[Federal Register Volume 60, Number 175 (Monday, September 11, 1995)]
[Rules and Regulations]
[Pages 47041-47051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22445]



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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 270 and 274

[Release Nos. 33-7208; IC-21332; S7-3-95]
RIN 3235-AG29


Registration Fees for Certain Investment Companies

AGENCY: Securities and Exchange Commission.

ACTION: Adoption of rule amendments and form.

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SUMMARY: The Commission is adopting amendments to rule 24f-2 under the 
Investment Company Act of 1940, the rule that permits certain 
investment companies to register an indefinite number of securities 
under the Securities Act of 1933. The Commission is also adopting a new 
form, Form 24F-2, to provide a standard form for annual notices filed 
under rule 24f-2. The amendments and the new form are intended to 
clarify the application of certain provisions of rule 24f-2 and make 
the rule's filing deadlines more flexible under certain circumstances.

DATES: The amendments are effective October 10, 1995. The rule 
amendments and Form 24F-2 will apply to filings that cover fiscal 
periods ending on or after the effective date, and to mergers and 
reorganizations completed on or after the effective date.

FOR FURTHER INFORMATION CONTACT: Karen J. Garnett, Attorney, or Joseph 
E. Price, Deputy Chief, (202) 942-0721, Office of Disclosure and 
Investment Adviser Regulation, Division of Investment Management, 
Securities and Exchange Commission, 450 Fifth Street NW., Washington, 
DC 20549. After the effective date, questions concerning filings should 
be addressed to Carolyn A. Miller, Senior Financial Analyst, (202) 942-
0510, Office of Financial Analysis, Securities and Exchange Commission, 
450 Fifth Street NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission 
(``Commission'') today is adopting amendments to rules 24f-1 (17 CFR 
270.24f-1) and 24f-2 (17 CFR 270.24f-2) under the Investment Company 
Act of 1940 (15 U.S.C. 80a-1 et seq.) (``1940 Act'') and a new Form 
24F-2 (17 CFR 274.24).

Table of Contents

Executive Summary

I. Background
II. Amendments to Rule 24f-2
    A. Delayed Filings
    B. Dividend Reinvestment Shares
    C. Mergers and Other Business Combinations
    D. Calculation of Time Periods
    E. Investment Companies Funding Insurance Company Separate 
Accounts
III. Form 24F-2
IV. Cost/Benefit Analysis
V. Summary of Regulatory Flexibility Act Analysis
Text of Rule Amendments
Appendix I

Executive Summary

    The Commission is amending rule 24f-2 under the 1940 Act, the rule 
that permits certain investment companies to register an indefinite 
number of securities under the Securities Act of 1933 (15 U.S.C. 77a et 
seq.) (``Securities Act''). The amendments provide that annual notices 
required by rule 24f-2 will be deemed timely filed if the investment 
company establishes that it timely transmitted the notice to a company 
or governmental entity that guaranteed delivery to the Commission no 
later than the filing date. In addition, the amendments modify certain 
filing periods under rule 24f-2 and clarify the operation of the rule's 
termination provisions in the case of investment company business 
combination transactions. The Commission also is adopting Form 24F-2, a 
standard form for annual notices required by rule 24f-2. Form 24F-2 
solicits the information currently required by rule 24f-2 for annual 
notices and includes a work sheet for calculating filing fees. The form 
is intended to improve the accuracy of information contained in Rule 
24f-2 Notices and improve the Commission's ability to process the 
notices. Finally, the Commission is adopting conforming amendments to 
rule 24f-1, the rule that permits certain investment companies to 
register securities sold in excess of the number of shares included in 
a registration statement.

I. Background

    Section 6(b) of the Securities Act (15 U.S.C. 77f(b)) specifies the 
fees that must be paid in connection with registering securities with 
the Commission under the Securities Act. Section 24 of the 1940 Act (15 
U.S.C. 80a-24) modifies these provisions for certain investment 
companies 

[[Page 47042]]
(``funds'').1 Section 24 was intended to address the problem of 
inadvertent ``oversales'' of fund securities, i.e., sales in excess of 
securities registered, which could easily occur with a fund that 
continually issues and redeems securities.

    \1\These companies include face amount certificate companies, 
open-end management companies, and unit investment trusts.
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    Rule 24f-2 under the 1940 Act permits funds to register an 
indefinite number of securities. A fund that makes a declaration to be 
governed by the rule (``Rule 24f-2 declaration'') pays an initial 
election fee of $500. Once a fund makes its Rule 24f-2 declaration, it 
must file a notice within six months after the close of each fiscal 
year (``Rule 24f-2 Notice'') and pay a registration fee based upon the 
number of shares sold during the fiscal year.2 If the fund files 
its Rule 24f-2 Notice within two months after the close of its fiscal 
year, the fund may deduct the value of shares redeemed from the value 
of shares sold in calculating the amount of fees due.3 This 
netting provision can result in substantial savings to funds and their 
shareholders.

    \2\Rules 24f-2(a)(1), (a)(3), and (b)(1) [17 CFR 270.24f-
2(a)(1), (a)(3), and (b)(1)].
    \3\Rule 24f-2(c) (17 CFR 270.24f-2(c)).
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    On February 1, 1995, the Commission issued a release (``Proposing 
Release'') proposing for public comment amendments to rule 24f-2 that 
would modify the method for determining when Rule 24f-2 Notices will be 
deemed timely filed with the Commission.4 The proposed amendments 
would also change the computation of filing deadlines and the operation 
of rule 24f-2's termination provisions in the case of investment 
company business combination transactions. In addition, the Commission 
proposed a standard form for filing Rule 24f-2 Notices, which was 
intended to improve the accuracy of information contained in the 
notices. The Commission received six comment letters on the Proposing 
Release,5 all of which supported the proposals.6 The 
Commission is adopting the amendments and form substantially as 
proposed.

    \4\Investment Company Act Rel. No. 20874 (Feb. 1, 1995) (60 FR 
7146 (Feb. 7, 1995)).
    \5\The comment letters are available for public inspection and 
copying in the Commission's public reference room in File No. S7-3-
95.
    \6\One commenter, who supported the proposed rule amendments and 
form, suggested further changes to accommodate unit investment 
trusts (``UITs'') under certain circumstances. While such revisions 
are beyond the scope of the current proposal, the Commission intends 
to consider revisions to rule 24f-2 for UITs in the future.
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II. Amendments to Rule 24f-2

A. Delayed Filings

    Under rule 24f-2, the consequences of filing a late Rule 24f-2 
Notice can be severe.7 The Commission proposed an amendment to 
rule 24f-2 to provide a means for funds to ensure that their Rule 24f-2 
Notices are timely filed and thus to avoid the consequences of late 
filings. The proposed amendment to rule 24f-2 provided that a Rule 24f-
2 Notice is deemed timely filed, regardless of when it reaches the 
Commission, if the fund establishes that it timely transmitted the 
notice to a third party company or governmental entity that guaranteed 
delivery to the Commission no later than the filing date. All of the 
commenters supported the amendment, which the Commission is adopting as 
proposed.

    \7\Rule 24f-2 currently provides that a fund cannot use the 
netting provision of paragraph (c) of the rule, which may result in 
substantially higher filing fees, if the fund's Rule 24f-2 Notice 
arrives at the Commission more than two months after the end of the 
fund's fiscal year. In addition, a fund's Rule 24f-2 declaration 
will terminate if the fund files its Rule 24f-2 Notice more than six 
months after its fiscal year end.
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    As adopted, new paragraph (f) of rule 24f-2 (17 CFR 270.24f-2(f)) 
applies to both the deadline for using the rule's netting provision and 
the deadline for filing Rule 24f-2 Notices.8 In order to rely on 
this provision, a fund must retain a receipt or other writing from the 
third party evidencing timely receipt by the third party for filing 
with the Commission by the due date.9 By providing a means for 
funds to ensure that they are not penalized for the failure of a third 
party to timely file their Rule 24f-2 Notices, the amendments should 
eliminate the need for such funds to seek exemptive relief from the 
requirements of rule 24f-2.10 Consequently, the Commission does 
not expect to entertain further exemptive applications from late 
filers.

    \8\The amendments change the deadline for filing in order to use 
the netting provision from two months to 60 days and the deadline 
for filing Rule 24f-2 Notices from six months to 180 days. See infra 
section II.D (``Calculation of Time Periods'').
    \9\Funds that file Rule 24f-2 Notices by direct transmission on 
the Commission's EDGAR system (``electronic filers'') will not be 
affected by this provision, since the timeliness of their filings 
does not depend upon the mail or courier services. While an 
electronic filing may be delayed for technical reasons, the rules 
governing electronic filings contain adequate procedures to address 
transmission problems. See 17 CFR 232.13(b).
    \10\The Commission has recently issued exemptive orders pursuant 
to its authority under section 6(c) of the 1940 Act (15 U.S.C. 80a-
6(c)) to allow funds filing after the two month deadline under 
certain circumstances to use rule 24f-2's netting provision. See 
Proposing Release, supra note 4, at n.7 and accompanying text.
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B. Dividend Reinvestment Shares

    As discussed above, rule 24f-2 permits a fund to calculate the 
registration fee due by deducting the amount of shares redeemed during 
the fiscal year from the amount of shares sold during the period. In 
determining the amount of shares sold during the fiscal year, some 
funds have excluded shares issued in connection with dividend 
reinvestment plans (``DRIP shares'').11 These funds, however, also 
may have included DRIP shares in determining the amount of shares 
redeemed during the fiscal year.12 In the Proposing Release, the 
Commission explained that this method of counting shares is 
inconsistent with the netting provision of rule 24f-2, which recognizes 
that a substantial portion of shares being registered under rule 24f-2 
were issued to replace redeemed shares that previously had been 
registered under the Securities Act.13 To address this 
inconsistency, the Commission proposed an amendment to rule 24f-2 to 
require funds taking advantage of the rule's netting provision to 
include DRIP shares when determining the amount of shares sold and 
redeemed during the fiscal year.

    \11\DRIP shares generally are not treated as ``sales'' of stock 
for purposes of registration requirements under the Securities Act. 
See Securities Act Rel. No. 929 (Jul. 29, 1936). Many funds, 
therefore, do not include DRIP shares as ``sales'' for purposes of 
rule 24f-2.
    \12\Funds that do not separately track DRIP shares generally 
have no means of determining whether shares redeemed during the 
fiscal year include DRIP shares.
    \13\Proposing Release, supra note 4, at section II.B.
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    Five of the six commenters generally supported the proposed 
amendment. The objecting commenter argued that including DRIP shares in 
the amount of securities sold during the fiscal year would contradict 
the Commission's long-standing position that the issuance of DRIP 
shares is not a ``sale'' of securities for purposes of 
registration.14 This commenter asserted that the proposed 
amendments could require a fund to pay registration fees on DRIP shares 
in years that the amount of DRIP shares issued exceeds redemptions. The 
Commission acknowledges that in some years a fund could pay fees on 
DRIP shares that would not be offset by redemptions. Those 
circumstances would occur infrequently, however, and the fees typically 
would be recaptured when those shares are redeemed in later years and 
netted against other sales.15

    \14\See supra note 11.
    \15\Furthermore, in years when the fund has no sales but issues 
DRIP shares, the fund would not be required to pay registration fees 
on shares sold, regardless of redemptions in that year. This is 
because the amendment does not require a fund to include DRIP shares 
in the total amount of securities sold unless the fund is netting 
redemptions against sales. See Instruction B.7 of Form 24F-2. 

[[Page 47043]]

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    The Commission considered alternatives to address the commenter's 
concern, including requiring funds to track the redemption of DRIP 
shares and exclude them from the amount redeemed in calculating net 
sales. Industry commenters supported the proposed approach as being 
less burdensome. The Commission is adopting the amendment as 
proposed.16

    \16\Paragraph (c) of rule 24f-2.
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C. Mergers and Other Business Combinations

    Paragraph (b)(3) of rule 24f-2 (17 CFR 270.24f-2(b)(3)) requires a 
fund planning to cease operations to file a post-effective amendment 
terminating the Rule 24f-2 declaration and file a final Rule 24f-2 
Notice ``before ceasing operations.'' In the case of investment company 
business combination transactions, especially those involving a 
liquidation, merger, or sale of assets, the operation of the rule has 
been unclear. While in most cases a fund's operations cease upon 
consummation of the transaction, it may be impractical for the fund to 
file a final Rule 24f-2 Notice before the transaction since sales and 
redemptions may be occurring until the time of the transaction. In 
addition, paragraph (b)(3) is silent as to the applicability of the 
netting provision of paragraph (c) when a fund files a Rule 24f-2 
Notice in connection with ceasing operations.
    To address these issues, the Commission proposed amendments to rule 
24f-2 to remove the requirement that a fund file its final Rule 24f-2 
Notice prior to ceasing operations and, in its place, provide that if a 
fund ceases operations, the end of its fiscal year for purposes of rule 
24f-2 is the date it ceases operations.17 Commenters supported the 
proposal, and the Commission is adopting amendments to paragraph (b)(3) 
of rule 24f-2 as proposed.

    \17\Proposing Release, supra note 4, at section II.C.
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    The rule, as amended, provides that the date a fund ceases 
operations will be deemed the close of its fiscal year.\18\ Thus, a 
fund must file a final Rule 24f-2 Notice within 180 days after ceasing 
operations and pay registration fees on all shares sold during the 
fiscal year.\19\ If a fund files the Rule 24f-2 Notice within 60 days 
after ceasing operations, it will be permitted, under paragraph (c), to 
net redemptions made between the end of the previous fiscal year and 
the date of ceasing operations against sales during that period.\20\ 
For funds involved in business combination transactions (other than 
reorganizations described below), revised paragraph (b)(3) specifies 
that a fund ceases operations for purposes of rule 24f-2 on the date 
that the fund's assets are distributed in a liquidation, the effective 
date of a merger, or, when there has been a sale of all or 
substantially all of the fund's assets, the date those assets are 
transferred.

    \18\Rule 24f-2(b)(3).
    \19\Rule 24f-2(b)(1).
    \20\This approach is similar to that taken in rule 8f-1 under 
the 1940 Act (17 CFR 270.8f-1), which requires a registered 
investment company winding up its affairs or being merged into or 
consolidated with another investment company to file an application 
for an order declaring that the company has ceased to be a 
registered investment company after the transaction has occurred.
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    As proposed, paragraph (b)(3) also clarified that reorganizations 
for the purpose of changing the fund's state of incorporation or form 
of organization would not result in the company ceasing operations for 
purposes of rule 24f-2. These transactions would be limited under the 
proposed rule to reorganizations that satisfied the requirements of 
rule 414 under Regulation C of the Securities Act.21 Under a rule 
414 reorganization, the successor fund succeeds to all assets and 
liabilities of the acquired fund, including the registration fee 
liabilities (net of any redemption credits) under rule 24f-2.22

    \21\17 CFR 230.414. Rule 414 generally provides that the 
registration statement of a predecessor company will be deemed to be 
the registration statement of the successor company when the purpose 
of the reorganization is to change the company's domicile or form of 
organization, provided certain conditions are satisfied. The 
Commission staff has stated that rule 414 is applicable to certain 
fund reorganizations. See, e.g., Lowry Market Timing Fund, Inc. 
(pub. avail. Jan. 9, 1985); Frank Russell Investment Company (pub. 
avail. Dec. 3, 1984).
    \22\Rule 414(b) (17 CFR 230.414(b)) requires that the succession 
result in the successor issuer acquiring all of the assets of and 
assuming all of the liabilities and obligations of the issuer.
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    Two commenters recommended that the Commission expand the 
application of paragraph (b)(3) of rule 24f-2 to permit the transfer of 
redemption credits when the assets and liabilities of an existing fund 
are merged or otherwise transferred into the portfolio of a newly-
created series of another fund.23 The Commission staff has 
previously allowed a successor fund to use an acquired fund's 
redemption credits when the successor fund was a newly-created series 
of a series company.24 The Commission has decided to revise 
paragraph (b)(3) to provide that a fund may transfer redemption credits 
to a successor fund in the case of either a succession under rule 414 
or a transfer of assets to a newly-created series of a series company.

    \23\This type of transaction would not satisfy the requirements 
of rule 414 because the successor series would be part of a 
separately registered series company and would not adopt the 
predecessor fund's registration statement as its own, as required by 
rule 414. As a result, the acquired fund would cease to do business, 
unlike the acquired fund in a rule 414 succession.
    \24\The Victory Funds (pub. avail. Apr. 24, 1995). In The 
Victory Funds, the staff stated that when a shell series assumes the 
assets and liabilities of an acquired fund, the transaction is 
similar to a reorganization under rule 414 because the successor 
fund is continuing the acquired fund's business and each shareholder 
of the acquired fund, following the transaction, owns the same pro 
rata interest in the same portfolio of securities as the shareholder 
owned before the transaction.
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D. Calculation of Time Periods

    The Commission proposed amending paragraphs (b)(1) and (c) of Rule 
24f-2 to replace the ``six month'' and ``two month'' time periods for 
filing Rule 24f-2 Notices with ``180 day'' and ``60 day'' time periods, 
respectively.25 The rule's references to ``months'' has resulted 
in different filing periods depending upon the months involved and is 
inconsistent with the timing provisions in other Commission 
rules.26 This has, on occasion, caused some confusion among funds 
about filing deadlines. Only one commenter objected to the proposed 
revisions, arguing that the proposal to measure time periods in days 
rather than months would create more confusion among filers about the 
deadlines for filing Rule 24f-2 Notices. The Commission believes, 
however, that the proposed amendments, which make rule 24f-2 consistent 
with other filing requirements under the 1940 Act, will reduce 
confusion among funds about the time periods for filing annual notices 
under rule 24f-2. Therefore, the Commission is adopting the amendments 
as proposed.27 To further clarify how to calculate time periods, 
the Commission is also adopting, as proposed, a new paragraph 
specifying 

[[Page 47044]]
that the first day of the time period is the first calendar day of the 
fiscal year following the fiscal year for which the Rule 24f-2 Notice 
is filed.28

    \25\Proposing Release, supra note 4, at section II.D.
    \26\See, e.g., rule 30b1-1 under the 1940 Act (17 CFR 270.30b1-
1) (requiring funds to file semi-annual reports with the Commission 
not more than 60 calendar days after the close of each fiscal year 
and fiscal second quarter); rule 30d-1 under the 1940 Act (17 CFR 
270.30d-1) (requiring funds to mail semi-annual reports to 
stockholders within 60 days after the close of the period for which 
the report is made); and rule 485 under the Securities Act (17 CFR 
230.485) (providing that certain post-effective amendments will 
become effective on the sixtieth day after filing).
    \27\The Commission is adopting similar amendments to rule 24f-1, 
which permits funds with effective registration statements to file a 
notification that has the effect of registering shares sold in 
excess of the number of shares previously registered. The six month 
time periods referred to in paragraphs (a)(1) and (c) of rule 24f-1 
(17 CFR 270.24f-1(a)(1), 270.24f-1(c)) are changed to 180 days.
    \28\Rule 24f-2(e) (17 CFR 270.24f-2(e)).
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E. Investment Companies Funding Insurance Company Separate Accounts

    Variable insurance contracts typically are offered through two tier 
arrangements in which contract premiums are pooled in an unmanaged 
insurance company separate account and invested in an underlying 
investment company (``Underlying Fund''). Many of the separate accounts 
are registered as investment companies and organized as unit investment 
trusts; others are eligible for exemption from the 1940 Act.
    Pursuant to an interpretive letter recently issued by the Division 
of Investment Management, Underlying Funds are not required to pay 
registration fees on securities they sell to certain separate 
accounts.29 These separate accounts are those organized as unit 
investment trusts and registered as investment companies or separate 
accounts that are exempt from registration under the 1940 Act but which 
register their securities under the Securities Act and pay registration 
fees thereon. The purpose of the interpretive letter was to prevent 
payment of registration fees under the Securities Act for the same 
aggregate proceeds from investors in variable insurance products that 
results in ``double counting'' of assets on which such fees are paid.

    \29\American Council of Life Insurance (pub. avail. June 20, 
1995).
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    The Commission is codifying this interpretive advice in two 
instructions to new Form 24F-2.30 Under these instructions, an 
Underlying Fund that files a Rule 24f-2 Notice generally is not 
required to include securities sold to an unmanaged separate account 
that issues interests therein that are registered under the Securities 
Act and on which registration fees have been or will be paid.31 If 
an Underlying Fund excludes such securities from the amount reported in 
its Rule 24f-2 Notice, the Underlying Fund is not required to pay a 
registration fee for those securities. An Underlying Fund relying on 
this exemption may not include shares redeemed or repurchased from such 
unmanaged separate accounts for purposes of netting sales under rule 
24f-2.32

    \30\Instructions B.5 and C.4 to Form 24F-2.
    \31\American Council of Life Insurance (pub. avail. June 20, 
1995). The letter and the new instructions do not apply to shares 
sold to separate accounts whose interests are not registered under 
the Securities Act or to pension plans.
    \32\The Commission may, in the future, consider a separate form 
designed specifically for variable insurance products to report 
shares sold under rule 24f-2.
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III. Form 24F-2

    The Commission is adopting Form 24F-2, substantially as proposed, 
to provide a standard format for filing information required by Rule 
24f-2.33 All of the commenters generally supported the proposed 
form. The Commission believes that a standard form for Rule 24f-2 
Notices will facilitate the calculation of fees due under rule 24f-2 
and reduce errors in the calculation of filing fees. The standard form 
should also improve the Commission's ability to process Rule 24f-2 
Notices and detect errors.

    \33\Paragraph (b)(1) of the rule currently specifies the 
information that must appear in a Rule 24f-2 Notice. Because Form 
24F-2 solicits the same information, the amendments delete this 
information from the rule.
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    Instructions to the form as adopted specify that an issuer may file 
a single Rule 24f-2 Notice for more than one class or series of 
securities, provided each series has the same fiscal year end and each 
class or series is registered on the same Securities Act registration 
statement.34 One commenter objected to limiting the use of a 
single Form 24F-2 to series with the same fiscal year end. This 
commenter suggested that series funds with different fiscal year ends 
be permitted to file a single Form 24F-2 for a specified 12-month 
period, which would permit series with different fiscal year ends to 
net sales of all series against redemptions of all series. The 
Commission believes, however, that the limitation is appropriate. 
Series having different year ends appear to operate more like separate 
funds than a single fund and thus should not be treated as a single 
fund for purposes of aggregating sales and redemptions. The Commission 
has therefore decided not to expand the circumstances under which a 
series fund is permitted to file a single Form 24F-2 for series within 
the fund.35

    \34\Instruction A.3. This instruction does not affect the method 
of allocating expenses among multiple classes of funds in accordance 
with existing orders or rule 18f-3 under the 1940 Act. A multiple 
class fund is permitted to net credits for redemptions of shares of 
one class against sales of shares of another class if the fund's 
exemptive order or plan under rule 18f-3 treats federal securities 
registration fees as a fund expense and does not provide for the 
allocation of those fees on a class-by-class basis. See Investment 
Company Act Rel. No. 20915 (Feb. 23, 1995) (60 FR 11876 (Mar. 2, 
1995)) (adopting rule 18f-3).
    \35\This limitation on filing a single Rule 24f-2 Notice for 
more than one series is not intended to suggest that all series of a 
series company must have the same fiscal year end.
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    As adopted, Form 24F-2 consists of twelve items and detailed 
instructions for completing and filing the form. The first four items 
require basic identifying information: the name and address of the 
fund; the class of shares or series to which the filing relates; the 
Securities Act file number of the registration statement on which the 
shares are registered; and the last day of the fiscal-year for which 
the Rule 24f-2 Notice is filed.
    Items 5 and 6 must be completed only if the fund fails to file its 
Rule 24f-2 Notice within 180 days after its fiscal year end. In such a 
case, the fund's declaration to register an indefinite number of shares 
is terminated on the next business day.36 As under the current 
rule, the fund must file a separate Form 24F-2 with respect to sales of 
securities made pursuant to the declaration during (1) the fiscal year 
for which the notice was not timely filed, and (2) the period after the 
close of the fiscal year but before the declaration was terminated. 
Item 5 requires the fund to indicate whether the form is being filed 
for purposes of reporting securities sold after the close of the fiscal 
year but before termination of the fund's Rule 24f-2 declaration. In 
either case, the fund must report the date of termination of its Rule 
24f-2 declaration in Item 6.

    \36\Rule 24f-2(b)(2) (17 CFR 270.24f-2(b)(2)).
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    Items 7 through 11 require a fund to identify the shares sold 
during the fiscal year for which registration fees have previously been 
paid or which must be accounted for in determining the fee payable with 
the Rule 24f-2 Notice.37 This information is substantially the 
same as that currently required for a Rule 24f-2 Notice. The only 
significant change is that the form reflects amendments to paragraph 
(c) of rule 24f-2 that require a fund to include all securities issued 
pursuant to DRIPs in the fund's aggregate sales for purposes of 
calculating registration fees under the rule's netting 
provisions.38

    \37\As proposed, Item 7 required funds to report the number and 
aggregate sale price of securities of the same class or series 
``sold during the fiscal year'' which had been registered under the 
Securities Act other than pursuant to rule 24f-2 in a prior fiscal 
year, but which remained unsold at the beginning of the fiscal year. 
One commenter asserted that it would be more meaningful, for 
purposes of calculating filing fees due under rule 24f-2, not to 
limit this item to securities sold during the fiscal year. The 
Commission agrees and has omitted the limiting phrase from the form 
as adopted.
    \38\Instruction B.7 clarifies that this item should be completed 
only if the fund is using the netting provision of rule 24f-2(c) to 
calculate its registration fee. See supra section II.B (``Dividend 
Reinvestment Shares'').
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    Item 12 is a work sheet for calculating the fee payable with the 
notice. The fee calculation is presented in tabular 

[[Page 47045]]
format to facilitate the Commission staff's review of filing fees for 
purposes of determining whether a fund has paid the appropriate amount. 
The work sheet contains seven line items:
    (i) The aggregate sale price of securities sold during the fiscal 
year in reliance on rule 24f-2;39

    \39\In the case of a fund with a front-end load, the aggregate 
sale price includes the sales load.
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    (ii) The aggregate price of DRIP shares (if not included in (i));
    (iii) The aggregate price of shares redeemed or repurchased during 
the fiscal year;
    (iv) The aggregate price of shares redeemed or repurchased and 
previously applied as a reduction to filing fees pursuant to rule 24e-
2;40

    \40\Section 24(e)(1) of the 1940 Act (15 U.S.C. 80a-24(e)(1)) 
permits a fund to file a post-effective amendment to its Securities 
Act registration statement to increase the number of securities 
registered. Rule 24e-2 (17 CFR 270.24e-2) provides that the fee to 
be paid at the time of filing such post-effective amendment will be 
based on the maximum aggregate offering price at which the 
additional securities will be offered. This filing fee may be 
reduced by the amount of securities redeemed or repurchased by the 
issuer in its previous fiscal year, provided the issuer did not use 
those redemptions or repurchases under the netting provisions of 
rule 24f-2. Conversely, the issuer may not count redemptions and 
repurchases used to reduce the filing fee under rule 24e-2 for 
purposes of netting under rule 24f-2.
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    (v) The net aggregate sale price of securities sold during the 
fiscal year in reliance on rule 24f-2 (line (i), plus line (ii), less 
line (iii), plus line (iv));
    (vi) The multiplier to be used to determine the fee;41 and

    \41\In the Act making appropriations for the Commission for 
fiscal 1994, Congress increased the rate of fees prescribed by 
section 6(b) of the Securities Act from one fiftieth of one percent 
to one twenty-ninth of one percent. Pub. L. 103-121 (Oct. 27, 1993). 
Congress extended the increased fee for fiscal year 1995. Pub. L. 
103-352 (Oct. 13, 1994). The current fee rate will be in effect 
through September 30, 1995, unless further extended by Congress; 
otherwise, the rate will revert to one fiftieth of one percent. 
Instruction C.6 to the form reminds funds to determine the current 
fee rate before filing.
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    (vii) The fee due (line (i) (if the netting provision is not used) 
or line (v) (if the netting provision is used) multiplied by line 
(vi)).42

    \42\Instruction C.2 specifies that the $100 minimum fee 
prescribed by section 6(b) of the Securities Act does not apply to 
fees payable under rule 24f-2. This provision also has been 
incorporated into paragraph (c) of the rule.
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    A fund must complete lines (ii), (iii), (iv), and (v) only if it is 
using the rule's netting provision.
    The work sheet provided in Item 12 is similar to the method for 
reporting the calculation of Rule 24f-2 fees on the EDGAR system. Under 
the EDGAR system, an electronic filer is required to prepare a header 
for each Rule 24f-2 Notice. The header contains certain filing fee 
information that is included in the accompanying Rule 24f-2 Notice. As 
adopted, Form 24F-2 does not alter the headers for EDGAR 
filings.43

    \43\The Proposing Release requested comment whether the 
Commission should modify its systems to permit computer verification 
of the fee calculation based on information in the form rather than 
the header, thus avoiding the need for filers to duplicate 
information. The only commenter to address this question supported 
such a modification because it would relieve EDGAR filers of the 
burden of manually transferring information from Form 24F-2 to the 
header. The Commission agrees that such a modification could 
simplify electronic submissions of Form 24F-2. As the staff further 
develops the EDGAR system, the Commission may propose appropriate 
modifications relating to Form 24F-2.
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IV. Cost/Benefit Analysis

    The rule amendments and new form adopted today are intended to 
clarify the operation of rule 24f-2 and make the rule's filing 
deadlines more flexible under certain circumstances. The addition of 
paragraph (f) to rule 24f-2 provides a means for funds to avoid late 
filings, which can result in significant costs to the funds. This 
provision will relieve funds of the cost of preparing applications for 
exemption from the provisions of the rule and will relieve the 
Commission of the cost of reviewing such applications. Other revisions 
to rule 24f-2 adopted today are intended to clarify the operation of 
the rule when an extraordinary business transaction occurs such as a 
merger or liquidation. The change to use of days rather than months to 
measure the filing deadlines under rules 24f-1 and 24f-2 will, in most 
cases, shorten the period to make required filings by a day or two, and 
thus could be viewed as a ``cost.'' The Commission believes, however, 
that this ``cost'' will be minor and is outweighed by the added 
certainty and uniformity that such a change brings to the operation of 
the rule. Form 24F-2 is designed to ensure that funds provide 
consistent information in their Rule 24f-2 Notices and to facilitate 
the staff's review of annual notices. The Commission believes that the 
standard form and the interpretive guidance provided in the form's 
instructions will reduce the burden of preparing and reviewing Rule 
24f-2 Notices.

V. Summary of Regulatory Flexibility Act Analysis

    A summary of the Initial Regulatory Flexibility Act Analysis, 
prepared in accordance with 5 U.S.C. 603, was published in the 
Proposing Release. No comments were received on this analysis. The 
Commission has prepared a Final Regulatory Flexibility Analysis, a copy 
of which may be obtained by contacting Karen J. Garnett, Office of 
Disclosure and Investment Adviser Regulation, Securities and Exchange 
Commission, 450 Fifth Street NW., Washington, DC 20549.

Text of Rule Amendments

List of Subjects in 17 CFR Parts 270 and 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

    For the reasons set out in the preamble, Chapter II, Title 17 of 
the Code of Federal Regulations is amended as follows:

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

    1. The authority citation for Part 270 continues to read in part as 
follows:

    Authority: 15 U.S.C. 80a-1 et seq., 80a-37, 80a-39, unless 
otherwise noted;
* * * * *
    2. The authority citations following Secs. 270.24f-1 and 270.24f-2 
are removed.


Sec. 270.24e-2  [Amended]

    3. By amending Sec. 270.24e-2, paragraph (a)(1), by revising the 
reference ``Rule 457(c) (17 CFR 230.457(c))'' to read ``Rule 457(d) (17 
CFR 230.457(d))''.


Sec. 270.24f-1  [Amended]

    4. By amending Sec. 270.24f-1, paragraphs (a) and (c)(1), by 
revising the phrase ``6 months'' to read ``180 days''.
    5. By amending Sec. 270.24f-2 by revising paragraphs (b)(1), 
(b)(3), and (c) and by adding paragraphs (e) and (f) to read as 
follows:


Sec. 270.24f-2  Registration under the Securities Act of 1933 of an 
indefinite number of certain investment company securities.

* * * * *
    (b)(1) If an issuer has filed a registration statement or post-
effective amendment with a declaration authorized by paragraph (a)(1) 
of this section, it shall, with respect to such registration statement 
and within 180 days after the close of any fiscal year during which 
such declaration was in effect, file five copies of a notice (``Rule 
24f-2 Notice'') with the Commission. The Rule 24f-2 Notice shall be 
filed on Form 24F-2 (17 CFR 274.24) and shall be prepared in accordance 
with the requirements of the form. The Rule 24f-2 Notice shall be 
accompanied by an opinion of counsel indicating whether the securities 
the registration of which the notice makes definite in number were 
legally issued, fully paid, and non-assessable, and the additional 
filing fee, 

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if any, specified in paragraph (c) of this section.
* * * * *
    (3) For purposes of this section, if a registrant ceases 
operations, the date the registrant ceases operations shall be deemed 
to be the close of its fiscal year. In the case of a liquidation, 
merger, or sale of all or substantially all of the assets of the 
registrant, the registrant shall be deemed to have ceased operations 
for purposes of this section on the date all or substantially all of 
the registrant's assets are distributed, the date the merger becomes 
effective under state law, or the date the assets are transferred; 
provided, however, that in the case of a merger of a registrant 
(``Predecessor Fund'') with another registrant (``Successor Fund''), or 
a sale of all or substantially all of a Predecessor Fund's assets and 
liabilities to a Successor Fund, the Predecessor Fund shall not be 
deemed to have ceased operations and the Successor Fund shall assume 
the obligations, fees, and redemption credits of the Predecessor Fund 
incurred pursuant to this section and Sec. 270.24e-2 if:
    (i) The registration statement of the Predecessor Fund is deemed 
the registration statement of the Successor Fund in a transaction 
described by Sec. 230.414 of this chapter; or
    (ii) The Successor Fund is a series of a series company (as defined 
in Sec. 270.18f-2), and immediately prior to the transaction the 
Successor Fund had no assets or liabilities, other than nominal assets 
or liabilities, and no operating history.
    (c) A Rule 24f-2 Notice shall be accompanied by the payment of a 
filing fee with respect to the securities sold during the fiscal year 
in reliance upon registration pursuant to this section and shall be 
based upon the actual aggregate sale price for which such securities 
were sold. The filing fee shall be calculated in the manner specified 
in section 6(b) of the Securities Act of 1933 and the rules and 
regulations thereunder, except that the minimum filing fee required 
under section 6(b) shall not apply to fees due under this section. When 
the Rule 24f-2 Notice is filed not later than 60 days after the close 
of the fiscal year during which such securities were sold pursuant to 
this section, the filing fee to be paid as to such securities shall be 
the fee, if any, calculated in the manner specified in Section 6(b) of 
the Securities Act of 1933 except that, for the purpose of such 
calculation, such fee shall be based upon the actual aggregate sale 
price for which securities (including, for this purpose, all securities 
issued pursuant to a dividend reinvestment plan) were sold during the 
issuer's previous fiscal year, reduced by the difference between:
    (1) The actual aggregate redemption or repurchase price of such 
securities of the issuer redeemed or repurchased by the issuer during 
such previous fiscal year; and
    (2) The actual aggregate redemption or repurchase price of such 
redeemed or repurchased securities previously applied by the issuer 
pursuant to Sec. 270.24e-2(a) in filings made pursuant to section 
24(e)(1) of the Investment Company Act of 1940.
* * * * *
    (e) To determine the date on which a Rule 24f-2 Notice must be 
filed with the Commission under paragraph (b)(1) of this section or the 
date that a Rule 24f-2 Notice must be filed in order to permit the 
issuer to calculate the fee due in accordance with the second sentence 
of paragraph (c) of this section, the first day of the 180 day or 60 
day period, as the case may be, shall be the first calendar day of the 
fiscal year following the fiscal year for which the Rule 24f-2 Notice 
is to be filed.

    Note to Paragraph (e): For example, a Rule 24f-2 Notice for a 
fiscal year ending on June 30 must be filed no later than December 
28 or, if the issuer calculates the fee due in accordance with the 
second sentence of paragraph (c), no later than August 29. If the 
last day of the period falls on a non-business day (a Saturday, 
Sunday or federal holiday), the period shall end on the first 
business day thereafter, as provided by Sec. 270.0-2.

    (f) The date of filing of a Rule 24f-2 Notice with the Commission 
shall be the date on which the Rule 24f-2 Notice is actually received 
by the Commission; provided, however, that other than in the case of a 
Rule 24f-2 Notice filed by direct transmission (as such term is defined 
in rule 11 of Regulation S-T (17 CFR 232.11) a Rule 24f-2 Notice 
received by the Commission after the date due under either paragraph 
(b)(1) or paragraph (c) of this section shall be deemed to have been 
timely filed if the issuer establishes that the Rule 24f-2 Notice was 
transmitted timely to a third party company or governmental entity 
providing delivery services in the ordinary course of business, which 
guaranteed delivery of the Notice to the Commission no later than the 
required filing date.

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

    6. The authority citation for Part 274 continues to read as 
follows:

    Authority: 15 U.S.C. 80a-1 et seq., unless otherwise noted.

    7. Section 274.24 and Form 24F-2 are added to read as follows:

    Note: The text of Form 24F-2 does not appear in the Code of 
Federal Regulations. A copy of Form 24F-2 is attached as Appendix I 
to this document.


Sec. 274.24  Form 24F-2, annual notice of securities sold pursuant to 
registration of an indefinite number of certain investment company 
securities.

    Form 24F-2 shall be used as the annual report filed by face amount 
certificate companies, open-end management companies, and unit 
investment trusts pursuant to Sec. 270.24f-2 of this chapter for 
reporting securities sold during the fiscal year.

    Dated: September 1, 1995.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.

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[FR Doc. 95-22445 Filed 9-8-95; 8:45 am]
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