[Federal Register Volume 59, Number 246 (Friday, December 23, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31530]
[[Page Unknown]]
[Federal Register: December 23, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 20782; 812-9252]
United Funds Inc. et al.; Notice of Application
December 16, 1994.
agency: Securities and Exchange Commission (``SEC'').
action: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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applicants: United Funds, Inc., United Retirement Shares, Inc., United
International Growth Fund, Inc., United Continental Income Funds, Inc.,
United Vanguard Fund, Inc., United Municipal Bond Fund, Inc., United
High Income Fund, Inc., United Government Securities Fund, Inc., United
New Concepts Fund, Inc., United Gold & Government Fund, Inc., United
Municipal High Income Fund, Inc., United High Income Fund II, Inc.,
United Cash Management, Inc., and United Asset Strategy Fund, Inc.
(collectively, the ``United Group Funds''); Waddell & Reed Funds, Inc.
(the ``W&R Funds''); Waddell & Reed Investment Management Company
(``WRIMCO''); Waddell & Reed, Inc. (``Waddell & Reed''); and any future
open-end management investment company or series thereof (a) for which
WRIMCO, or any person controlling, controlled by or under common
control with WRIMCO, serves as investment adviser and/or Waddell &
Reed, or any person controlling, controlled by or under common control
with Waddell & Reed, serves as principal underwriter and (b) that
issues and sells one or more classes of shares which are identical in
all material respects to the classes described in the application.
relevant act sections: Order requested under section 6(c) for
exemptions 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 applications: Applicants request an order which would permit
them to offer an unlimited number of classes, add a conversion feature,
and assess and, under certain circumstances waive, a contingent
deferred sales charge (``CDSC'') on redemptions of shares. The order
would supersede a prior order that permits certain of the investment
company applicants to assess and, under certain circumstances, waive a
CDSC on redemptions of shares.
filing dates: The application was filed on September 27, 1994, and was
amended on November 21, 1994 and December 14, 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
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on January 10,
1995, and should be accompanied by proof of service on the applicants,
in the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons may request
notification of a hearing by writing to the SEC's Secretary.
addresses: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission,
Kansas 66201-9217.
for further information contact: Sarah A. Wagman, Law Clerk, at (202)
942-0654, 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. Each of the United Group Funds and the W&R Funds (collectively,
``Corporations'') is a Maryland corporation registered under the Act as
an open-end, diversified management investment company.\1\ Some
Corporations have multiple series, each of which has separate
investment objectives and policies (hereinafter, the series of each
Corporation, and each Corporation which is organized in other than
series form and that in the future is subject to the order requested by
this application, are referred to collectively as the ``Funds'' and
individually as a ``Fund'').
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\1\Each Corporation reserves the right to, and may, from time to
time, reorganize from corporate to business trust or other form
under the laws of another state, consistent with applicable state
and federal law and the Corporation's articles of incorporation.
Except as otherwise noted herein, references to Corporations,
Directors, and articles of incorporation shall be deemed to apply to
any form in which a Corporation or Fund may be organized.
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2. For each existing Fund, WRIMCO serves as the investment adviser
and Waddell & Reed serves as principal underwriter. WRIMCO is a wholly-
owned subsidiary of Waddell & Reed, which is an indirect subsidiary of
Torchmark Corporation and United Investors Management Company, and is a
direct subsidiary of Waddell & Reed Financial Services, Inc.
3. Existing shares of United Group Funds, other than United Cash
Management, Inc.\2\ and United Asset Strategy Fund, Inc.,\3\ are
currently sold at net asset value per share plus a front-end sales
charge. Shares of the W&R Funds are sold at net asset value per share
plus a CDSC, in accordance with a prior order (the ``Prior Order'').\4\
In addition to the front-end sales charge and the CDSC described above,
each Fund, other than United Cash Management, Inc., has adopted a rule
12b-1 plan.
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\2\Existing shares of United Cash Management, Inc. are sold at
net asset value, without the imposition of a front-end sales load or
CDSC.
\3\On October 3, 1994, United Asset Strategy Fund, Inc. filed a
registration statement to register its shares under the Securities
Act of 1933. As of the date of this notice, its registration had not
yet become effective.
\4\Investment Company Act Release Nos. 18777 (June 11, 1992)
(notice) and 18833 (July 7, 1992) (order). The Prior Order permits
W&R Funds, WRIMCO, and Waddell & Reed to assess and, under certain
circumstances, waive a CDSC on redemptions of shares. Applicants
request that any order granted pursuant to this applicant supersede
the Prior Order.
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A. The Multiple Class System
1. Applicants seek an exemptive order that would permit the Funds
to issue an unlimited number of classes of shares. Each class of such
new shares (``New Shares'') of a Fund would be identical in all
respects, except that: (a) Each class of shares would have a different
class designation; (b) certain classes of shares may have different
sales charges; (c) certain classes of shares may bear fees under a plan
adopted pursuant to rule 12b-1 (``12b-1 Plan''), a non-rule 12b-1
shareholder services plan (``Shareholder Services Plan''), or a
combination of these (collectively, the ``Plans''); (d) each class of
shares could also bear certain other expenses that are directly
attributable only to that class (``Class Expenses,'' as described in
condition 1, below); (e) only the holders of a class of shares would be
entitled to vote on matters pertaining to a 12b-1 Plan and any related
agreements, or any other matters, relating to such class; (f) exchange
privileges could vary among the classes; and (g) only certain classes
will have a conversion feature.
2. Each 12b-1 Plan applicable to New Shares would contemplate
compensation and/or reimbursement to the principal underwriter for: (1)
the distribution of shares, the provision of other distribution-related
services, and the payment of related expenses (``Distribution
Services'');\5\ and/or (2) the provision of certain personal and/or
account maintenance services and the payment of related expenses
(``Maintenance Services'').\6\ The amount of 12b-1 Plan payments by a
class of 12b-1 Shares for Distribution and Maintenance Services will
not exceed .75% and .25%, respectively, per annum of the average daily
net assets of that class, or such other amount as may be permitted
pursuant to applicable NASD rules.
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\5\These expenses may include, for example, advertising
expenses, costs of printing and mailing to prospective shareholders
prospectuses and other sales promotion materials relating to the
applicable Fund, costs relating to the Distributor's selling and
servicing activities, including, among other things, employee
salaries and overhead expenses, and ongoing fees to entities that
have sold shares subject to a rule 12b-1 Plan (``12b-1 Shares'').
\6\These expenses may include, for example, ongoing fees to
entities that provide such services.
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3. Under a Shareholder Services Plan applicable to New Shares, one
or more organizations would provide various administrative support
services (``Support Services'') to shareholders of the particular
class.\7\ With respect to each class of New Shares, a Fund could enter
into Shareholder Services Plan agreements with the principal
underwriter and/or other organizations, such as broker-dealers or
banks.
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\7\These services may include, for example, preparing, printing,
and distributing prospectuses and annual reports to shareholders;
ensuring compliance with securities laws; processing purchase,
exchange, and redemption requests for shares from customers;
providing information to shareholders concerning their shares;
providing and maintaining elective services; acting as shareholder
of record; maintaining account records; and responding to
shareholder inquiries.
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4. The Distribution, Maintenance, and/or Support Services provided
under the Plans are intended to complement, rather than duplicate, the
services to be provided to each Fund by WRIMCO, the principal
underwriter, and the various parties that provide custody, shareholder
servicing, and accounting services to each Fund. If a class of shares
is subject to both a rule 12b-1 Plan and a Shareholder Services Plan,
the services provided under one Plan would augment, rather than
duplicate, the services provided under the other Plan. In establishing
and implementing the Plans, applicants will comply with subsection (d)
of Article III, section 26, of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (``NASD''), to the
extent applicable.
5. The expenses of a Corporation that has established more than one
Fund, which expenses cannot be attributed directly to any one Fund
(``Corporation Expenses'') will be allocated to each Fund based on the
relative daily net assets of those Funds. Expenses which may be
attributable to a particular Fund, but not to a particular class
(``Fund Expenses''), will be allocated to each class of the particular
Fund's shares based on the relative daily net assets of the class.
Further, Plan payments and Class Expenses will be charged directly to
the net assets of the particular class and thus will be borne on a pro
rata basis by the outstanding shares of such class.
6. The shares in different classes within a Fund will have
different exchange privileges. The applicable exchange privileges will
comply with rule 11a-3 under the Act.
7. WRIMCO may choose to reimburse or waive Class Expenses on
certain classes of the Fund on a voluntary, temporary basis. The amount
of Class Expenses reimbursed or waived by WRIMCO may vary from class to
class. Class Expenses are by their nature specific to a given class and
obviously expected to vary from one class to another. Applicants thus
believe that it is acceptable and consistent with shareholder
expectations to reimburse or waive Class Expenses at different levels
for different classes of the same Fund.
8. In addition, WRIMCO may waive or reimburse Corporation Expenses
and/or Fund Expenses (with or without a waiver or reimbursement of
Class Expenses), but only if the same proportionate amount of
Corporation Expenses and/or Fund Expenses is waived or reimbursed for
each class of a Fund. Thus, any Corporation Expenses that are waived or
reimbursed would be credited to each class of a Fund according to the
relative net assets of the classes. Similarly, any Fund Expenses that
are waived or reimbursed would be credited to each class of that Fund
according to the relative net assets of the classes. Corporation
Expenses and Fund Expenses apply equally to all classes of a given
Fund. Accordingly, it may not be appropriate to waive or reimburse
Corporation Expenses or Fund Expenses at different levels for different
classes of the same Fund.
9. Shares of one or more classes (``Purchase Class Shares'') may
automatically convert to another class (``Target Class Shares'') after
a prescribed period of time. It currently is expected that such
Purchase Class Shares will convert to Target Class Shares following the
expiration of approximately eight years from the purchase date,
although a shorter period may be prescribed.
10. Purchase Class Shares in a shareholder's account that were
acquired through the reinvestment (or payment in shares) of dividends
and other distributions paid in respect of Purchase Class Shares will
be considered to be held in a separate sub-account (``Dividend Purchase
Shares''). Each time any Purchase Class Shares in the shareholder's
account covert to Target Class Shares, a pro rata share of the Dividend
Purchase Shares also will convert to Target Class Shares. The portion
converted will be determined by the ratio that the shareholder's
convertain Purchase Class Shares bears to the total of the
shareholder's Purchase Class Shares subject to the conversion feature,
excluding Dividend Purchase Shares.
11. The conversion of the Purchase Class Shares into Target Class
Shares will be subject to the availability of an opinion of counsel or
an Internal Revenue service private letter ruling to the effect that
the conversion of the Purchase Class Shares does not constitute a
taxable event under federal income tax law. The proposed conversion
feature may be suspended if such a ruling or opinion is not available.
B. The CDSC
1. Applicants also seek to impose a CDSC on redemptions of certain
classes of shares of the Funds (``CDSC Shares'') and to waive or reduce
the CDSC with respect to certain types of redemptions. Under the
proposed CDSC arrangement, some or all shares of certain classes of a
Fund may be subject to a CDSC if such shares are redeemed or
repurchases within a prescribed period of time after their purchase.
The CDSC may be imposed at a constant or declining rate over a
specified period of years. No CDSC will be imposed with respect to: (a)
the portion of redemption or repurchase proceeds attributable to
increases in the value of the shares due to capital appreciation; (b)
shares representing reinvestment or payment of dividends or other
distributions; or (c) shares held for more than a certain time after
their purchase. The amount of a CDSC would be calculated as the lesser
of the net asset value of the shares at the time of purchase and the
net asset value of the shares at the time of repurchase or redemption.
2. In determining the applicability and rate of any CDSC, it will
be assumed that a redemption is made first of shares representing
capital appreciation, next of shares representing reinvestment of
dividends and capital gains distributions, and finally of other shares
held by the shareholder for the longest period of time. This will
result in any such charge being imposed on the fewest number of shares
at the lowest possible rate. The amount of the CDSC and the
circumstances and timing of its imposition may vary among classes and
may be changed with respect to any class. The Funds may change the
length of time during which the CDSC will be imposed or the percentage
used to calculate the amount of the CDSC, if issued shares would be
unaffected or, if such issued shares would be affected, the changes
would be to shareholders' benefit. Except in accordance with the Prior
Order, a CDSC will not be imposed on any shares issued by the Funds
prior to the date of the order requested by this application.
3. Each Fund will have the ability to waive or reduce a CDSC in
connection with certain categories of transactions, as described in
that Fund's prospectus. In waiving or reducing a CDSC, the Funds will
comply with the requirements of rule 22d-1 under the Act.
Applicants' Legal Analysis
1. Applicants request an order pursuant to section 6(c) of the Act
exempting them from sections 18(f)(1) and 18(g) of the Act to the
extent that the proposed creation, issuance, and sale of multiple
classes of shares may result in a ``senior security'' prohibited by
section 18(f), and in a violation of section 18(i) of the Act to the
extent that the different voting rights associated with such classes
may be deemed to result in one or more classes of shares having unequal
voting rights with other classes of shares. In addition, applicants
request an exemption from sections 2(a)(32), 2(a)(35), 22(c), and 22(d)
of the Act and rule 22c-1 thereunder, to the extent necessary to permit
the proposed CDSC arrangement.
2. Applicants believe that the proposed allocation of expenses and
voting rights is equitable and would not discriminate against any group
of shareholders. The proposed arrangement does not involve borrowing
and will not affect the Funds's existing assets or reserves. It will
not increase the speculative character of the shares in a Fund, since
all shares will participate in all of the Fund's appreciation, income,
and expenses in the manner described in the representations above.
Applicants' Conditions
Applicants agree that the order granting the requested exemptions
will be subject to the following conditions:
1. Each class of shares of a Fund will represent interests in the
same portfolio of investments, 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 one or more of the following: (a) Expenses
assessed to a class pursuant to a Plan, if any, with respect to such
class; (b) the impact of Class Expenses, which are limited to any or
all of the following: (i) transfer agent and shareholder servicing fees
identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to
preparing and distributing materials such as shareholder reports,
prospectuses, and proxy statements to current shareholders of a
specific class of shares, (iii) Blue Sky registration fees incurred by
a specific class of shares, (iv) Commission registration fees incurred
by a specific class of shares, (v) expenses of administrative personnel
and services as required to support the shareholders of a specific
class of shares, (vi) Directors' fees or expenses incurred as a result
of issues relating to a specific class of shares, (vii) accounting
expenses relating solely to a specific class of shares, (viii)
auditors' fees, litigation expenses, and legal fees and expenses
relating to a specific class of shares, (ix) expenses incurred in
connection with shareholders meetings as a result of issues relating to
a specific class of shares, and (x) any other expenses subsequently
identified which should be properly allocated to a specific class of
shares and which, as such, are approved by the Commission pursuant to
an amended order; (c) certain classes of shares may have different
sales charges; (d) the fact that the classes will vote separately with
respect to matters relating to the applicable Plan or any other
matters, if any, relating to a class, except as provided in condition
16 below; (e) the different exchange privileges of the classes of
shares, if any; (f) the designation of each class of shares of a Fund;
and (g) the fact that only certain classes will have a conversion
feature.
2. The Board of Directors of each Corporation, including a majority
of the Directors who are not interested persons of the Corporation
(``Independent Directors''), will have approved the Multiple Class
System with respect to a particular Fund of the Corporation prior to
the implementation of the system by that Fund. The minutes of the
meetings of the Board of the Corporation regarding the deliberations of
the Directors with respect to the approvals necessary to implement the
Multiple Class System will reflect in detail the reasons for the
determination by the Board that the proposed Multiple Class System is
in the best interests of each Fund and its shareholders.
3. The initial determination of the Class Expenses that will be
allocated to a particular class and any subsequent changes thereto will
be reviewed and approved by a vote of the appropriate Board of
Directors, 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 Expenses shall provide to the
applicable Board, 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. On an ongoing basis, the Board of each Corporation, pursuant to
its fiduciary responsibilities under the Act and otherwise, will
monitor each Fund, as applicable, for the existence of any material
conflicts among the interests of the classes of its shares, if there is
more than one class. The Board, including a majority of the Independent
Directors, shall take such action as is reasonably necessary to
eliminate any such conflicts that may develop. Each Fund's principal
underwriter and investment adviser will be responsible for reporting
any potential or existing conflicts to the appropriate Board. If such a
conflict arises, the Fund's principal underwriter and investment
adviser, at their own expense, will take such actions as are necessary
to remedy such conflict, including establishing a new registered
management investment company, if necessary.
5. Each Shareholder Services Plan will be adopted and operated in
accordance with the procedures set forth in rule 12b-1 (b) through (f)
as if the expenditures made thereunder were subject to rule 12b-1,
except that shareholders need not enjoy the voting rights specified in
rule 12b-1.
6. The principal underwriter of each Fund implementing a Multiple
Class System 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 Fund to agree to conform
to such standards.
7. The Board of Directors of each Corporation will receive
quarterly and annual statements concerning the amounts expended under
the Corporation's Plans 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 fee for
Distribution, Maintenance, or Support Services charged to that class.
Expenditures not related to the sale or servicing of a particular class
will not be presented to the Board of 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
Independent Directors in the exercise of their fiduciary duties.
8. Dividends and other distributions of income, including capital
gains, paid by the Fund with respect to each class of its shares, to
the extent any such dividends and other distributions are paid, will be
declared and paid on the same day and at the same time, and will be
determined in the same manner and will be in the same amount, except
that the amount of dividends and other distributions declared and paid
by a particular class may be different from that of another class
because of Plan payments made by a class and Class Expenses borne
exclusively by that class.
9. The methodology and procedures for calculating the net asset
value and dividends and other distributions of the classes and the
proper allocation of expenses among the classes have been reviewed by
an expert (the ``Expert'') who has rendered a report to the Applicants,
which is attached as Exhibit A to the originally filed application,
stating that such methodology and procedures are adequate to ensure
that such calculations and allocations will be made in an appropriate
manner. On an ongoing basis, the Expert, or an appropriate substitute
Expert, will monitor the manner in which the calculations and
allocations are being made and, based upon such review, will render at
least annually a report to the Funds that the calculations and
allocations are being made properly. The reports of the Expert will be
filed as part of the periodic reports filed with the Commission
pursuant to sections 30(a) and 30(b)(1) of the Act. The work papers of
the Expert with respect to such reports, following request by the Funds
(which the Funds agree to provide), will be available for inspection by
the Commission staff upon the written request to the Funds for such
work papers by a senior member of the Division of Investment
Management, limited to the Director, an Associate Director, the Chief
Accountant, the Chief Financial Analyst, an Assistant Director, and any
Regional Administrators or Associate and Assistant Administrators. The
initial report of the Expert is a ``Special Purpose'' report on
``policies and procedures placed in operation'' in accordance with
Statement of Auditing Standards (``SAS'') No. 70, ``Reports on the
Processing of Transactions by Service Organizations,'' of the American
Institute of Certified Public Accountants (``AICPA''). Ongoing reports
will be ``reports on policies and procedures placed in operation and
tests of operating effectiveness'' prepared in accordance with SAS No.
70 of the AICPA, as it may be amended from time to time, or such other
applicable auditing standards as may be adopted by the AICPA.
10. Applicants have adequate facilities in place to ensure
implementation of the methodology and procedures for calculating the
net asset value and dividends and other 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 condition 9, above, and will be
concurred with by the Expert, or an appropriate substitute Expert, on
an ongoing basis at least annually in the ongoing reports referred to
in condition 9, above. Applicants will take immediate corrective
measures if the Expert, or appropriate substitute Expert, does not so
concur in the ongoing reports.
11. The prospectuses of each class of shares will contain a
statement to the effect that a salesperson and any other person
entitled to receive compensation for selling or servicing shares may
receive different compensation with respect to one particular class of
shares over another in the Funds.
12. The conditions pursuant to which the exemptive order is granted
and the duties and responsibilities of the Board of each Fund with
respect to the Multiple Class System will be set forth in guidelines
that will be furnished to the Directors.
13. Each Fund implementing a Multiple Class System will disclose
the respective expenses, performance data, distribution arrangements,
services, fees, sales charges, and exchange privileges applicable to
each class of its shares in every prospectus, regardless of whether all
classes of its shares are offered pursuant to each prospectus. Each
Fund will disclose the respective expenses and performance data
applicable to all classes of its shares in every shareholder report.
The shareholder reports will contain, in the statement of assets and
liabilities and statement of operations, information related to the
Fund as a whole generally and not on a per class basis. Each Fund's per
share data, however, will be prepared on a per class basis with respect
to all classes of shares of such Fund. To the extent any advertisement
or sales literature describes the expenses 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 that
Fund's shares. The information provided by an applicant for publication
in any newspaper or similar listing of a Fund's net asset value and
public offering price will present each class of that Fund's shares
separately.
14. Applicants acknowledge that the grant of the exemptive order
requested by this application will not imply Commission approval of,
authorization of, or acquiescence in any particular level of payments
that any Fund may make pursuant to a Plan in reliance on the exemptive
order.
15. 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 charge, fee, or
other charge. After conversion, the converted shares will be subject to
an asset-based sales charge and/or service fee (as those terms are
defined in Article III, section 26 of the NASD's rules of Fair
Practice), if any, that in the aggregate are lower than the asset-based
sales charge and service fee to which they were subject prior to the
conversion.
16. If a Fund implements any amendment to a 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 12b-1
Plan, then existing Purchase Class Shares will stop converting into the
Target Class Shares unless Purchase Class shareholders, voting
separately as a class, approve the proposal. If the holders of a
majority of the Purchase Class Shares fail to approve such amendment,
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 Shares''), identical in all
material respects to Target Class Shares as they existed prior to
implementation of the amendment, no later than the date such 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 Shares''), identical to existing
Purchase Class Shares in all material respects except that the New
Purchase Class Shares will convert into the New Target Class Shares.
The New Target Class Shares and New Purchase Class Shares may be formed
without further exemptive relief. Exchanges or conversions described in
this condition shall be effected in a manner that the Directors
reasonably believe will not be subject to federal taxation. In
accordance with condition 4, any additional cost associated with the
creation, exchange, or conversion of the New Target Class Shares or New
Purchase Class Shares will be borne solely by the investment adviser
and the principal underwriter. Purchase Class Shares sold after the
implementation of the amended 12b-1 Plan may convert into Target Class
Shares subject to the higher maximum payment, provided that the
material features of the amended 12b-1 Plan applicable to the Target
Class Shares and the relationship of such amended 12b-1 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.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-31530 Filed 12-22-94; 8:45 am]
BILLING CODE 8010-01-M