[Federal Register Volume 59, Number 87 (Friday, May 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10981]


[[Page Unknown]]

[Federal Register: May 6, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20265; 812-8710]

 

Kemper Technology Fund, Inc., et al.; Notice of Application

May 2, 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: Kemper Technology Fund, Kemper Total Return Fund, Kemper 
Growth Fund, Kemper Small Capitalization Equity Fund, Kemper Income and 
Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper 
Diversified Income Fund, Kemper High Yield Fund, Kemper U.S. Government 
Securities Fund, Kemper International Fund, Kemper State Tax-Free 
Income Series, Kemper Investment Portfolios, Kemper Adjustable Rate 
U.S. Government Fund, Kemper Blue Chip Fund, Kemper Global Income Fund, 
Kemper Environmental Services Fund, Kemper Short-Term Global Income 
Fund, Sterling Funds, and any existing or future open-end management 
investment companies or series thereof for which Kemper Financial 
Services, Inc. (``KFS'') or any person directly or indirectly 
controlling, controlled by or under common control with KFS serves or 
may in the future serve as investment adviser or principal underwriter 
(collectively, the ``Funds''), and KFS.\1\

    \1\No existing Funds other than those named as applicants 
currently intend to rely upon the requested exemptive order.
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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), and 22(d) 
and from rule 22c-1.

SUMMARY OF APPLICATION: Applicants seek an order to permit the Funds to 
issue multiple classes of shares representing interests in the same 
portfolio of securities and to permit the Funds to assess and, under 
certain circumstances, waive a contingent deferred sales charge 
(``CDSC'') on certain redemptions of certain shares.\2\
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    \2\Certain applicants have received exemptive orders with 
respect to (i) issuance of multiple classes of shares (Kemper 
Investment Portfolios, Investment Company Act Release Nos. 18385 
(Oct. 31, 1991) (notice) and 18422 (Nov. 27, 1991) (order)) and (ii) 
imposition and waiver of a CDSC upon the redemption of certain 
shares (Investment Portfolios, Inc., Investment Company Act Release 
Nos. 13676 (Dec. 16, 1983) (notice) and 13720 (Jan. 13, 1984) 
(order) and Kemper Blue Chip Fund, Investment Company Act Release 
Nos. 18801 (June 19, 1992) (notice) and 18849 (July 15, 1992) 
(order) as amended and restated in Kemper Blue Chip Fund, Investment 
Company Act Release Nos. 20036 (Jan. 26, 1994) (notice) and 20089 
(Feb. 23, 1994) (order)) (collectively, the ``Prior Orders''). The 
order requested hereby, if granted, would supersede the Prior 
Orders.

FILING DATE: The application was filed on December 1, 1993 and amended 
on February 28, 1994. By letters dated April 20, 1994 and April 28, 
1994, applicants' counsel stated that an amendment, the substance of 
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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 May 26, 
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: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants, 120 South LaSalle Street, Chicago, Illinois 60603.

FOR FURTHER INFORMATION CONTACT:
James M. Curtis, Senior Counsel, at (202) 942-0563, or Barry D. Miller, 
Senior Special Counsel, at (202) 942-0564 (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.

Applicant's Representations

    1. Each Fund is an open-end management investment company 
registered under the Act. KFS serves as the investment adviser and 
principal underwriter for each Fund. Each Fund has a non-rule 12b-1 
administrative services agreement (``Administrative Plan'') with KFS 
providing for a service fee\3\ at an annual rate of up to .25% of 
average daily net assets.
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    \3\As used herein, the term ``service fee'' has the meaning 
given to that term in Article III, Section 26 of the Rules of Fair 
Practice of the National Association of Securities Dealers, Inc. 
(``NASD'') and the term ``distribution fee'' means an ``asset-based 
sales charge'' as defined in said NASD rule.
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    2. Applicants propose to establish a Multiple Distribution System 
(the ``Multiple Distribution System''). Under the Multiple Distribution 
System, each Fund would have the opportunity to offer investors the 
option of purchasing shares subject to: (i) A front-end sales load that 
may vary among Funds and a service fee (``Class A shares''), (ii) 
without a front-end sales load, but subject to a CDSC, a rule 12b-1 
distribution fee and a service fee (the ``Deferred Option'' or ``Class 
B shares''), (iii) without a front-end sales load or CDSC but subject 
to a rule 12b-1 plan distribution fee and to a service fee (the ``Level 
Load Option'' or ``Class C shares''), and (iv) without a front-end 
load, CDSC, distribution fee or service fee (``Class I shares'').\4\
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    \4\No Fund will charge a service fee under a rule 12b-1 plan.
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    3. The Funds may create one or more additional classes of shares in 
the future, the terms of which will differ from the Class A, B, C, and 
I shares in the following respects: Any such class: (a) May bear 
different distribution fees and any other costs relating to 
implementing or amending the rule 12b-1 plan for such class; (b) may 
bear different service fees; (c) may bear different shareholder 
servicing fees;\5\ (d) may bear different ``Class Expenses,'' that may 
include any or all of the following expenses: (i) Printing and postage 
expenses related to preparing and distributing materials such as 
shareholder reports, prospectuses, and proxy statements to current 
shareholders of a specific class; (ii) Commission registration fees 
incurred by a specific class; (iii) litigation or other legal expenses 
relating to a specific class of shares; (iv) Trustee fees or expenses 
incurred as a result of issues relating to a specific class; and (v) 
accounting expenses relating to a specific class; (e) may bear a 
different name or designation; (f) will have exclusive voting rights as 
to any rule 12b-1 plan adopted exclusively with respect to such class 
except as provided in condition 16 below; (g) may have different 
conversion features; (h) may have different exchange privileges; (i) 
may be sold under different sales arrangements, including selling only 
to a particular type of investor; and (j) may bear any other 
incremental expenses subsequently identified that should be properly 
allocated to such class and that shall be approved by the Commission.
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    \5\As used herein, the term ``shareholder servicing fees'' means 
fees and out-of-pocket expenses paid by the Funds to their 
shareholder servicing agent for transfer agency, account maintenance 
or dividend disbursing functions or for administering dividend 
reinvestment or systematic investment plans. ``Shareholder servicing 
fees'' does not refer to ``service fees'' as described in Article 
III, section 26 of the Rules of Fair Practice of the NASD.
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    4. Any distribution arrangement of a Fund, including distribution 
fees, service fees, and front-end and deferred sales loads, will comply 
with Article III, section 26, of the Rules of Fair Practice of the 
NASD.
    5. After a shareholder's Class B shares remain outstanding for a 
period of time, they automatically will convert to Class A shares of 
the same Fund at the relative net asset values of the two classes and 
will thereafter not be subject to a rule 12b-1 plan. Shares purchased 
through the reinvestment of distributions paid upon Class B shares will 
be treated as Class B shares and will be converted to Class A shares on 
a pro rata basis with the Class B shares. The Level Load Option differs 
from the Deferred Option in that the Class C shares would not 
automatically convert to Class A shares after a specified period of 
time as would the Class B shares.
    6. Any other class of Non-Institutional Shares (as defined below) 
may provide that shares in that class (the ``Purchase Class'') will, 
after a period of time, automatically convert into another class of 
shares (the ``Target Class'') on the basis of the relative net asset 
values of the two classes, without the imposition of any sales load, 
fee, or other charge provided that, after conversion, the converted 
shares would be subject to an asset-based sales charge and/or service 
fee, if any, that in the aggregate are lower than the asset-based sales 
charge and/or service fee to which the Purchase Class shares were 
subject prior to the conversion.
    7. Any conversion of shares of one class to shares of another class 
is subject to the continuing availability of a ruling of the Internal 
Revenue Service or an opinion of counsel to the effect that the 
conversion of shares does not constitute a taxable event under federal 
income tax law. Any such conversion may be suspended if such a ruling 
or opinion is no longer available.
    8. Class I shares would be offered for purchase only by the 
following investors (the ``Institutional Investors''): (a) Tax-exempt 
retirement plans of KFS and its affiliates, and (b) the following 
investment advisory clients of KFS and its investment advisory 
affiliates that invest at least $1 million in a Fund: (1) benefit plans 
unaffiliated with KFS, such as qualified retirement plans (other than 
individual retirement accounts and self-directed retirement plans), (2) 
banks and insurance companies unaffiliated with KFS purchasing for 
their own accounts, and (3) endowment funds of non-profit organizations 
unaffiliated with KFS.
    9. Future classes may be offered to meet the specific investment 
needs of non-institutional investors (herein, such future classes 
together with Class A, B, and C shares are ``Non-Institutional 
Shares''). Other future classes, in addition to Class I shares, may be 
offered to meet the specific investment needs of a particular category 
of Institutional Investor (together with Class I shares, 
``Institutional Shares''). Still other future classes may be offered to 
various market segments or through various types of intermediaries.
    10. Only Institutional Investors will be eligible to invest in 
Institutional Shares. Applicants may choose not to make a particular 
class of Institutional Shares available to one or more categories of 
Institutional Investors. If no class of Institutional Shares is made 
available to a particular category of Institutional Investor, 
Institutional Investors in this category will be permitted to purchase 
Non-Institutional Shares. However, no Institutional Investor that is 
eligible to invest in any class of Institutional Shares will be 
permitted by applicants to invest in any class of Non-Institutional 
Shares. Accordingly, there will be no overlap between the investors 
eligible to invest in Institutional Shares and investors eligible to 
invest in Non-Institutional Shares of a Fund or series thereof.
    11. Under the Multiple Distribution System, certain expenses may be 
attributable to a Fund, but not to a particular series thereof. All 
such expenses will be borne by each class on the basis of the relative 
aggregate net assets of the classes, except in the case of a Fund that 
has series, in which case they will first be allocated among series, 
based on the relative aggregate net assets of such series. Expenses 
that are attributable to a particular series, but not to a particular 
class thereof, will be borne by each class on the basis of the relative 
aggregate net assets of the classes.
    12. Applicants also propose to assess and, under certain 
circumstances, waive or reduce a CDSC on certain redemptions of their 
shares. The CDSC will not be imposed upon a redemption of shares that 
were purchased more than a specified period of time prior to the 
redemption (the ``CDSC Period'') or upon shares derived from 
reinvestment of distributions. Furthermore, no CDSC will be imposed 
upon an amount that represents share appreciation.
    13. The Funds request the ability to waive the CDSC as described 
below: (a) On redemptions following the total disability (as evidenced 
by a determination by the federal Social Security Administration) of 
the shareholder (including a registered joint owner) occurring after 
the purchase of the shares being redeemed, (b) in the event of the 
death of the shareholder (including a registered joint owner), (c) on 
redemptions pursuant to the Funds' right to liquidate small accounts or 
to charge an annual small account fee, (d) on redemptions of shares 
acquired as a result of the investment of distributions from shares of 
a class of one Fund into shares of the same class of another Fund, (e) 
for redemptions made pursuant to a systematic withdrawal plan, and (f) 
in connection with the following redemptions of shares held by employer 
sponsored employee benefit plans maintained on the subaccount record 
keeping system made available by KFS: (i) Redemptions to satisfy 
participant loan advances (loan repayments would constitute new 
purchases for purposes of the contingent deferred sales charge and the 
conversion privilege), (ii) redemptions in connection with retirement 
distributions (limited at any one time to 10% of the total value of 
plan assets invested in the Fund), (iii) redemptions in connection with 
distributions qualifying under the hardship provisions of Internal 
Revenue Code section 403(b)(7) or in Treasury Regulation 401(k)-
1(d)(2), as amended, and (iv) redemptions representing returns of 
excess contributions to such plans.
    14. The Funds will provide a credit (i.e., a reimbursement) for any 
CDSC paid by a redeeming shareholder in connection with a redemption of 
shares of a class followed by a reinvestment in any shares of the same 
class of the same Fund or, as permitted by KFS, the same class of 
another Fund, effected within such number of days of the redemption as 
may be specified in a Fund's prospectus. The CDSC credit will be paid 
by KFS. Upon redemption thereafter, when calculating the amount of the 
CDSC the shares will be deemed to have been held for the period from 
purchase through reinvestment, except for the period between redemption 
and reinvestment, until such shares are finally redeemed.

Applicants' Legal Analysis

    1. 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) Shareholders of different classes (i) would pay 
different fees because of the rule 12b-1 plan (and related costs) and 
(ii) may pay different service fees, shareholder servicing fees and 
Class Expenses and (2) each class would be entitled to exclusive voting 
rights as to matters concerning its rule 12b-1 plan.
    2. The abuses that section 18 of the Act is intended to address as 
set forth in section 1(b) of the Act are that the interest of investors 
are adversely affected 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 operate 
without adequate assets or reserves. The Multiple Distribution System 
does not involve borrowings and does not affect the Funds' existing 
assets or reserves. In addition, the proposed arrangement will not 
increase the speculative character of the shares of the Funds, since 
all such shares will participate pro rata in all the Fund's 
appreciation, income and expenses (with the exception of the different 
distribution fees payable by each class of shares and any other costs 
relating to implementing the rule 12b-1 plan for such class or an 
amendment to such plan including obtaining shareholder approval of the 
rule 12b-1 plan for such class or any amendment to such plan), any 
different service fees, shareholder servicing fees, and Class Expenses.
    3. Applicants believe that the imposition of the CDSC is fair and 
in the best interests of their shareholders. The proposed CDSC provides 
shareholders the advantage of having more investment dollars working 
for them from the time of their purchase than if a sales load were 
imposed at the time of purchase. Furthermore, the CDSC described above 
is fair to shareholders because it applies only to amounts representing 
purchase payments and does not apply to amounts representing share 
appreciation, or to amounts representing reinvestment of distributions.

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 to 
each other class, except as set forth below. The only differences among 
the various classes of shares of the same Fund will relate solely to: 
(a) Different distribution fee payments associated with any rule 12b-1 
plan for a particular class of shares and any other costs relating to 
implementing or amending such Plan (including obtaining shareholder 
approval of such Plan or any amendment thereto) which will be borne 
solely by shareholders of such classes, (b) different service fees, (c) 
different shareholder servicing fees, (d) different Class Expenses, 
which will be limited to the following expenses determined by the 
Trustees to be attributable to a specific class of shares: (i) Printing 
and postage expenses related to preparing and distributing materials 
such as shareholder reports, prospectuses, and proxy statements to 
current shareholders of a specific class; (ii) Commission registration 
fees incurred by a specific class; (iii) litigation or other legal 
expenses relating to a specific class; (iv) Trustee fees or expenses 
incurred as a result of issues relating to a specific class; and (v) 
accounting expenses relating to a specific class; (e) the voting rights 
related to any 12b-1 Plan affecting a specific class of shares, except 
as provided in condition 16 below; (f) conversion features; (g) 
exchange privileges; and (h) class names or designations. Any 
additional incremental expenses not specifically identified above which 
are subsequently identified and determined to be properly applied to 
one class of shares shall not be so applied unless and until approved 
by the Commission by an amended order.
    2. The Trustees of each Fund, including a majority of the 
Independent Trustees, will approve the Multiple Distribution System for 
a particular Fund prior to its implementation by that Fund. The minutes 
of the meetings of the Trustees of each Fund regarding the 
deliberations of the Trustees with respect to the approvals necessary 
to implement the Multiple Distribution System will reflect the reasons 
for the Trustees' determination that the proposed Multiple distribution 
System is in the best interests of both the Fund and its shareholders.
    3. The initial determination of any Class Expenses that will be 
applied to a class and any subsequent changes thereto will be reviewed 
and approved by a vote of the Board of Trustees, including a majority 
of the non-interested Trustees. Any persons authorized to direct the 
application 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.
    4. Any distributor will adopt compliance standards as to when each 
class of shares may be sold to particular investors. Applicants will 
require all persons selling shares of the Funds to conform to such 
standards; and such compliance standards will require that all 
investors eligible to purchase Institutional Shares will be sold only 
Institutional Shares rather than any other class of shares offered by a 
Fund, and that all investors eligible to purchase Non-Institutional 
Shares will be sold only Non-Institutional Shares.
    5. The Administrative 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.
    6. 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 among the 
interests of the various 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. 
KFS will be responsible for reporting any potential or existing 
conflicts to the Trustees. If a conflict arises, KFS at its own cost 
will remedy such conflict up to and including establishing a new 
registered management investment company.
    7. The Trustees of the Funds will receive quarterly and annual 
statements concerning distribution and 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 any distribution or service fee charged to that class. 
Expenditures not related to the sale or servicing of a particular class 
will not be presented to the Trustees to support any distribution or 
servicing fee attributable to that class. The statements, including the 
allocations upon which they are based, will be subject to the review of 
the Independent Trustees in the exercise of their fiduciary duties.
    8. Dividends paid by a Fund as 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 any distribution fees, service fees, shareholder servicing 
fees and Class Expenses allocated to a class will be borne exclusively 
by that class.
    9. The methodology and procedures for calculating the net asset 
value and dividends and distributions of the various classes and the 
proper allocation of expenses between or among the various classes has 
been reviewed by an expert (the ``Expert'') who has rendered to the 
applicants a report, which has been provided to the staff of the 
Commission, 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 Commission 
pursuant to sections 30(a) and 30(b)(1) of the Act. The work papers of 
the Expert concerning such reports, following request by the Funds 
which the Funds agree to make, will be available for inspection by the 
Commission 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 Commission, 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 Regional Administrators. The initial report of the Expert is 
a ``Report on Policies and Procedures in Existence,'' 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 they may be adopted by the 
AICPA from time to time.
    10. 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 between or among such 
classes of shares; and this representation has been concurred with by 
the Expert in the initial report referred to in condition (9) 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 (9) above. Applicants agree to take immediate 
corrective action if the Expert, or appropriate substitute Expert, does 
not so concur with the ongoing reports.
    11. The prospectuses of 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 as to one class of Fund shares in relation to another.
    12. The conditions pursuant to which the exemptive order is granted 
and the duties and responsibilities of the Trustees of the Funds 
concerning the Multiple Distribution System will be set forth in 
guidelines that will be furnished to the Trustees as part of the 
materials setting forth the duties and responsibilities of the 
Trustees.
    13. Each Fund will disclose the respective expenses, performance 
data, distribution arrangements, services, fees, sales loads, deferred 
sales loads, conversion features, 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. The shareholder reports on each Fund will 
disclose the respective expenses and performance data applicable to 
each class of shares. The shareholder reports will contain, in the 
statement of assets and liabilities and statement of operations, 
information related to the Fund as a whole and not on a per class 
basis. Each Fund's per share data, however, will be prepared on a per 
class basis for all classes of shares of that Fund. To the extent that 
any advertisement or sales literature describes the expenses or 
performance data applicable to any class of shares, it will disclose 
the 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 the Funds' net asset values and public 
offering prices will present separately each class of shares except 
Institutional Shares.
    14. 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 Funds may make pursuant to their rule 12b-1 distribution plans or 
Administrative Plan in reliance upon the exemptive order.
    15. Purchase Class shares will convert into Target Class shares on 
the basis of the relative net asset values of 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.
    16. If a Fund implements any amendment to its rule 12b-1 Plan (or, 
if presented to shareholders, adopts or implements any amendment of a 
non-rule 12b-1 service plan) that would increase materially the amount 
that may be borne by the Target Class shares under the plan, existing 
Purchase Class shares will stop converting into Target Class shares 
unless the Purchase Class shareholders, voting separately as a class, 
approve the proposal. The Trustees shall take such actions as are 
necessary to ensure that existing Purchase Class shares are exchanged 
or converted into a new class of shares (``New Target Class''), 
identical in all material respects to the Target Class as it existed 
prior to implementation of the proposal, no later than such shares 
previously were scheduled to convert into the Target Class. If deemed 
advisable by the Trustees to implement the foregoing, such action may 
include the exchange of all existing Purchase Class shares for a new 
class (``New Purchase Class''), identical to the existing Purchase 
Class shares in all material respects except that New Purchase Class 
will convert into New Target Class. The New Target Class or the New 
Purchase Class may be formed without further exemptive relief. 
Exchanges or conversions described in this condition shall be effected 
in a manner that the Trustees reasonably believe will not be subject to 
federal taxation. In accordance with condition 6 above, any additional 
cost associated with the creation, exchange, or conversion of the New 
Target Class or the New Purchase Class shall be borne solely by the 
investment adviser and principal underwriter. Purchase Class shares 
sold after the implementation of the proposal may convert into Target 
Class shares subject to the higher maximum payment, provided that the 
material features of the Target Class plan and the relationship of such 
plan to the Purchase Class shares are disclosed in an effective 
registration statement.
    17. Applicants will comply with the provisions of proposed rule 6c-
10 under the Act, Investment Company Act Release No. 16619 (November 2, 
1988) as such rule is currently proposed and as it may be reproposed, 
adopted, or amended.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-10981 Filed 5-5-94; 8:45 am]
BILLING CODE 8010-01-M