[Federal Register Volume 59, Number 136 (Monday, July 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17318]


[[Page Unknown]]

[Federal Register: July 18, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20392; 812-8716]

 

MassMutual Institutional Funds, et al.

July 11, 1994.
AGENCY: Securities and Exchange Commission (the ``SEC'' or the 
``Commission'').

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

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APPLICANTS: MassMutual Institutional Funds (the ``Trust''), 
Massachusetts Mutual Life Insurance Company (the ``Advisor''), and 
Oppenheimer Funds Distributor, Inc. (the ``Distributor'').

RELEVANT 1940 ACT SECTIONS: Order requested under Section 6(c) for 
exemptions from Sections 18(f), 18(g) and 18(i) and under Section 17(b) 
for exemption from Section 17(a).

SUMMARY OF APPLICATION: Applicants seek an order to (i) permit 
MassMutual Institutional Funds to issue and sell multiple classes of 
securities representing interests in some or all of the Trust's 
existing and future investment portfolios and (ii) permit the transfer 
of assets of seven separate accounts of the Adviser to corresponding 
series of the Trust in exchange for shares of a certain class of each 
such series.

FILING DATE: The application was filed on December 10, 1993 and amended 
on June 27, 1994.

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 August 5, 1994, 
and should be accompanied by proof of service on the Applicants, in the 
form an affidavit or, for lawyers, a certificate of service. Hearing 
request 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 5th Street, NW., Washington, DC 20549. 
Applicants, 1295 State Street, Springfield, Massachusetts 01111.

FOR FURTHER INFORMATION CONTACT:
Joyce M. Pickholz, Senior Counsel, or Michael V. Wible, Special 
Counsel, at (202) 942-0670, Office of Insurance Products, Division of 
Investment Management.

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

Applicants' Representations

    1. The Trust is a Massachusetts business trust registered under the 
1940 Act as a diversified, open-end management investment company. The 
Advisor is a mutual life insurance company organized under 
Massachusetts law. The Distributor is a registered broker-dealer which 
serves as principal underwriter to the Trust. A majority of the 
outstanding voting stock of the Distributor is indirectly owned by the 
Adviser. The Trust presently consists of seven separate series (the 
``Funds''), each of which has separate investment objectives and 
policies.
    2. Applicants request that relief pursuant to Section 6(c) of the 
1940 Act be extended to any future series of the Trust and to any other 
registered open-end investment management company (which is not a 
separate account) for which (a)(i) the Adivser or a person controlled 
by the Adviser serves as investment adviser, or (ii) the Distributor or 
a person controlled by the Distributor serves as principal underwriter 
and (b) that (i) is within the same ``group of investment companies'' 
as that term is defined in Rule 11a-3 under the 1940 Act and (ii) may 
in the future offer separate classes of shares on a basis identical in 
all material respects to that set forth in the application. Applicants 
represent that all representations made herein, as well as any 
conditions imposed by any order issued by the Commission with respect 
to this Application, will apply to all investment companies that elect 
to rely on such order.
    3. The Trust intends to offer multiple classes of shares of each 
Fund (the ``Multiple Class System''). Each Fund proposes to have four 
classes of shares Class 1, Class 2, Class 3 and Class 4.
    4. Class 1, Class 2 and Class 3 shares will be marketed primarily 
to defined contribution plans to qualify under Section 401(a) of the 
Internal Revenue Code of 1986, as amended (the ``Code''), which include 
401(k) plans, profit sharing plans, money purchase plans and target 
benefit plans. Under defined contribution plans, an individual account 
is established for each plan participant. Class 1, Class 2 and Class 3 
shares will also be available to custodial tax-sheltered accounts 
described in Code Section 403(b)(7), deferred compensation plans 
described in Code section 457, individual retirement accounts described 
in Code section 408, voluntary employees' beneficiary associations 
described in Code section 501(c)(9), defined benefit plans that qualify 
under Section 401(a) of the Code, other non-qualified plans, and other 
institutional or sophisticated investors (collectively, ``Institutional 
Investors'').
    5. Class 4 shares of each Fund will be available only to the 
unregistered separate accounts of the Adviser and life insurance 
company affiliates of the Adviser (``Separate Accounts''). Each of the 
Separate Accounts is expected from the definition of an investment 
company pursuant to Section 3(c)(11) of the 1940 Act and interests in 
the Separate Accounts are exempt securities pursuant to Section 3(a)(2) 
of the Securities Act of 1933. Interests in the Separate Accounts are 
offered only to corporate qualified plans, including defined 
contribution plans (which are generally participant-directed) and 
defined benefit plans.
    6. Class 1 shares will be offered to Institutional Investors. Each 
Fund will adopt with respect to Class 1 a plan pursuant to Rule 12b-1 
under the 1940 Act (a ``Rule 12b-1 Plan'') which will provide for 
payment to the Distributor of an amount (currently expected to be .40% 
of the average daily net asset value of the Class 1 shares) as an 
``asset-based sales charge'' (as such term is defined in section 26 of 
Article III of the Rules of Fair Practice of The National Association 
of Securities Dealers, Inc. (the ``NASD Rule''). In addition, the Class 
1 shares will bear an annual ``service fee'' (as defined in the NASD 
Rule) of up to .25%. Class 1 shares will be offered at net asset value 
without a front-end or contingent deferred sales charge.
    7. Class 2 shares will be offered to Institutional Investors who 
are either a retirement arrangement covering 400 or more lives or who 
initially invest a minimum of $2,000,000. For purposes of determining 
whether an initial investor has satisfied the minimum initial 
investment requirement for Class 2 shares, amounts invested in certain 
other products of the Adviser by the Institutional Investor will be 
counted toward the minimum initial investment requirement. In addition, 
when determining the number of lives covered by a retirement 
arrangement investing in Class 2 shares of a Fund, the number of lives 
covered by that retirement arrangement, including lives covered in 
certain products of the Adviser, will be counted toward the number of 
lives covered by the retirement arrangement purchasing Fund shares. 
Each Fund will adopt with respect to Class 2 a Class 2 Rule 12b-1 Plan 
which will provide for payment to the Distributor of an amount 
(currently expected to be .15% of the average daily net asset value of 
the Class 2 shares) as an asset-based sales charge. It is not expected 
that Class 2 shares will be subject to a service fee. Class 2 shares 
will be offered at net asset value without a front-end or contingent 
deferred sales charge.
    8. Class 3 shares will be offered to Institutional Investors who 
are either a retirement arrangement covering 750 or more lives or who 
initially invest a minimum of $10,000,000. For purposes of determining 
whether the minimum number of lives or initial investment requirements 
have been met, the same approach will be followed as described above 
for Class 2 shares. It is not expected the Class 3 shares will be 
subject to any payments pursuant to a Rule 12b-1 Plan or service fee. 
They will be offered at net asset value without a front-end or 
contingent deferred sales charge.
    9. Class 4 shares of each Fund will be offered only to the Separate 
Accounts of the Adviser and life insurance company affiliates of the 
Adviser. Class 4 shares will be offered at net asset value and will not 
be subject to a sales load or payment pursuant to a Rule 12b-1 Plan or 
service fee. However, the corporate qualified plans are subject to 
certain charges as a result of their investment in the Separate 
Accounts. The amount of these charges depends on the particular 
provisions and services of the respective plans and the unregistered 
group annuity contracts purchased to fund such plans and, therefore, 
vary from plan to plan.
    10. The adoption and implementation of a Rule 12b-1 Plan as to one 
Fund and class thereof will necessarily be made independently of, and 
will not be conditioned upon, the adoption or implementation of such a 
Plan as to any other class within that Fund or as to any other Fund of 
the Trust or class thereof. Similarly, the Distributor will not use the 
Rule 12b-1 Plan fees charged to one class within a Fund to support the 
marketing or services of any other class within the Fund or any other 
Fund or class thereof. The different maximum Rule 12b-1 fees for Class 
1 and Class 2 shares generally reflect the different type and amount of 
marketing and service effort required with respect to these two 
classes. Class 1 shares will be sold primarily through brokers, whereas 
Class 2 shares will be marketed primarily by employees of an affiliate 
of the Adviser. Were these expenses allocated pro rata to all shares 
without regard to the size of the shareholder's purchase, some 
shareholders would be subsidizing the expenses incurred by or on 
account of other shareholders. Class 3 shares will be subject to no 
12b-1 fees because it is anticipated that no commissions will be paid 
upon the sale of such shares and that servicing expenses will be 
minimal in relation to the size of the accounts; any expenses related 
to sales and distribution would be borne by the Adviser and not by the 
Trust. With respect to Class 4 shares, because of the nature of the 
investors eligible to purchase them, there are not expected to be any 
distribution or service expenses attributable to that class.
    11. Each share of the Trust, regardless of class, will have 
identical voting, dividend, liquidation and other rights, preferences, 
powers, restrictions, limitations, qualifications, designations and 
terms and conditions, except that: (a) each class will have a different 
class designation; (b) each class offered in connection with a Rule 
12b-1 Plan will bear the expense of the payments that would be made 
pursuant to such Rule 12b-1 Plan; (c) each class will also bear certain 
other expenses (``Identifiable Class Expenses'') that are directly 
attributable only to the class; (d) only the holders of the shares of 
the appropriate class involved will be entitled to vote on matters 
pertaining to a Rule 12b-1 Plan relating to such class (for example, 
the adoption, amendment or termination of a Rule 12b-1 Plan) in 
accordance with the requirements and procedures set forth in Rule 12b-
1; (e) each class will have different exchange privileges; and (f) 
Class 1 and Class 2 will have the conversion feature described below.
    12. All expenses of the Trust that cannot be attributed directly to 
any one Fund will be allocated to each Fund based on the relative net 
assets of such Fund. Certain other expenses may be attributable to a 
Fund, but not to a particular class of the Fund's shares. All such 
Expenses incurred by a Fund would be borne by the outstanding shares of 
the Fund regardless of class.
    13. The Adviser may choose to reimburse or waive the Identifiable 
Class Expenses of certain classes on a voluntary, temporary basis. The 
amount of such expenses waived or reimbursed by the Adviser may vary 
from class to class. In addition, the Adviser may waive or reimburse 
expenses attributable to the Trust generally and/or expenses 
attributable to a Fund (with or without a waiver or reimbursement of 
Identifiable Class Expenses) but only if the same proportionate amount 
of such expenses are waived or reimbursed for each class. Thus, any 
expenses attributable to the Trust generally that are waived or 
reimbursed would be credited to each class of a Fund based on the 
relative net assets of the classes. Similarly, any expenses 
attributable to a Fund that are waived or reimbursed would be credited 
to each class of that Fund according to the relative net assets of the 
classes.
    14. Because of the Rule 12b-1 fees and Identifiable Class Expenses 
that may be borne by each class of shares, the net income of (and 
dividends payable to) each class may be different from the net income 
of the other classes of shares of the Trust.
    15. Class 1 and Class 2 shares of the Funds will have the following 
conversion feature: Once the aggregate net asset value of a 
shareholder's Class 1 or Class 2 shares equal the minimum investment or 
the investing retirement arrangement reaches the minimum number of 
lives requirement for Class 2 or Class 3 shares, semi-annually, as of 
predetermined dates, the shareholder's Class 1 or Class 2 shares will 
be converted into Class 2 or Class 3 shares of equal aggregate net 
asset value in the same Fund. Such shares will thereafter be subject to 
the lower Rule 12b-1 Plan fee applicable to Class 2 shares or to no 
Rule 12b-1 Plan fee in the case of Class 3 shares.
    16. The Adviser serves as investment adviser to seven Separate 
Accounts through which are invested the assets of underlying contracts 
between the Adviser and certain retirement plans or other arrangements. 
Each of the Separate Accounts has a distinct portfolio of assets and 
its own investment objectives that correspond to those of a Fund. The 
Adviser has determined that, as part of a plan of reorganization to be 
carried out prior to commencement of the public offering of shares of 
the Funds, it would be desirable to transfer assets of each of the 
seven Separate Account to the Fund having corresponding investment 
objectives in exchange for Class 4 shares of that Fund (the 
``Exchange'').
    17. The Exchange has been or will be reviewed and approved both by 
the Board of Trustees of the Trust and by the Adviser in the exercise 
of its investment discretion over the Separate Accounts. The number of 
shares of a Fund to be issued to a Separate Account will be determined 
by dividing the value of a Separate Account's net assets on the date 
set for the Exchange by the net asset value of one share of the 
corresponding Fund on the same date. The value of a Separate Account's 
assets to be exchanged will be determined by the same method used to 
value the assets of the Funds. Each Fund will assume liability for any 
settlement costs of securities transactions of the corresponding 
Separate Account outstanding at the time of transfer, however, in no 
event will a Fund bear the expenses, if any, associated with the 
transfer of assets. The value of the assets transferred, taking account 
of the liabilities transferred therewith, will equal the value of the 
Class 4 shares received in return.

Applicants' Legal Analysis

    1. Applicants request an order exempting them from the provisions 
of Sections 18(f)(1), 18(g) and 18(i) to the extent that the proposed 
issuance and sale of various classes of shares representing interests 
in the same Fund might be deemed: (a) to result in a ``senior 
security'' within the meaning of Section 18(g) of the 1940 Act; (b) 
prohibited by Section 18(f)(1) of the 1940 Act; and (c) to violate the 
equal voting provisions of Section 18(i) of the 1940 Act.
    2. Applicants believe that the proposed allocation of expenses and 
voting rights in the manner described is equitable and would not 
discriminate against any group of shareholders. Applicants assert that 
the proposed arrangement does not involve borrowings and does not 
affect the Trust's existing assets or reserves. Nor will the proposed 
arrangement increase the speculative character of the shares of the 
Trust since all shares will participate based on relative net asset 
value in all of the Trust's income and expenses, with the exception of 
the Rule 12b-1 Plan payments and Identifiable Class Expenses.
    3. The Applicants believe that by creating and offering shares in 
connection with Rule 12b-1 Plans as described above, and by also 
creating and offering shares independently of the Rule 12b-1 Plans, the 
Trust will be able to achieve added flexibility in meeting the service 
and investment needs of its shareholders and future investors. The 
Applicants believe further that, to the extent shares are created and 
Rule 12b-1 Plans adopted as described above, the Trust will be able to 
address more precisely the needs of the particular investors and to 
cause the associated expenses to be borne by such investors. The Trust 
believes that it would be inefficient, and probably economically or 
operationally unfeasible, to organize a separate series for each class 
of shares. Not only would the Trust incur unnecessary accounting and 
bookkeeping costs in organizing and operating such new series, but the 
Trust's management of the new series, as well as its existing Funds, 
might be hampered.
    4. Because the proposed Exchange might be deemed to be a 
transaction between the Trust and an affiliated person of an affiliated 
person of the Trust and, therefore, prohibited by Section 17(a) of the 
1940 Act, Applicants also request an order pursuant to Section 17(b) 
exempting the Exchange transaction from the provisions of Section 
17(a).
    5. According to the Applicants, the exchange will avoid unnecessary 
brokerage expenses which would otherwise be borne by the Funds and the 
Separate Accounts if the Separate Accounts were required to liquidate 
their portfolios in order to purchase shares of the Funds and the 
Funds, in turn, were to use such purchase proceeds for investment in 
their respective portfolio securities. Moreover, the Separate Accounts 
might be forced to sustain losses caused by the untimely sale of one or 
more of their portfolio securities. Applicants argue that there appears 
to be no persuasive reason for requiring the Separate Accounts' 
reorganizations to be accomplished in a manner subjecting both the 
Separate Accounts and the Funds to unnecessary disadvantages in view of 
the safeguards which will assure fairness in the terms of the Exchange 
if effected in the manner described.
    6. Applicants submit that, because the value of shares of the Funds 
and the value of the assets of the Separate Accounts will be determined 
as described above, the terms of the Exchange are reasonable and fair, 
and that there is no inadequacy of consideration to be received by any 
party to the transaction. The parties further submit that the Exchange 
is consistent with the recited policies of the Separate Accounts and 
the Funds, since the investment objectives of the Separate Accounts and 
the corresponding Funds are the same. Finally, the Applicants submit 
that the Exchange is consistent with the general purposes of the Act by 
avoiding the possibility that the Separate Accounts or the Funds will 
incur unnecessary expenses of losses in connection with the 
reorganization of the Separate Accounts.

Applicants' Conditions

    Applicants agree that the following conditions may be imposed in 
any order granting the requested relief:
    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 related solely to: (a) the impact of 
the respective Rule 12b-1 Plan payments made by each class of shares 
(or the absence of any such distribution or service fees), and any 
Identifiable Class Expenses that may be imposed upon a particular class 
of shares and which are limited to (i) transfer agency fees 
attributable to a specific class of shares, (ii) printing and postage 
expenses related to preparing and distributing materials such as 
shareholder reports, prospectuses and proxies to current shareholders 
of a specific class, (iii) Blue Sky registration fees incurred by a 
class of shares, (iv) SEC registration fees incurred by a class of 
shares, (v) shareholder and administrative service fees payable under 
each class's respective administrative service agreement, if any, and 
(vi) any other incremental expenses subsequently identified that should 
be properly allocated to one class which shall be approved by the 
Commission pursuant to an amended order; (b) voting rights on matters 
which pertain to Rule 12b-1 Plans; (c) the different exchange 
privileges of the various classes of shares as described in the 
prospectuses (and as more fully described in the statement of 
additional information) of the Funds; (d) the conversion feature 
applicable to the Class 1 and Class 2 shares as described in the 
prospectus; and (e) the designation of each class of shares of a Fund.
    2. If a Fund implements any amendments 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 a class of shares under the 
plan into which another class will convert (the ``Target Class''), 
shares of the class that will convert (the ``Purchase Class'') will 
stop converting into the Target Class unless the Purchase Class 
shareholders, voting separately as a class, approve such a proposal. If 
(i) holders of Purchase Class shares do not approve such a proposal; 
(ii) such proposal is approved by the holders of Target Class shares; 
and (iii) such material increase occurs, than the Trustees shall take 
such action as is necessary to ensure that existing Purchase Class 
shares are exchanged or converted into a new class of shares (the ``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 (the ``New Purchase Class''), identical to existing 
Purchase Class shares in all material respects except that the New 
Purchase shares will convert into the 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, 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 Adviser and the Distributor. The Purchase Class shares sold 
after implementation of the proposal may convert into the 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.
    3. Any class of shares with a conversion feature will convert into 
another 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 the NASD Rule), if any, that in the aggregate are lower than 
the asset-based sales charge and service fee to which they are subject 
prior to the conversion.
    The Trustees of the Trust, including a majority of the Trustees who 
are not interested persons of the Trust, shall have approved the 
multiple class system prior to the implementation of the multiple class 
system by a particular Fund and will approve the creation and issuance 
of any new class of shares. The minutes of the meetings of the Trustees 
regarding their deliberations with respect to the approvals necessary 
to implement the multiple class system or to create new classes will 
reflect in detail the reasons for determining that such action is in 
the best interests of both the Funds and their respective shareholders.
    5. The initial determination of the Identifiable Class 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 Trustees, including a majority of the Independent Trustees. Any 
person authorized to direct the allocation and disposition of the 
monies paid or payable by a Fund to meet Identifiable Class Expenses 
shall provide to the 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.
    6. On an ongoing basis, the Trustees, 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. The Adviser and the 
Distributor will be responsible for reporting any potential or existing 
conflicts to the Trustees. If a conflict arises, the Adviser and the 
Distributor at their own costs will remedy such conflict up to and 
including establishing a new registered management investment company.
    7. The Trustees of the Trust will receive quarterly and annual 
statements complying with paragraph (b)(3)(ii) of Rule 12b-1, as it may 
be amended from time to time. In the statements, only distribution and/
or service expenditures properly attributable to the sale or servicing 
of a class of shares will be used to support the Rule 12b-1 fee charged 
to shareholders of such class of shares. Expenditures not related to 
the sale or servicing of the relevant class of shares will not be 
presented to the Trustees to support Rule 12b-1 fees charged to 
shareholders of such class of shares. The statements, including the 
allocations upon which they are based, will be subject to the review 
and approval of the Independent Trustees in the exercise of their 
Fiduciary duties.
    8. 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 Plans 
relating to a particular class of shares, will be borne exclusively by 
such class and except that any Identifiable Class Expenses may be borne 
by the applicable class of shares.
    9. The methodology and procedures for calculating the net asset 
value and dividends and distributions of the various classes and the 
proper allocation of income expenses among such classes have been 
reviewed by an expert (the ``Expert''), and the Expert has rendered a 
report to the Applicants, as set forth in Exhibit B as filed December 
10, 1993. The Expert has demonstrated that such methodology and 
procedures are adequate to ensure that such calculations and 
allocations will be made in an appropriate manner, subject to the 
conditions and limitations in that report. 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 Section 30(a) and 30(b)(1) of the Act. The 
work papers of the Expert with respect to such reports, following 
request by the Funds which the Funds agree to make, will be available 
for inspection by the Commission 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 Commission, limited to the 
Director, an Associate Director, the Chief Accountant, the Chief 
Financial Analyst, any Assistant Director, and any Regional 
Administrator or Associate and Assistant Administrator. The initial 
report of the Expert is a ``Special Purpose'' report on the ``Design of 
a System'' and the ongoing reports will be ``reports on policies and 
procedures placed in operation and tests of operating effectiveness'' 
as defined and described in the Statement of Accounting Standards 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.
    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 among the various 
classes of shares and the proper allocation of income and expenses 
among such classes of shares and this representation will be 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. The Applicants agree to 
take immediate corrective action if the Expert, or an appropriate 
substitute Expert, does not so concur in the ongoing reports.
    11. The prospectus or prospectuses of the Funds relating to Class 
1, Class 2, Class 3 and Class 4 shares will include a statement to the 
effect that a dealer or other organization selling shares of those 
classes may receive different levels of compensation for selling one 
particular class of shares over another in the Funds.
    12. The Distributor will adopt compliance standards as to when each 
class of shares may appropriately be sold to particular investors. 
Applicants will require all persons selling shares of the Funds to 
agree to conform to these standards.
    13. The conditions pursuant to which the exemptive order is granted 
and the duties and responsibilities of the Trustees of the Funds with 
respect to the multiple class system will be set forth in guidelines 
which will be furnished to the Trustees as part of the materials 
setting forth the duties and responsibilities of the Trustees.
    14. Each Fund will disclose the expenses, performance data, 
distribution arrangements, services, fees, sales loads, conversion 
features, and exchange privileges applicable to each class of shares of 
the Fund 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 a Fund as a whole generally and not 
on a per class basis. A Fund's per share data, however, will be 
prepared on a per class basis with respect to all classes of shares of 
such Fund. To the extent any advertisement or sales literature 
describes the expenses or performance data applicable to Class 1, Class 
2, and Class 3 shares, it will also disclose (i) the expenses and/or 
performance data applicable to each of Class 1, Class 2 and Class 3 
shares and (ii) the existence of Class 4 shares. To the extent any 
advertisement or sales literature describes the expenses or performance 
data applicable to Class 4 shares, it will also disclose (i) that Class 
4 shares are only available to the Separate Accounts and are not 
offered to the public, (ii) the fact that the investors purchasing 
Class 4 shares though a Separate Account are subject to additional 
charges, and (iii) the existence of Class 1, Class 2 and Class 3 
shares. Any such performance information applicable to Class 4 shares 
will be provided net of Separate Account and Fund expenses. The 
information provided by Applicants for publication in any newspaper or 
similar listing of a Fund's net asset value and public offering price 
will present each outstanding class of shares separately.
    15. Applicants acknowledge that the grant of the requested 
exemptive order will not imply Commission approval or authorization of 
are acquiescence in any particular level of payments that the Funds may 
make pursuant to Rule 12b-1 Plans in reliance on the order.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-17318 Filed 7-15-94; 8:45 am]
BILLING CODE 8010-01-M