
to convert into Class A. If deemed advisable by the Directors to 
implement the foregoing, such action may include the exchange of all 
existing Class B shares for a new class (``New Class B''), identical to 
existing Class B shares in all material respects except that New Class 
B will convert into New Class A. New Class A or New Class B may be 
formed without further exemptive relief. Exchanges or conversions 
described in this condition shall be effected in a manner that the 
Directors reasonably believe will not be subject to federal taxation. 
In accordance with condition 4 any additional cost associated with the 
creation, exchange, or conversion of New Class A or New Class B shall 
be borne solely by the Adviser and the Distributor. Class B shares sold 
after the implementation of the proposal may convert into Class A 
shares subject to the higher maximum payment, provided that the 
material features of the Class A plan and the relationship of such plan 
to the Class B shares are disclosed in an effective registration 
statement.
    16. The relief requested from the provisions of sections 2(a)(32), 
2(a)(35), 22(d), and 22(c) of the Act and rule 22c-1 thereunder shall 
be subject to applicants' compliance with the provisions of proposed 
Rule 6c-10 under the Act (Investment Company Release No. 16619 
(November 2, 1988)), as such rule is currently proposed and as it may 
be reproposed, adopted or amended.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-5477 Filed 3-9-94; 8:45 am]
BILLING CODE 8010-01-M