[Federal Register Volume 59, Number 105 (Thursday, June 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13343]


[[Page Unknown]]

[Federal Register: June 2, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20318; 812-8758]

 

Fortis Advantage Portfolios, Inc., et al.; Notice of Application

May 25, 1994.
AGENCY: Securities and Exchange Commission (the ``SEC'').

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

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APPLICANTS: Fortis Advantage Portfolios, Inc., Fortis Equity 
Portfolios, Inc., Fortis Fiduciary Fund, Inc., Fortis Growth Fund, 
Inc., Fortis Income Portfolios, Inc., Fortis Money Portfolios, Inc., 
Fortis Tax-Free Portfolios, Inc., and Fortis Worldwide Portfolios, Inc. 
(the ``Funds''); Fortis Advisers, Inc. (the ``Adviser''), and Fortis 
Investors, Inc. (the ``Underwriter'').

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

SUMMARY OF APPLICATION: Applicants request an order that would permit 
the Funds to issue multiple classes of shares representing interests in 
the same portfolio of securities and to assess, and under certain 
circumstances waive, a contingent deferred sales charge (``CDSC''). The 
order would supersede a prior order (``Prior Order'') and would permit 
the Funds to impose CDSC schedules that may be different from the one 
described in the Prior Order.

FILING DATES: The application was filed on January 3, 1994, and amended 
on April 6, 1994. Applicants have agreed to file an additional 
amendment, the substance of which is incorporated herein, 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 SEC by 5:30 p.m. on June 20, 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 who wish to be 
notified of a hearing may request notification by writing to the SEC's 
Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants, 500 Bielenberg Drive, Woodbury, Minnesota 55125.

FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Staff Attorney, at (202) 942-0574, or Robert A. 
Robertson, Branch Chief, at (202) 942-0564 (Division of Investment 
Management, Office of Investment Company Regulation).

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

Applicants' Representations

    1. The Funds are open-end management investment companies. Each 
Fund other than Fortis Fiduciary Fund and Fortis Growth Fund is 
organized as a series investment company and is authorized to issue its 
shares in more than one series. Fortis Fiduciary Fund and Fortis Growth 
Fund currently are authorized to issue only one series of shares. The 
Adviser serves as the investment adviser of each Fund. The Underwriter 
serves as the principal underwriter of the shares of each Fund.
    2. The Fortis Money Fund series of Fortis Money Portfolios offers 
one class of shares at net asset value without the imposition of a FESC 
or CDSC. Each of the other Funds offers one class of shares at net 
asset value plus a front-end sales charge (``FESC'') in connection with 
investments of up to $1 million. Investments of $1 million or more are 
not subject to a FESC, but rather a CDSC, which is permitted by the 
Prior Order.\1\
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    \1\Fortis Advantage Portfolios, Inc., et al., Investment Company 
Act Release Nos. 19264 (February 11, 1993) (notice) and 19320 (March 
9, 1993) (order), that permitted applicants to eliminate the FESC, 
and impose a CDSC, on sales of shares in the amount of $1 million or 
more. The CDSC may be in an amount of up to 1% and will be imposed 
only on shares redeemed within a period of up to 24 months after 
purchase.
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A. Variable Pricing System

    1. Applicants, on behalf of themselves and future investment 
companies for which the Adviser, or any person controlled by or under 
common control with the Adviser, may serve as investment adviser, or 
for which the Underwriter, or any person controlled by or under common 
control with the Underwriter, may serve as principal underwriter, 
request an order that would permit the Funds to issue multiple classes 
of shares and to assess a CDSC. The order would supersede the Prior 
Order and would permit the Funds to impose CDSC schedules that may be 
different from the one described in that order.
    2. Under applicants' proposal, the Funds could offer classes of 
shares either: (a) Subject to a FESC (with respect to investments of 
less than $1 million) or a CDSC (with respect to investments of $1 
million or more) and subject to a 12b-1 distribution plan (``Class A 
shares'');\2\ (b) subject to a CDSC (expected to range from 4% on 
redemptions made during the first two years following purchase to 1% on 
redemptions made during the sixth year), a rule 12b-1 distribution plan 
with a service fee at an annual rate of up to .25% and a distribution 
fee at an annual rate of up to .75% of average daily net assets, and an 
automatic conversion to Class A after a certain period of time (``Class 
B shares''); (c) subject to a CDSC (expected to be 1% on redemptions 
made during the first two years following purchase), a rule 12b-1 
service fee at an annual rate of up to .25% and a rule 12b-1 
distribution fee at an annual rate of up to .75% of average daily net 
assets (``Class C shares''); (d) subject to a FESC, a rule 12b-1 
service fee at an annual rate of up to .25%, and a rule 12b-1 
distribution fee at an annual rate of up to .75%, of average daily net 
assets (``Class D shares''); (e) subject to a FESC (with respect to 
investments of less than $1 million) or a CDSC (with respect to 
investments of $1 million or more) but not subject to rule 12b-1 fees 
(``Class E shares'');\3\ (f) without a FESC or CDSC, but subject to a 
rule 12b-1 service fee at an annual rate of up to .25% of average daily 
net assets, for purchase exclusively by investors meeting such minimum 
investment and/or other eligibility requirements established by 
applicants (``Class Y shares''); and (g) without any sales or service 
charges for purchase exclusively by the Adviser, the Underwriter, 
certain agents and affiliates of the Adviser and Underwriter, and 
officers, directors, and employees of such entities (``Class Z 
shares''). The Funds also may establish one or more additional classes 
to be sold with different sales loads and service and distribution fee 
structures.
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    \2\Applicants contemplate that existing shares of the Funds will 
be designated Class A shares upon implementation of the multi-class 
structure (except that existing shares of those Funds that do not 
currently have a 12b-1 plan will be designated Class E).
    \3\Applicants anticipate that Class E shares would be 
implemented for each of the Funds that currently have no rule 12b-1 
plan. If a Fund offers Class E shares, all existing shares would 
become Class E shares. Sales of Class E shares would be available 
only to those investors who were holders of a Fund's shares at the 
time of implementation of the multi-class structure.
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    3. Class B shares of a Fund held for a specified number of years 
will convert automatically to Class A shares of such Fund at the 
relative net asset values of each of the classes.\4\ For purposes of 
calculating the holding period, Class B shares will be deemed to have 
been issued on the sooner of: (a) The date on which the issuance of 
Class B shares occurred; or (b) for Class B shares obtained through an 
exchange, or a series of exchanges, the date on which the issuance of 
the original Class shares occurred.
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    \4\Applicants currently contemplate that Class B shares will be 
the only class of shares that automatically convert to another class 
of shares, except that upon the initial offering of Class Y and/or 
Class Z shares of any Fund, applicants may provide that shareholders 
of such Fund who would qualify for investment in Class Y or Class Z 
shares would automatically convert into Class Y or Class Z shares, 
as applicable.
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    4. Shares purchased through the reinvestment of dividends and other 
distributions paid in respect of Class B shares are also Class B 
shares. However, for purposes of conversion to Class A, all Class B 
shares in a shareholder's Fund account that were purchased through the 
reinvestment of dividends and other distributions paid in respect of 
Class B shares (and which have not converted to Class A shares) will be 
considered to be held in a separate sub-account. Each time any Class B 
shares in the shareholder's Fund account (other than those in the sub-
account) convert to Class A, a pro rata portion of the Class B shares 
then in the sub-account also will convert to Class A. The portion will 
be determined by the ratio that the shareholder's Class B shares 
converting to Class A bears to the shareholder's total Class B shares 
not acquired through dividends and distributions.
    5. A class of shares will be exchangeable only for shares of the 
corresponding class of other Funds. all exchanges between Funds will 
comply with rule 11a-3 under the Act.
    6. The classes of a Fund will represent interests in the same 
portfolio of investments, and will be identical in all respects except: 
(a) Each class would have a different designation; (b) each class may 
bear any rule 12b-1 plan payments related to that class (and any other 
costs related to obtaining shareholder approval of the rule 12b-1 plan 
for that class or an amendment to its rule 12b-1 plan); (c) each class 
may bear expenses determined by the board of directors to be allocated 
to that class, which are set forth in condition 1 below; (d) only 
shareholders of the affected classes would be entitled to vote on 
matters pertaining to the rule 12b-1 plan relating to their respective 
class in accordance with the procedures set forth in rule 12b-1; (e) 
each class would have different exchange privileges; and (f) classes 
that impose a rule 12b-1 fee may convert into another class.
    7. The sum of any FESC, service fees, distribution fees, and CDSC 
will not exceed the maximum sales charge provided for in Article III, 
section 26 of the Rules of Fair Practice of the National Association of 
Securities Dealers (``NASD'').
    8. Because of the varying levels of rule 12b-1 fees and other 
class-level expenses paid by the holders of different classes of 
shares, the net income attributable to and the dividends payable on 
each class may differ and, consequently, different classes of shares 
may have different net asset values.

B. The CDSC

    1. Applicants also request an exemption that would permit the Funds 
to impose a CDSC and to waive the CDSC in certain cases. With respect 
to any class of shares of any Fund that charge a CDSC, the applicable 
CDSC will be calculated on the lesser of the net asset value at the 
time of the issuance or redemption of the shares. No CDSC will be 
imposed on: (a) Shares, or amounts representing shares, purchased 
through the reinvestment of dividends or capital gains distributions; 
(b) an amount that represents an increase in the value of the shares 
due to capital appreciation; or (c) shares held for longer than the 
applicable CDSC period. Upon any request for redemption of shares that 
imposes a CDSC, it will be assumed, unless otherwise requested, that 
shares subject to no CDSC will be redeemed first in the order purchased 
(however, if a shareholder owns more than one class of shares, then 
shares not subject to a CDSC with the highest rule 12b-1 fee will be 
redeemed in full prior to any redemption of shares not subject to a 
CDSC with a lower rule 12b-1 fee), all remaining shares that are 
subject to a CDSC will be redeemed in the order purchased.
    2. Applicants request the ability to waive the CDSC in the 
following instances: (1) Involuntary redemptions effected pursuant to a 
Fund's right to liquidate shareholder accounts having an aggregate net 
asset value of less than the minimum account balance set forth in the 
Fund's then current prospectus; (b) the death or disability of a Fund 
shareholder within the meaning of section 72(m)(7) of the Internal 
Revenue Code; (c) in connection with redemptions of any shares held by 
tax-qualified retirement plans, excluding individual retirement 
accounts, simplified employee pension plans, section 403(b) plans and 
section 457 plans; (d) in connection with purchases of shares funded by 
the proceeds from the redemption of shares of any unrelated investment 
company that charges a FESC, provided that there was no CDSC, fee, or 
other charge imposed in connection with such redemption and if the 
purchase is made within 60 days following the redemption; (e) in 
connection with purchases of Fund shares funded by the proceeds from 
the surrender of a fixed annuity contract within 60 days of the 
purchase of Fund shares; (f) in connection with purchases of Fund 
shares by the following categories of investors and transactions; (i) 
Fortis, Inc., and its subsidiaries and specified persons associated 
with such companies; (ii) Fund directors and officers and specified 
persons associated with such directors and officers; (iii) 
representatives or employees of the Underwriter (including agencies) or 
of the other broker-dealers having a sales agreement with the 
Underwriter and specified persons associated with such entities; (iv) 
pension, profit-sharing and other retirement plans of the persons 
referenced in clause (i), (ii) and (iii), (v) registered investment 
companies; (vi) registered investment advisers, trust companies and 
bank trust departments exercising discretionary authority or using a 
money management/mutual fund ``wrap'' program; (vii) purchases that are 
funded by the proceeds from the plans referenced in clause (iv) upon 
the retirement or employment termination of such persons; (viii) 
purchases by employees (including their spouses and dependent children) 
of banks and other financial services firms that provide referral and 
administrative services pursuant to a sales agreement with the 
Underwriter or one of its affiliates; (ix) with respect to Asset 
Allocation Portfolio of Advantage Portfolios only, former officers and 
directors of Morison Asset Allocation Fund, and officers, directors and 
employees of Morison Asset Management, Inc. and its affiliates; (x) 
with respect to Government Total Return Portfolio of Advantage 
Portfolios only, officers and trustees of the Olympus Funds Trust, 
officers, directors and employees of Furman Selz Capital Management, 
and Furman Selz Mager Dietz and Birney, members of the Xerox Employee's 
Credit Union and members of their immediate family and persons owning 
shareholder accounts which were in existence and entitled to purchase 
shares of Olympus U.S. Government Plus Fund at net asset value, without 
the imposition of a FESC, at the time that such Fund's assets were 
acquired by Advantage Portfolios; (xi) with respect to Growth Fund, the 
Fortis U.S. Government Securities Fund series of Income Portfolios and 
each current series of Advantage Portfolios only, persons owning 
shareholder accounts of the applicable series of Carnegie-Capiello 
Trust or Carnegie Government Securities Trust that was acquired by the 
applicable Fund if, at the time of such acquisition, such shareholder 
accounts were in existence and entitled to purchase shares of the 
applicable Carnegie fund at net asset value, without the imposition of 
a FESC; (xii) with respect to the Fortis U.S. Government Securities 
Fund series of Income Portfolios and the New York Portfolio series of 
Tax Free Portfolios only, persons owning shareholder accounts of the 
applicable series of The Pathfinder Heritage Funds that was acquired by 
the applicable Fund if, at the time of such acquisition, such 
shareholder accounts were in existence and entitled to purchase shares 
of the applicable Pathfinder fund at net asset value, without the 
imposition of a FESC; and (xiii) with respect to Fiduciary Fund only, 
persons having a Fiduciary Fund account on April 30, 1986; and (g) for 
an amount that represents, on an annual (non-cumulative) basis, up to 
10% of the amount (at the time of the investment) of the shareholder's 
purchases.
    3. In regard to waiver category (d) above, applicants will take 
such steps as may be necessary to determine that the shareholder has 
not paid a deferred sales load, fee or other charge in connection with 
such redemption, including, without limitation, requiring the 
shareholder to provide a written representation in the shareholder's 
application that no deferred sales load, fees or other charge was 
imposed in connection with such redemption and, in addition, either 
requiring that shareholder provide the redemption check of such 
unrelated open-end investment company (or a copy of the check) or a 
copy of the confirmation statement showing the redemption.
    4. Applicants intend to provide a one time credit for any CDSC paid 
upon redemption, the proceeds of which are reinvested in the same class 
of shares of a Fund within 60 days of redemption. The Underwriter will 
provide this credit from its own assets.

Applicants' Legal Analysis

    1. Applicants request an exemption under section 6(c) of the Act 
from sections 18(f)(1), 18(g), and (18)(i) of the Act to the extent 
that the proposed issuance of various classes of shares representing 
interests in the same Fund might be deemed to result in a ``senior 
security'' within the meaning of section 18(g) and thus be prohibited 
by section 18(f)(1), and to violate the equal voting provisions of 
section 18(i). Applicants believe that the proposed multi-class 
arrangement does not present the concerns that section 18 was designed 
to address. The multi-class arrangement does not involve borrowing, nor 
will it affect the Fund's existing assets or reserves, and does not 
involve a complex capital structure.
    2. Applicants also request an exemption under section 6(c) from 
sections 2(a)(32), 2(a)(35), 22(c), and 22(d) of the Act and rule 22c-1 
thereunder to assess and, under certain circumstances, waive a CDSC on 
redemption of shares. The order would supersede the Prior Order and 
would permit the Funds to impose CDSC schedules that may be different 
from the one described in the Prior Order.

Applicants' Conditions

    Applicants agree that any order 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 various classes 
of shares of the same Fund will relate solely to: (a) The designation 
to each class of shares of the Fund; (b) expenses assessed to a class 
as a result of a rule 12b-1 plan providing from a service and/or 
distribution fee; (c) different expenses which the board of directors 
of a Fund may in the future determine to allocate to a specific class 
(``class-specific expenses''), which will be limited to: (i) Transfer 
agency fees as identified by the transfer agent as being attributable 
to a specific class; (ii) printing and postage expenses related to 
preparing and distributing materials such as shareholder reports, 
prospectuses and proxies to current shareholders; (iii) Blue Sky 
registration fees incurred by a class of shares; (iv) SEC registration 
fees incurred by a class of shares; (v) the expenses of administrative 
personnel and services as required to support the shareholders of a 
specific class; (vi) litigation or other legal expenses relating solely 
to one class of shares; and (vii) director's fees incurred as a result 
of issues relating to one class of shares; (d) voting rights on matters 
exclusively affecting one class of shares (e.g., the adoption, 
amendment, or termination of a rule 12b-1 plan) in accordance with the 
procedures set forth in rule 12b-1 (except as provided in condition 15 
below); (e) the different exchange privileges of the various classes of 
shares as described in the prospectuses of the Funds; and (f) classes 
that impose a 12b-1 fee may convert to another class. Any additional 
incremental 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 SEC 
pursuant to an amended order.
    2. The directors of each the Funds, including a majority of the 
independent directors, shall have approved the variable pricing system 
prior to the implementation thereof by a particular Fund. The minutes 
of the meetings of the directors of each of the Funds regarding the 
deliberations of the directors with respect to the approvals necessary 
to implement the variable pricing system will reflect in detail the 
reasons for determining that the proposed variable pricing system is in 
the best interest of the Fund and its shareholders.
    3. The initial determination of the class-specific expenses, if 
any, that will be allocated to a particular class of a Fund and any 
subsequent changes thereto will be reviewed and approved by a vote of 
the directors of the affected Fund, including a majority of the 
independent directors. Any person authorized to direct the allocation 
and disposition of monies paid or payable by a Fund to meet class-
specific expenses shall provide to the directors, and the directors 
shall review, at least quarterly, a written report of the amounts so 
expended and the purpose of which the expenditures were made.
    4 On an ongoing basis, the directors 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 directors, including a 
majority of the independent directors, shall take such action as is 
reasonably necessary to eliminate any such conflicts that may develop. 
The Adviser and the Underwriter will be responsible for reporting any 
potential or existing conflicts to the directors. If a conflict arises, 
the Adviser and the Underwriter at their own costs will remedy such 
conflict up to and including establishing a new registered management 
investment company.
    5. The directors 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 servicing of a particular class of 
shares will be used to justify any distribution or servicing fee 
charged to that class. Expenditures not related to the sale of 
servicing of a particular class will not be presented to the directors 
to justify any fee attributable to the class. The statements, including 
the allocations upon which they are based, will be subject to the 
review and approval of the independent 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 fee payments made under the rule 12b-1 plan 
relating to a particular class will be borne exclusively by each class 
and except that any class-specific expenses will be borne by the 
applicable class of shares.
    7. The methodology and procedures for calculating the net asset 
value and dividends/distributions of the various classes and the proper 
allocation of income and expenses among the classes has been reviewed 
by an expert (the ``Independent Examiner''). The Independent Examiner 
has rendered a report, 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 Independent Examiner, or an 
appropriate substitute Independent Examiner, 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 Independent Examiner shall be filed as part of the periodic 
reports filed with the SEC pursuant to sections 30(a) and 30(b)(1) of 
the Act. The work papers of the Independent Examiner 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 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 Independent Examiner 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. Applicants have adequate facilities in place to ensure 
implementation of the methodology and procedures for calculating the 
net asset value and dividends/distributions among the various 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 Independent Examiner in its initial report referred to in condition 
(7) above and will be concurred with by the Independent Examiner, or 
appropriate substitute Independent Examiner, on an ongoing basis at 
least annually in the ongoing reports referred to in condition (7) 
above. The applicants agree to take immediate corrective action if the 
Independent Examiner, or an appropriate substitute Independent 
Examiner, does not so concur in the ongoing reports.
    9. The prospectuses of the Funds will include 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 
levels of compensation for selling one particular class of shares over 
another in a Fund.
    10. The Underwriter will adopt compliance standards as to when 
shares of a particular class may appropriately be sold to particular 
investors. Applicants will require all persons selling shares of the 
Funds to agree to conform to these standards.
    11. The conditions pursuant to which the exemptive order is granted 
and the duties and responsibilities of the directors of the Funds with 
respect to the variable pricing system will be set forth in guidelines 
which will be furnished to the directors.
    12. Each Fund prospectus (regardless of whether all classes of 
shares of such Fund are offered through such prospectus) will disclose 
the respective expenses, performance data, distribution arrangements, 
services, fees, FESC, CDSC, exchange privileges, and conversion 
features applicable to each class of shares. The shareholder reports of 
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 and ratios, 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 disclose the expenses 
and/or performance data applicable to all classes. The information 
provided by applicants for publication in any newspaper or similar 
listing of the Funds' net asset values and public offering prices will 
separately present each class of shares.
    13. The applicants acknowledge that the grant of the exemptive 
order requested by this application will not imply SEC approval, 
authorization or acquiescence in any particular level of payments that 
the Funds may make pursuant to rule 12b-1 plans in reliance on the 
exemptive order.
    14. Any class of shares with a conversion feature (``Purchase 
Class'') will convert into another class (``Target Class'') of 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.
    15. 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 shareholder services 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 directors shall take 
such action as is 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 Target Class as 
it existed prior to implementation of the proposal, no later than such 
shares previously were scheduled to convert into Target Class shares. 
If deemed advisable by the directors to implement the foregoing, such 
actions may include the exchange of all existing Purchase Class shares 
for a new class (``New Purchase Class''), identical to existing 
Purchase Class shares in all material respects except that New Purchase 
Class will convert into New Target Class. New Target Class or New 
Purchase Class may be formed without further exemptive relief. 
Exchanges or conversions described in this condition shall be effected 
in any 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 
Target Class or New Purchase Class shall be borne solely by the Adviser 
and the Underwriter. Purchase Class shares sold after the 
implementation of the proposal may convert into Target Class shares 
subject to the higher maximum payments, 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.
    16. Applicants will comply with the provisions of proposed Rule 6c-
10 under the Act, Investment Company Act Release No. 16169 (Nov. 2, 
1988), as 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. 94-13343 Filed 6-1-94; 8:45 am]
BILLING CODE 8010-01-M