[Federal Register Volume 59, Number 225 (Wednesday, November 23, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28866]


[[Page Unknown]]

[Federal Register: November 23, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 20710; 812-9084]

 

Connecticut Mutual Investment Accounts, Inc., et al.; Notice of 
Application

November 17, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').

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

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APPLICANTS: Connecticut Mutual Investment Accounts, Inc (including all 
existing and future series thereof) (the ``Fund''), and G.R. Phelps & 
Co., Inc. (``Phelps''), on their own behalf and on behalf of any 
registered open-end investment companies (including any series thereof) 
for which Phelps or any person controlling, controlled by, or under 
common control with Phelps serves in the future as investment adviser 
or distributor (collectively, the ``Fund'').

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

SUMMARY OF APPLICATION: Applicants seek an order that would permit the 
Funds to issue an unlimited number of classes of shares representing 
interests in the same portfolio of securities, assess a contingent 
deferred sales load (``CDSL'') on certain redemptions of shares, and 
waive the CDSL in certain instances.

FILING DATE: The application was filed on July 1, 1994, and amended on 
September 19, 1994 and November 16, 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 December 12, 
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 such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, D.C. 
20549. Applicants, 140 Garden Street, Hartford, Connecticut 06154.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Attorney, 
at (202) 942-0583, or Barry D. Miller, Senior Special Counsel, 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 may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. The Fund, a Maryland corporation, is a registered open-end 
management investment company, which currently consists of ten series. 
Each of the series has a separate investment objective and policies, 
and separate assets.
    2. Phelps, a registered investment adviser and a registered broker/
dealer, is an indirect wholly-owned subsidiary of Connecticut Mutual 
Life Insurance Company (``Connecticut Mutual''). Phelps is the 
investment adviser to five series of the Fund, and the distributor of 
the Fund's shares.\1\
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    \1\Five new series of the Fund (the ``New Accounts''), which 
commenced operations on October 3, 1994, are distributed, but not 
advised, by Phelps. Each New Account invests substantially all of 
its assets in another registered investment company advised by an 
unaffiliated investment adviser (in what is commonly referred to as 
a ``master/feeder'' structure).
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    3. Shares of the single existing class of the Fund (the ``Non-Money 
Market Series''), except shares of the money market series (the ``Money 
Market Series''), are sold at net asset value plus a front-end sales 
load. In accordance with the terms of a prior exemptive order,\2\ 
purchases of shares of the Non-Money Market Series in amounts of 
$500,000 or more are not subject to a front-end sales load, but instead 
are subject to a CDSL of 1% on redemptions of such shares within twelve 
months after purchase. Shares of the Money Market Series are sold at 
net asset value with no sales load. In addition, the Fund has adopted 
distribution plans pursuant to rule 12b-1 under the Act (the 
``Distribution Plans''); to date, only the shareholders of the Money 
Market Series and the initial shareholder of each New Account have 
approved the Distribution Plans.
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    \2\Connecticut Mutual Investment Accounts, Inc., et al., 
Investment Company Act Release Nos. 19374 (Mar. 31, 1993) (notice) 
and 19435 (Apr. 27, 1993) (order). Any order issued on this 
application will supersede the prior order.
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    4. Applicants propose to establish a multiple class distribution 
system (the ``Multiple Class System''), which would permit the Funds to 
issue an unlimited number of classes of shares. These classes would 
differ in the following respects: (a) the impact of certain class 
expenses (as set forth in condition 1 below) (``Class Expenses''); (b) 
expenses payable under a Distribution Plan, a service fee paid to 
institutions for the provision of certain account administration and 
shareholder liaison services to their customers pursuant to a non-rule 
12b-1 shareholder services plan (``Shareholder Services Plan''), and/or 
an administration fee paid to institutions for the provision of certain 
account administration services to their customers pursuant to a non-
rule 12b-1 administration plan (an ``Administration Plan'') 
(collectively, the ``Plans'' and ``Plan Payments''); (c) voting rights 
related to any Plan; (d) exchange privileges; (e) the conversion 
feature; (f) class designations; and (g) any other additional 
incremental expenses subsequently identified that could be properly 
allocated to one class, as permitted by the SEC pursuant to an amended 
order. Under the Multiple Class System, the Funds will be authorized to 
sell shares of different classes under different sales arrangements, 
including sales with a front-end sales charge, subject to a CDSL, a 
combination of a front-end sales load and a CDSL, or at net asset 
value.
    5. Under a Distribution Plan, shares of an affected class would 
bear the cost of selling and servicing such shares. The distribution 
fees under such a Plan would be payable to reimburse or compensate the 
Fund's distributor for expenses that primarily are intended to result 
in the sale of the class shares. The service fees under a Distribution 
Plan would be payable to reimburse or compensate the Fund's 
distributor, securities dealers, and other institutions for personal 
services and maintenance of shareholder accounts, and any additional 
service-related expenses.
    6. Under a Shareholder Services Plan, a Fund (or the distributor) 
enters into service agreements with affiliated and unaffiliated 
financial institutions, broker-dealers, and securities professionals 
(``Service Organizations'') concerning the provision of account 
administration services (``Account Administration Services''), and 
certain other services\3\ to customers of the Service Organizations who 
beneficially own class shares offered pursuant to such Plan. Under its 
Shareholder Services Plan, the Fund would pay a Service Organization 
for its services and assistance in accordance with the terms of the 
Plan and its particular service agreement.
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    \3\These additional services would include, but not be limited 
to, receiving and answering investor correspondence, including 
requests for prospectuses, statements of additional information and 
shareholder reports; assisting customers in completing application 
forms, selecting dividend and other account options, and opening 
custody accounts with the Service Organization; and acting as a 
liaison between customers and the Fund, including obtaining 
information from the Fund, working with the Fund to correct errors 
and resolve problems, and providing statistical and other 
information to the Fund.
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    7. Under an Administration Plan, the Fund (or its distributor) 
enters into service agreements with Service Organizations for the 
provision of Account Administration Services to the customers of such 
Service Organizations who beneficially own class shares offered 
pursuant to such Plan. Under its Administration Plan, the Fund would 
pay a Service Organization a fee for its services and assistance in 
accordance with the terms of the Administration Plan and its particular 
service agreement. The expense of such payments would be borne entirely 
by the beneficial owners of class shares.
    8. The provision of services under the Plans will augment (and not 
be duplicative of) the services to be provided to the Fund by its 
investment adviser, transfer agent, and custodian.
    9. The Funds may establish classes of shares that will be available 
only for investment by one or more of the following categories of 
investors: (a) unaffiliated benefit plans; (b) tax-exempt retirement 
plans of Connecticut Mutual and its affiliates; (c) unit investment 
trusts sponsored by Phelps or entities controlling, controlled by, or 
under common control with Phelps; (d) banks and insurance companies 
that are not affiliated with a Fund's adviser, subadviser, manager, 
administrator or principal underwriter purchasing for their own 
accounts; (e) investment companies not affiliated with a Fund's 
adviser, subadviser, manager, administrator, or principal underwriter; 
and (f) endowment funds of non-profit organizations that are not 
affiliated with a Fund's adviser, subadviser, manager, administrator or 
principal underwriter (each class, a ``Limited Institutional Class''). 
Shares of a Limited Institutional Class will be available only to the 
above categories of institutional investors. A series may elect not to 
offer shares of a Limited Institutional Class to one or more of these 
categories of institutional investors. However, if a series elects to 
offer shares of any Limited Institutional Class to any category of 
investors, such investors will not be permitted to invest in shares of 
any other class of such series.
    10. The unaffiliated benefit plans in category (a) will include 
qualified retirement plans, with respect to which a trustee is vested 
with investment discretion as to plan assets, other than individual 
retirement accounts and self-employed retirement plans, and will have 
limitations on the ability of plan beneficiaries to access their plan 
investments without incurring adverse tax consequences. Applicants will 
exclude self-directed plans from this category.
    11. Appropriate exemptive relief will be sought from the SEC prior 
to any investment by UITs in category (c) in shares of a Limited 
Institutional Class of the Fund.
    12. All exchanges will comply with the provisions of rule 11a-3 
under the Act.
    13. Certain expenses may be attributable to the Fund, but not to a 
particular series thereof (``Fund Expenses''). All such Fund Expenses 
may be allocated among the series of the Fund based on the relative 
aggregate net assets of such series or on such other basis as the board 
of directors may from time to time approve. Expenses that are 
attributable to a particular series or to an investment company with 
only one series, but not a particular class thereof, will be allocated 
daily to each class based on the percentage that the net asset value of 
such class represents of the total of all classes of shares of such 
series. Payments under the Plans and Class Expenses will be allocated 
to the shares of the class to which they are attributable.
    14. A conversion feature, after the expiration of a specified 
period, will automatically convert shares of one class at their net 
asset value to shares of another class with different features, as set 
forth in condition 15 below. For purposes of the conversion, all shares 
in a shareholder's account that were acquired through the reinvestment 
of dividends and other distributions paid in respect of such shares 
(and which had not yet converted) will be considered to be held in a 
separate subaccount. Each time any shares in the shareholder's account 
convert, an equal pro rata portion of shares in the subaccount also 
will convert and no longer will be considered held in the subaccount. 
The portion will be determined by the ratio that the shareholder's 
converting shares bears to the shareholder's total shares subject to 
the conversion feature, but excluding shares held in the subaccount.
    15. Any conversion of shares will be subject to the continuing 
availability of an opinion of counsel or a private letter ruling from 
the Internal Revenue Service to the effect that the conversion of 
shares does not constitute a taxable event under federal income tax 
law. Conversion of shares might be suspended if such an opinion or 
ruling were no longer available.
    16. Applicants propose that the Funds be permitted to assess CDSLs 
on certain redemptions and repurchases of shares comprising a distinct 
class or particular shares within a class. Under the proposed CDSL 
arrangement, the amount of a CDSL charged to a shareholder would depend 
on the time that had elapsed since the shareholder purchased the CDSL 
shares. Any CDSL would be imposed on the lesser of (a) the net asset 
value of the redeemed shares at the time of purchase, or (b) the net 
asset value of the redeemed shares at the time of redemption. No CDSL 
would be imposed with respect to: (a) the portion of redemption 
proceeds attributable to increases in the value of an account above the 
net cost of the investment due to increases in the net asset value per 
share; (b) shares acquired through reinvestment of income dividends or 
capital gain distributions; or (c) CDSL shares held for more than a 
specified term after the end of the calendar period used to determine 
the period in which the purchase order for such shares was accepted. In 
determining whether a CDSL were payable, it would be assumed that 
shares, or amounts representing shares, that were not subject to a CDSL 
were redeemed first, and that other shares or amounts were then 
redeemed in the order purchased.
    17. The aggregate of any front-end sales load, an asset-based sales 
charge, and any CDSL would be subject to the limitation imposed by 
section 26(d) of Article III of the Rules of Fair Practice of the 
National Association of Securities Dealers (``NASD'').
    18. Applicants intend to waive or reduce the CDSL in certain 
circumstances described in the prospectus or prospectuses of the Funds. 
If a Fund waives or reduces the CDSL, such waiver or reduction will be 
uniformly applied to all shares in the specified category. In waiving 
or reducing a CDSL, the Fund will comply with the requirements of rule 
22d-1 under the Act.

Applicants' Legal Analysis

    1. Applicants request an exemptive order to the extent that the 
proposed issuance and sale of an unlimited number of classes of shares 
representing interests in the Fund might be deemed: (a) to result in a 
``senior security'' within the meaning of section 18(g) of the Act and 
to be prohibited by section 18(f)(1); and (b) to violate the equal 
voting provisions of section 18(i).
    2. Section 18 is intended to prevent investment companies from 
borrowing excessively and issuing excessive amounts of senior 
securities, which increase the speculative character of their junior 
securities, or from operating without adequate assets or reserves. The 
Multiple Class 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 each class of shares will participate in all of the 
Funds' appreciation (if any), income, and all of the Funds' expenses 
(with the exception of the Plan Payments and Class Expenses).
    3. Applicants believe that the proposed allocation of Class 
Expenses in the manner described above and the voting rights relating 
to the Plans is equitable and would not discriminate unfairly against 
any group of shareholders. Because, with respect to any Fund, the 
rights and privileges of each class of shares are substantially 
identical, the possibility that their interests would ever conflict 
would be remote. In any event, the interests of the affected 
shareholders with respect to Plan Payments would be adequately 
protected since Plans for each of those classes will conform to the 
requirements of rule 12b-1 (except that a Shareholder Services Plan or 
an Administration Plan may not confer certain voting rights), including 
the requirement that their implementation and continuance be approved 
on an annual basis by both the full board and the non-interested 
directors of a Fund.
    4. Applicants also request an exemption from sections 2(a)(32), 
2(a)(35), 22(c), and 22(d) of the Act, and rule 22d-1 thereunder, to 
the extent necessary to permit the Funds to assess a CDSL on certain 
redemptions. Applicants believe that the implementation of the CDSL as 
described above would be fair and would be in the public interest and 
the interests of the shareholders of the Funds, and would be consistent 
with the protection of investors and the purposes fairly intended by 
the provisions of the Act.

Applicants' Conditions

    Applicants agree that any order of the SEC granting the requested 
relief will be subject to the following conditions:
    1. Each class of shares will represent interests in the same 
portfolio of investments of a Fund or a series, and be identical in all 
respects except as set forth below. The only differences among the 
classes of shares of a Fund will relate solely to: (a) the impact of 
certain Class Expenses, which shall be limited to: (i) transfer agency 
fees (including the incremental cost of monitoring any CDSL) 
attributable to a specific class of shares; (ii) expenses related to 
preparing, printing, mailing and distributing materials such as 
shareholder reports, newsletters, prospectuses and proxy statements to 
current shareholders of a specific class; (iii) SEC, state, and foreign 
jurisdiction registration fees incurred by a specific class of shares; 
(iv) the expenses of administrative personnel and services required to 
support the shareholders of a specific class (including, but not 
limited to, maintaining telephone lines and personnel to answer 
shareholders' inquiries about their accounts or about the Fund); (v) 
litigation or other legal expenses relating to a class of shares; (vi) 
directors' fees or expenses incurred as a result of issues relating to 
a specific class of shares; and (vii) accounting, audit and tax 
expenses relating to a specific class of shares; (b) expenses payable 
by a class pursuant to a Plan with respect to such class; (c) the 
voting rights related to any Plan affecting a specific class of shares, 
except as provided in condition 16 below; (d) exchange privileges; (e) 
the conversion feature; (f) class designations; and (g) any other 
additional incremental expenses subsequently identified that could be 
properly allocated to one class, which shall be approved or permitted 
by the SEC pursuant to an amended order.
    2. The directors of a Fund, including a majority of the non-
interested directors, will approve the Multiple Class System. The 
minutes of the meetings of the directors of a Fund regarding the 
deliberations of the directors concerning, and their approval of, the 
Multiple Class System will reflect in detail the reasons for the 
directors' determination that the proposed Multiple Class System is in 
the best interests of both the Fund and its shareholders.
    3. The initial determination of Class Expenses that will be 
allocated to a class, and any subsequent changes thereto, will be 
reviewed and approved by a vote of the directors, including a majority 
of the non-interested directors. Any persons authorized to direct the 
allocation and disposition of monies paid or payable by a Fund to meet 
Class Expenses shall provide to the directors, and the directors 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 appropriately be sold to particular investors. 
Applicants will require all persons selling shares of a Fund to agree 
to conform to such standards. Such compliance standards will require 
that all investors eligible to purchase shares of a Limited 
Institutional Class be sold only shares of the Limited Institutional 
Class, rather than any other class of shares offered by the Fund.
    5. The Shareholder Services Plans and Administration Plans 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 directors of a Fund, pursuant to their 
fiduciary responsibilities under the Act and otherwise, will monitor 
the Fund for the existence of any material conflicts among the 
interests of the classes of shares. The directors, including a majority 
of the non-interested directors, will take such action as is reasonably 
necessary to eliminate any such conflicts that may develop. The 
investment adviser and distributor will be responsible for reporting 
any potential or existing conflicts to the directors. If a conflict 
arises, the investment adviser and the distributor, each at its own 
cost, will remedy such conflict up to and including establishing a new 
registered management investment company.
    7. The directors will receive quarterly and annual statements 
concerning the amounts expended under each Shareholder Services, 
Administration and Distribution Plan and the related Service Agreement 
complying with paragraph (b)(3)(ii) of rule 12b-1, as it may be amended 
from time to time, for the Fund. 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 or 
servicing of a particular class will not be presented to the directors 
to justify any fee attributable to that class. The statements, 
including the allocations upon which they are based, will be subject to 
the review and approval of the non-interested directors in the exercise 
of their fiduciary duties.
    8. Dividends paid by a Fund with respect to each class of its 
shares, to the extent any dividends are paid, will be calculated in the 
same manner, at the same time, on the same day, and will be paid in the 
same amount, except that Plan Payments and any Class Expenses will be 
borne exclusively by the affected class.
    9. The methodology and procedures for calculating the net asset 
value and dividends and distributions of the classes of shares and the 
proper allocation of expenses among the classes have been reviewed by 
an expert (the ``Expert''). The Expert has rendered a report to 
applicants 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 Fund that the calculations and 
allocations are being made properly. The reports of the Expert will 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 Expert 
with respect to such reports, following a request by a Fund (which the 
Fund agrees to provide), 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 Expert is a ``report on the 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 
American Institute of Certified Public Accountants (``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 of the classes of 
shares and the proper allocation of expenses among the classes of 
shares, and this representation has been concurred with by the Expert 
in the initial report referred to in the immediately preceding 
condition 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 the immediately preceding condition. Applicants 
agree to take immediate corrective action if this representation is not 
concurred in by the Expert or appropriate substitute Expert.
    11. The prospectus of the Fund, or if applicable, the prospectus of 
each class of shares of the Fund, will include a statement to the 
effect that any person entitled to receive compensation for selling or 
servicing Fund Shares may receive different compensation with respect 
to one particular class of shares over another in the Fund.
    12. The conditions pursuant to which the exemptive order is granted 
and the duties and responsibilities of the directors of the Fund with 
respect to the Multiple Class System will be set forth in guidelines, 
which will be furnished to the directors.
    13. The Fund will disclose the respective expenses, performance 
data, distribution arrangements, services, fees, sales loads, deferred 
sales loads, and exchange privileges applicable to each class of 
shares, other than the Limited Institutional Class, in every 
prospectus, regardless of whether all classes of shares are offered 
through each prospectus. The Limited Institutional Class will be 
offered solely pursuant to a separate prospectus. The prospectus for 
the Limited Institutional class will disclose the existence of the 
Fund's other classes, and the prospectus for the Fund's other classes 
will disclose the existence of the Limited Institutional Class, and 
will identify the persons eligible to purchase shares of such class. 
The Fund will disclose the respective expenses and performance data 
applicable to all classes of shares in every shareholder report. The 
shareholder reports will contain, in the statement of assets and 
liabilities and statement of operations, information related to the 
Fund as a whole generally and not on a per class basis. The Fund's per 
share data, however, will be prepared on a per class basis with respect 
to all classes of shares of the Fund. To the extent any advertisement 
or sales literature describes the expenses or performance data 
applicable to any class of shares, it will also disclose the respective 
expenses and/or performance data applicable to all classes of shares, 
except the Limited Institutional Class. Advertising materials 
reflecting the expenses or performance data for the Limited 
Institutional Class will be available only to those persons eligible to 
purchase the Limited Institutional Class. The information provided by 
applicants for publication in any newspaper or similar listing of the 
Fund's net asset value and public offering price will present each 
class of shares, except the Limited Institutional Class, separately.
    14. Applicants acknowledge that the grant of the relief requested 
by this application will not imply SEC approval, authorization or 
acquiescence in any particular level of payments that a Fund may make 
pursuant to the Distribution, Administration, or Shareholder Services 
Plans in reliance on the exemptive order.
    15. Any class of shares (``Purchase Class'') with a conversion 
feature will convert into another class of shares (``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. After 
conversion, the converted shares will be subject to an asset-based 
sales load 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 load and service fee 
to which they were subject prior to the conversion.
    16. If a Fund implements any amendment to its Distribution Plan 
(or, if presented to shareholders, adopts or implements any amendment 
of the non-rule 12b-1 Shareholder Services Plan or Administration 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 unless the Purchase Class 
shareholders, voting separately as a class, approve the proposal. If 
such approval is not granted, 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 the Target Class as it 
existed prior to implementation of the proposal, no later than the date 
such Purchase Class shares previously were scheduled to convert into 
Target Class shares. If deemed advisable by the directors 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 existing Purchase Class shares in all material respects 
except that New Purchase Class will convert into Target Class. A 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 a manner that the directors reasonable believe 
will not be subject to federal taxation. In accordance with condition 
6, 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 distributor. 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 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 (Nov. 2, 
1988)), as such rule is currently proposed, and as it may be 
reproposed, adopted, or amended.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-28866 Filed 11-22-94; 8:45 am]
BILLING CODE 8010-01-M