[Federal Register Volume 59, Number 201 (Wednesday, October 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25813]
[[Page Unknown]]
[Federal Register: October 19, 1994]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 200, 229, 239, 240, 270, and 274
[Release Nos. 33-7102; 34-34832; IC-20614; S7-33-93]
RIN 3235-AA69
Amendments to Proxy Rules for Registered Investment Companies
AGENCY: Securities and Exchange Commission.
ACTION: Final amendments to rules and forms; rescission of rules.
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SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
adopting rule and form amendments relating to the proxy rules
applicable to registered investment companies under the Investment
Company Act of 1940 and the Securities Exchange Act of 1934 to revise
the information required in investment company proxy statements. The
amendments are intended to improve the disclosure provided to
investment company shareholders in proxy statements.
DATES: Effective Date: The new amendments to the proxy rules are
effective on November 23, 1994.
Compliance Date: Only proxy statements filed on or after January
23, 1995, must comply with the new rules.
FOR FURTHER INFORMATION CONTACT: Kathleen K. Clarke, Special Counsel,
or Kenneth J. Berman, Deputy Chief, Office of Disclosure and Investment
Adviser Regulation, Division of Investment Management, (202) 942-0721,
Securities and Exchange Commission, 450 Fifth Street, NW., Mail Stop
10-6, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The Commission today is adopting amendments
to:
(1) Schedule 14A [17 CFR 240.14a-101] under the Securities Exchange
Act of 1934 [15 U.S.C. 78a et seq.] (the ``1934 Act'') to add a new
item 22 that includes the specific requirements applicable to the proxy
statements of management investment companies (``funds'') registered
under the Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.] (the
``1940 Act'') and to modify the application of certain items to fund
proxy statements. Item 22 replaces rules 20a-2, 20a-3, and 20a-4 under
the 1940 Act [17 CFR 270.20a-2 through 20a-4], which are rescinded;
(2) Regulation 14A [17 CFR 240.14a-1] under section 14(a) of the
1934 Act [15 U.S.C. 78n(a)], Regulation 14C [17 CFR 240.14c-1] under
section 14(c) of the 1934 Act [15 U.S.C. 78n(c)], Regulation S-K [17
CFR 229 et seq.], and related rules to clarify the applicability of
certain disclosure requirements to funds and to exempt funds from
certain proxy disclosure requirements;
(3) Rule 30d-1 [17 CFR 270.30d-1] and Forms N-1A [17 CFR 274.11A],
N-2 [17 CFR 274.11a-1], and N-3 [17 CFR 274.11b] to conform certain
disclosure requirements to the new proxy statement requirements, and to
make certain other technical and conforming changes; and
(4) Form N-14 [17 CFR 239.23], the form used by funds to register
securities issued in connection with business combination transactions,
to require a comparative fee table in the disclosure documents
delivered in connection with such transactions.
The amendments update fund proxy rules to reflect current matters
on which fund shareholders are commonly asked to vote and are designed
to improve the disclosure provided to shareholders and to simplify the
preparation of fund proxy statements.
Table of Contents
Executive Summary
I. Discussion
A. Item 22 of Schedule 14A: Reorganization of Disclosure Rules
B. General Provisions: Item 22(a)
1. Proxy Statement Format; Summary Table
2. Definitions
3. Comparative Fee Table
4. Voting Results
C. Election of Directors
D. Management Compensation
E. Approval of Investment Advisory Contract
1. General Partners of the Investment Adviser
2. Material Factor Discussion
F. Approval of Distribution Plan
G. Annual Report Delivery Requirements
H. Other Matters
I. Date of Effectiveness
II. Cost/Benefit of the Proposals
III. Regulatory Flexibility Act Analysis
IV. Statutory Authority
V. Text of Rule Amendments
Executive Summary
The Commission is adopting revisions to the disclosure requirements
for fund proxy statements to update the proxy disclosure requirements
for funds and to simplify the preparation of fund proxies. The
amendments consolidate into a new item 22 in Schedule 14A disclosure
requirements previously set forth in rules 20a-2, 20a-3, and 20a-4. The
disclosure requirements of these rules, as modified by the amendments,
are incorporated in proposed item 22, and these rules are rescinded.
Item 22 includes:
(i) in paragraph (a), definitions applicable to item 22 and certain
general requirements;
(ii) in paragraph (b), disclosure requirements applicable to
solicitations in connection with the election of directors;
(iii) in paragraph (c), disclosure requirements applicable to
solicitations in connection with approval of an investment advisory
contract or an amendment thereto; and
(iv) in paragraph (d), disclosure requirements applicable to
solicitations in connection with a distribution plan pursuant to rule
12b-1 under the 1940 Act [17 CFR 270.12b-1].
Item 22 eliminates certain of the current disclosure requirements
concerning matters that are not directly relevant to solicitations to
elect directors or to approve an investment advisory contract. Item 22
includes provisions designed to improve the disclosure provided to
shareholders, including, among other things, a table showing all
compensation paid to directors. This item also specifies information
required in fund proxy statements when a fund seeks approval of a
distribution plan under rule 12b-1.
The Commission also is adopting other amendments to the general
proxy requirements in Regulation 14A and Schedule 14A, Regulation 14C,
and related requirements in Regulation S-K to accommodate item 22 and
to make certain requirements more appropriate to disclosure for funds.
I. Discussion
On December 16, 1993, the Commission issued a release proposing
amendments to the proxy rules applicable to funds under the 1940
Act.1 The proposed amendments were intended to update the proxy
rules to reflect current matters on which fund shareholders are
typically asked to vote and changes in the fund industry since the
proxy rules were adopted in 1960. The amendments also were designed to
improve the disclosure provided to shareholders in fund proxy
statements by placing greater emphasis on information that is directly
relevant to specific matters submitted to a shareholder vote and by
eliminating disclosure that may not be pertinent to the matters being
voted upon and which is, in most cases, available in other disclosure
documents. The Commission received twelve comment letters in response
to the proposed amendments.2 Commenters generally expressed strong
support for the proposed amendments. The Commission is adopting the
proposed amendments with some modifications to reflect the comments
received.
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\1\Investment Company Act Rel. No. 19957 (Dec. 16, 1993) [58 FR
67729 (Dec. 22, 1993)] (``Proposing Release'').
\2\The comment letters, as well as a comment summary prepared by
the Commission's staff, are available for public inspection and
copying at the Commission's public reference room in File No. S7-33-
93.
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A. Item 22 of Schedule 14A: Reorganization of Disclosure Rules
The Commission is consolidating into a new item 22 to Schedule 14A
disclosure requirements set forth in rules 20a-2 and 20a-3.3
Previously, funds preparing proxy statements had to refer to rules
under both the 1934 Act and the 1940 Act including Regulation 14A and
Schedule 14A under the 1934 Act, Regulation S-K,4 and rules 20a-2
and 20a-3 under the 1940 Act. Commenters strongly supported the
consolidation of proxy disclosure requirements in item 22.
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\3\These rules are rescinded. Rule 20a-4, which requires a
financial data schedule to accompany a proxy filed in connection
with certain transactions if the proxy is filed electronically, is
also rescinded and incorporated in subparagraph (a)(4) of Item 22.
The other items in Schedule 14A continue to be applicable, as
appropriate, to fund proxy statements. Schedule 14A includes
provisions governing the form and content of all proxy statements.
It requires, among other things, information concerning: (i) the
date, time, and place of the meeting of shareholders (item 1); (ii)
proposals to amend an issuer's charter, by-laws or other corporate
documents (item 19); and (iii) voting tabulation procedures (item
21).
\4\17 CFR Part 229. Regulation S-K includes the generally
applicable disclosure items for filings under, among other things,
the 1934 Act.
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As discussed in more detail below, the Commission has deleted or
revised certain provisions currently in rules 20a-2 and 20a-3 and added
new requirements, including, among other things, a table showing
compensation paid to all directors.5 In addition, item 22
specifies information required in fund proxy statements when a fund
seeks approval of a distribution plan under rule 12b-1 (``Rule 12b-1
Plan'').6
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\5\The disclosure requirements in item 22 also are applicable to
information statements prepared in accordance with Regulation 14C
and Schedule 14C [17 CFR 240.14c-101].
\6\The Commission has adopted minor technical amendments to rule
20a-1 [17 CFR 270.20a-1], the rule that implements the Commission's
authority with respect to proxies under section 20(a) of the 1940
Act [15 U.S.C. 80a-20(a)], to delete references to rules 20a-2 and
20a-3 and to add references to, among other things, Regulation 14A
and Schedule 14A. In addition, the filing fee requirement in rule
20a-1(c) [17 CFR 270.20a-1(c)] has been moved to subparagraph (a)(2)
of item 22.
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B. General Provisions: Item 22(a)
1. Proxy Statement Format; Summary Table
Item 22, as proposed, included a new requirement concerning the
format for disclosure when one proxy statement solicits shareholder
votes for more than one fund or multiple portfolios of series
investment companies (``series funds'').7 This manner of
solicitation, while more efficient and less costly, may be confusing to
shareholders. Therefore, to assist shareholders in identifying
proposals applicable to their fund or portfolio, the Commission
proposed to require a fund to include a table at the beginning of the
proxy statement that summarizes each proposal and indicates which fund
or series shareholders are being requested to approve each proposal.
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\7\A series fund is a fund comprised of two or more portfolios,
each of which has a distinct investment objective with assets
specifically allocated to that portfolio; investors' interests in
such a fund are limited to those portfolios in which they invest.
Each portfolio operates for many purposes like a separate fund,
although the portfolios are all part of the same business entity
with one board of directors. Series funds are specifically permitted
under section 18(f)(2) of the 1940 Act [15 U.S.C. 80a-18(f)(2)].
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Some commenters opposed the proposed tabular format, asserting that
funds should have the flexibility to present the information in other
formats. The Commission believes that the tabular format affords ample
flexibility for funds to present the information they believe is
important, while providing the advantages of a uniform format. The
Commission is adopting the proposed item with one change from the
proposal:8 the summary table requirement, as adopted, also applies
to proxy statements for multiple class funds containing multiple
proposals affecting different classes.9
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\8\Subparagraph (a)(3)(ii) of item 22. The table would not be
required if the proxy statement solicits a vote or votes on the same
proposal or proposals from all fund or series shareholders. To
assure that shareholders are not confused in casting their vote, a
separate proxy card is required for each fund, portfolio, or class.
\9\Multiple class funds issue more than one class of securities,
with each class typically subject to a different distribution
arrangement, but representing interests in the same portfolio of
investments. Currently, funds must obtain exemptive orders to
implement these type of arrangements. The Commission recently
proposed rule and form amendments that would permit a fund to issue
multiple classes of securities without the need for an exemptive
order. Investment Company Act Rel. No. 19955 (Dec. 16, 1993) [58 FR
68074 (Dec. 23, 1993)].
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2. Definitions
The Commission proposed in paragraph (a) of item 22 definitions for
certain terms used in item 22. The definitions are adopted
substantially as proposed with some modifications to reflect comments
on the scope of two of the definitions.
First, the definition of ``fund complex'' has been modified. The
proposed amendments would require disclosure of certain information if
a fund director serves as director of more than one fund in a ``fund
complex,'' including, for example, the aggregate compensation paid to a
director who serves on a number of boards in a fund complex.10 As
proposed, item 22(a) defined a ``fund complex'' as two or more funds
with a common investment adviser (or which have advisers that are
affiliates) or, with respect to open-end funds, a common principal
underwriter. The Proposing Release requested comment on whether the
definition should include groups of funds with common administrators.
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\1\0See infra section I.D. The term ``fund complex'' also is
used with respect to disclosure of other directorships of a
director. See infra note 23 and accompanying text.
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The Commission believes it is important to define fund complex in a
manner that will result in disclosure of information about directors
(particularly concerning compensation) serving on the boards of related
funds. As some commenters pointed out, many funds may have common
principal underwriters or administrators that solely provide services
to the fund but are otherwise not associated with the fund, and
therefore would not be commonly understood to be part of a group of
related funds. Other similar definitions of ``group'' or ``family'' of
investment companies address this issue by specifying that the funds
hold themselves out to investors as related companies for the purposes
of investment and investor services, in addition to sharing a principal
underwriter.11 The Commission has decided to define fund complex
as two or more funds that hold themselves out to investors as related
companies or that have a common investment adviser.12 The
Commission believes the information about directors on the boards of
funds that are marketed to investors as related funds (regardless of
whether they have a common principal underwriter or administrator) is
important to shareholders. In addition, the Commission believes that an
investment adviser typically has such an important role in a fund's
activities that the definition of fund complex should include funds
with common investment advisers regardless of whether the funds hold
themselves out as related companies.
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\1\1Rule 11a-3 [17 CFR 270.11a-3] under the 1940 Act (``group of
investment companies'') and General Instruction H to Form N-SAR [17
CFR 274.101], which is the semi-annual reporting form for funds
(``family of investment companies'').
\1\2Subparagraph (a)(1)(v) of item 22.
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Second, as suggested by several commenters, the Commission has
deleted the definition of ``distributor.''13 This definition was
intended to identify persons involved in distributing fund shares for
purposes of other disclosure items that are designed to elicit
disclosure about relationships between fund directors (who vote on Rule
12b-1 Plans) and persons involved in distributing fund shares that
could involve conflicts of interest. Commenters argued that, because
many persons or firms may provide distribution services to a fund, the
definition would likely result in the disclosure of large amounts of
information much of which would be immaterial because many of the
persons involved have a minor role in the distribution of fund shares.
The Commission has eliminated the definition and has modified the
disclosure concerning Rule 12b-1 Plans to require information
concerning only those persons receiving significant payments from the
fund for distribution services.14
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\1\3Proposed item 22(a)(1)(iv) defined ``distributor'' as any
person or persons who either wholly or in part assist in the
distribution of a fund's shares, including, without limitation, a
fund's principal underwriter, investment adviser, manager, sponsor,
administrator, and other entities performing similar functions.
\1\4See infra section I.F.
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3. Comparative Fee Table
As proposed, item 22(a) would require fund proxy statements seeking
approval of proposals that would increase fees or expenses, directly or
indirectly, to include a comparative fee table showing the amount of
fees and expenses currently paid by fund shareholders and the amount of
fees and expenses shareholders would have paid if the matter being
voted on had been in effect. Some commenters suggested that the fee
table requirement be combined with a materiality limitation, either for
indirect fee increases or for increases in any fees, direct or
indirect. The Commission believes that shareholders should see the
effects of any increases in fees. Moreover, limiting the requirement to
material increases in fees would necessarily introduce more
variability, and possibly uncertainty, into a determination of when the
requirement is applicable. Therefore, the Commission is adopting the
fee table requirement as proposed.15
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\1\5Subparagraph (a)(3)(iv) of item 22. The comparative fee
table would be required if any of the fee categories in the fee
table would be increased (i.e., Management Fees, 12b-1 Fees, Other
Expenses) regardless of whether total expenses would be increased,
but would not be required if a proposal's effect on expenses is
speculative. A sample fee table is attached as an appendix to this
release.
The Commission also proposed to amend Form N-14, the form used
by funds to register securities issued in certain investment company
merger transactions, to require a comparative fee table for the
combined fund. Commenters supported the addition of the comparative
fee table to Form N-14, and the Commission is adopting the
amendments as proposed. Paragraph (a) of item 3 of Form N-14.
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4. Voting Results
As proposed, item 22(a) would include a requirement that a fund
state in the proxy statement whether it intends to inform shareholders
of the voting results in a shareholder report or other document
transmitted to shareholders. Some commenters had reservations about the
voting results statement because, among other things, their experience
did not suggest that shareholders had a significant interest in the
information. In addition, commenters objected to a requirement for a
negative statement if the fund does not plan to provide voting results
in a subsequent shareholder report. In lieu of the proposed disclosure
requirement, the Commission is adopting an express requirement that
funds report voting results in the fund's next annual or semi-annual
report. The Commission is amending rule 30d-1 to require a report of
voting results in the annual or semi-annual report to shareholders. The
Commission believes that this approach will assure that voting result
information is available to shareholders and eliminate any necessity
for funds to make a negative statement regarding the availability of
voting results in proxy statements.
C. Election of Directors
The Commission proposed a number of revisions to the proxy
disclosure requirements relating to the election of directors,
primarily to focus the requirements on information directly relevant to
the qualifications, background, and relationships of directors and to
eliminate information that is not pertinent to the election of
directors. The proposed revisions included eliminating detailed
disclosure concerning the investment adviser (including a certified
balance sheet of the adviser),16 the investment advisory
contract,17 and brokerage commission practices.18 Commenters
generally supported the elimination of this information on the basis
that it has become ``boiler plate'' and is not relevant to the election
of directors. The Commission is adopting its proposal with no changes
and eliminating these requirements.
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\1\6Rules 20a-2(a)(1)-(4) and 20a-2(a)(9) [17 CFR 270.20a-
2(a)(1)-(4) and (9)].
\1\7Rule 20a-2(a)(6) [17 CFR 270.20a-2(a)(6)].
\1\8Rule 20a-2(a)(7)[17 CFR 270.20a-2(a)(7)].
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The proxy rules currently require disclosure of whether a director
presently has any relationships with fund affiliates.19 The
Commission proposed to expand this disclosure to require information
concerning whether the director previously had a material interest in,
or relationship with, the investment adviser, principal underwriter,
administrator, or any of their respective affiliates. The Proposing
Release requested comment on whether disclosure of past relationships
should be limited to a specific period of time. Many of the commenters
supported the proposed disclosure of past relationships. Of those
commenting, most recommended limiting the disclosure of past
relationships to the preceding five-year period, the same period as
currently required for disclosure of business experience of directors
and nominees under item 401(e) of Regulation S-K [17 CFR 229.401(e)].
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\1\9Rule 20a-2(a)(5) [17 CFR 270.20a-2(a)(5)].
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The Commission is adopting the proposed disclosure of past
relationships of directors and nominees with related parties and is
limiting the required disclosure to past relationships that existed
during the preceding five-year period.20 The Commission believes
that a five-year period will provide material information concerning
past relationships.
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\2\0Subparagraphs (b)(1) and (2) of item 22.
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The Commission is adopting other modifications to the disclosure
requirements it proposed for directors and nominees. These
modifications, incorporated in item 22(b), include a description of
non-routine litigation, specifically tailored for funds, in which a
director or an affiliated person is a party adverse to the fund or any
of its affiliated persons.21 Another modification affects the
current requirement for a list of all boards of directors on which a
director serves.22 As noted in the Proposing Release, disclosure
of this information often results in long lists of other directorships
of a director in the same fund complex that do not provide useful
information to shareholders concerning the qualifications and competing
responsibilities of a director or a nominee. The Commission proposed
that, in lieu of providing the list, the proxy statement identify the
fund complex and the number of directorships. Commenters generally
supported this revision to the disclosure of other directorships, and
the Commission is adopting the modification as proposed.23
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\2\1Subparagraph (b)(5) of item 22.
\2\2Item 7(b) of Schedule 14A requires this information by
reference to item 401(e) of Regulation S-K.
\2\3Instruction to item 401(e) of Regulation S-K. As adopted, a
fund is required to state, if applicable, that a director serves on
the board of other funds in the identified fund complex and to
specify the number of the boards on which the director serves. The
amendment is applicable to disclosure documents and reports by all
issuers (not only funds) that are required to provide the
information about fund directorships called for by item 401(e). Item
401(e) would continue to require disclosure of information
concerning service of a fund director as a director of companies
that are not registered investment companies.
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D. Management Compensation
Fund proxy statements are required to include information about the
compensation of fund directors and officers in connection with the
election of directors or proposals seeking shareholder approval of
benefit plans in which directors or officers will participate. These
requirements have been included in item 8 of Schedule 14A, which
references Regulation S-K and fund registration statement forms.24
The Commission proposed amendments to consolidate the disclosure
requirements for management compensation paid by funds to directors and
officers in paragraph (b) of item 22, to reformat the requirements, and
to expand the information provided for directors, in particular, adding
disclosure of the aggregate compensation of directors who serve on the
board of more than one fund in a fund complex.25
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\2\4Item 8 of Schedule 14A (by reference to item 402(g) of
Regulation S-K [17 CFR 229.402(g)]). Item 8 also incorporates for
funds the management compensation disclosure requirements in fund
registration statement forms. Forms N-1A (item 14), N-2 (item 18),
and N-3 (item 20). Prior to recent revisions to the management
compensation disclosure for operating companies, funds had been
subject to the general compensation disclosure requirements of item
402 [17 CFR 229.402]. In the recent revisions, funds were excluded
from amended item 402 and instead made subject to the registration
statement form requirements. Securities Act Rel. No. 6962 (Oct. 16,
1992) [57 FR 48125 (Oct. 21, 1992)].
\2\5The Commission also proposed to amend fund registration
statements to require a statement in the prospectus that information
about director and officer compensation and the background of fund
management is available in the Statement of Additional Information
(``SAI''). Upon consideration of the comments, the Commission
believes the general statement in the prospectus about the
availability of information in the SAI is sufficient notice for
shareholders and has not included this requirement in the final
rules.
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Most of these changes were generally supported by the commenters.
Commenters, however, were evenly divided on the proposed disclosure of
aggregate fund compensation paid to directors. The aggregate
compensation disclosure was proposed in recognition that directors
often receive substantial annual fees for their service on a number of
boards in a fund complex, and that disclosure of only the compensation
they receive from a single fund does not provide a complete picture of
director compensation. Commenters opposed to the disclosure asserted,
among other things, that disclosure of aggregate compensation could
overshadow some of the benefits associated with directors serving on a
number of fund boards (such as development of expertise in fund issues
and cost-savings) or ignore the necessity of paying adequate
compensation to attract well-qualified directors. Several commenters
noted that because directors determine their level of compensation,
which is paid by the fund, the compensation received from other related
funds is not indicative of a conflict of interest or lack of
independence from the investment adviser. Whether or not they supported
disclosure of aggregate fund complex compensation, many of the
commenters specifically objected to what they considered to be
implications in the Proposing Release that compensation could
compromise a director's independence or that directors are not
responsibly discharging their statutory and regulatory role.
The Commission believes that the nature and amount of a director's
aggregate compensation from a fund complex is useful information that
funds should provide to shareholders. Whether the amount of
compensation affects a director's independence is only one of many
possible inferences a shareholder may draw from compensation
information.26 Another inference may be that the fund is
overpaying directors; another may be that the fund is not obtaining the
best quality directors because they are underpaid; and still another
inference may be that the amount of compensation is commensurate with
the level of expertise, oversight, and effort that directors provide to
the fund. The Commission believes that the possibility that unwarranted
inferences may result from the disclosure of compensation information
is not an appropriate basis to eliminate a requirement for information
about directors that will improve shareholders' understanding of the
compensation paid to directors and that is readily available to
funds.27 Therefore, the Commission is adopting the revised
compensation disclosure requirements as proposed.28
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\2\6The Commission believes that the receipt of a substantial
amount of compensation from a fund complex is not necessarily
determinative of the director's independence. The amount of
compensation received, however, could be one factor to be considered
in evaluating the independence of a fund director from fund
management.
\2\7Funds can, of course, provide supplemental information about
director compensation if there is concern that shareholders may draw
incorrect inferences from the disclosure of aggregate compensation
received by directors from a fund complex.
\2\8Subparagraph (b)(6) of item 22. Paragraph (ii) of
subparagraph (b)(6) has been revised to make it clear that the
material terms of compensation arrangements with directors other
than the typical directors' fees disclosed in the compensation
table, including, for example, consulting arrangements, must be
described. Such arrangements, however, could raise the issue of
whether a director has a material business or professional
relationship with the fund and could be found to be an
``interested'' director under section 2(a)(19)(A)(vi) of the 1940
Act [15 U.S.C. 80a-2(a)(19)(A)(vi)]. See Lexington Research Fund,
Inc. (pub. avail. Dec. 3, 1977); Variable Stock Fund of Richmond
(pub. avail. Feb. 17, 1972).
The compensation disclosure required for fund officers would
remain the same under the proposed amendments except for minor
revisions. Because most funds are externally managed, fund executive
officers generally do not have formal management roles and receive
no compensation from the fund. As currently required, however,
compensation received by the three highest paid executive officers
having aggregate compensation from a fund (but not the fund complex)
exceeding $60,000 would have to be disclosed in the compensation
table. To make the disclosure of management compensation uniform,
the compensation disclosure required to appear in the SAI portion of
a fund's registration statement is amended to be consistent with
item 22. Forms N-1A (item 14), N-2 (item 18), and N-3 (item 20).
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E. Approval of Investment Advisory Contract
The Commission proposed to modify several of the disclosure
requirements applicable to proxy statements seeking approval of an
investment advisory contract to improve and to update the information
provided to shareholders. These modifications included:
eliminating the disclosure of extensive information
currently required concerning brokerage allocation and commission
practices;29
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\2\9Current rule 20a-2(a)(7) requires extensive information
concerning brokerage allocation and commission practices. A
discussion of soft dollar arrangements benefitting the investment
adviser would be required in the proposed discussion of material
factors considered by the board of directors in approving the
investment advisory contract in item 22(c)(11).
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requiring only disclosure of the amount and percentage of
brokerage commissions paid to affiliates of the investment
adviser;30
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\3\0Subparagraph (c)(13) of item 22.
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limiting disclosure of the rate and amount of the advisory
fee charged to other funds advised by the investment adviser to those
funds with substantially similar investment objectives;31 and
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\3\1Subparagraph (c)(10) of item 22. Current rule 20a-2(b)(4)
[17 CFR 270.20a-2(b)(4)] requires disclosure of fee information for
all funds advised by the same adviser.
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eliminating the requirement that the proxy statement
contain a certified balance sheet of the investment adviser.32
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\3\2In lieu of the balance sheet, item 22 requires that funds
disclose in their proxy statements any financial condition of the
adviser that is reasonably likely to impair its ability to fulfill
its commitment to the fund under the investment advisory contract.
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Commenters generally endorsed these modifications, and the
Commission is adopting them as proposed.33
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\3\3The Commission also is adopting, as proposed, an additional
disclosure requirement concerning investment advisory fees. If a
change in the investment advisory fee is sought, subparagraph (c)(9)
of item 22 requires disclosure of the aggregate amount of the
investment adviser's fee for the last year, the amount the adviser
would have received had the proposed fee been in effect, and the
percentage amount of the proposed increase.
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The Commission is eliminating some of the requirements that funds
provide information about brokerage practices because the requirements
have not provided investors with information that is helpful in making
a decision whether to vote for or against an investment advisory
contract. The Commission continues to be concerned about fund brokerage
practices. Recently, the Commission proposed amendments to Form N-1A
that, if adopted, would require certain expenses paid by directed
brokerage to be treated as an expense in fund financial statements and
the fee table, and would require average brokerage commission rates to
be disclosed in the Financial Highlights Table in fund
prospectuses.34 Thus, the Commission continues to be committed to
improving the transparency of fund brokerage commissions, and has
directed the Division of Investment Management to develop rules
designed to improve disclosure about the ``soft dollar'' benefits
advisers obtain from the use of their client brokerage.
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\3\4Investment Company Act Rel. No. 20472 (Aug. 11, 1994) [59 FR
42187 (Aug. 17, 1994)].
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The Commission received several comments on other of the proposed
modifications. As discussed below, the modifications, as adopted, have
been revised in some respects to reflect these comments.
1. General Partners of the Investment Adviser
If the investment adviser is a partnership, the proxy rules have
required disclosure of the names of all general partners in the proxy
statement.35 The Commission proposed to limit the disclosure to
those general partners of the investment adviser with the five largest
economic interests in the partnership and, if different, to those
general partners comprising the management or executive committee of
the partnership. The Commission requested comment on whether general
partners that have significant management responsibilities relating to
the fund also should be identified. Commenters generally supported
limiting the disclosure concerning the general partners of the
investment adviser but differed on the scope of the limitation. One
commenter supported naming both the partners with the five largest
economic interests, as proposed, and partners with significant
management responsibilities relating to a fund. Upon reconsideration,
the Commission believes that the names of partners with significant
managerial responsibilities as well as controlling partnership
interests is material to shareholders and has modified the partner
disclosure requirement accordingly.36
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\3\5Rule 20a-2(b)(1) [17 CFR 270.20a-2(b)(1)] incorporating rule
20a-2(a)(2).
\3\6Subparagraph (c)(2) of item 22.
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2. Material Factor Discussion
The Commission proposed to require a discussion of material factors
considered by the board of directors in recommending that fund
shareholders approve an investment advisory contract. As proposed, the
item enumerated certain material factors that might be included in the
discussion. Several commenters objected to enumerated material factors
arguing that such a requirement would lead to formalistic and ``boiler
plate'' disclosure and may tend to oversimplify the board's evaluation
process. The Commission believes that the material factors discussion
should reflect the board of directors' evaluation of the investment
advisory contract and shares commenters' concern that enumeration of
factors might lead to ``boiler plate'' disclosure.37 Therefore,
the Commission has decided not to include a list of material factors in
the requirement for a discussion of the recommended investment advisory
contract.38
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\3\7Section 15(c) of the 1940 Act [15 U.S.C. 80a-15(c)] requires
fund directors to request and to assess such information as may be
necessary to evaluate the terms of an investment advisory contract.
\3\8The Commission is retaining, as proposed, the requirement to
include a discussion of soft dollar arrangements benefitting the
investment adviser in the discussion of material factors considered
by the board of directors. Under section 15(c) of the 1940 Act, the
responsibilities of directors in approving an investment advisory
contract extend to monitoring of soft dollar arrangements of the
investment adviser. See Securities Exchange Act Rel. No. 23170 (Apr.
23, 1986) [51 FR 16004 (Apr. 30, 1986)] at Sec. IV.B.3.
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F. Approval of Distribution Plan
The Commission proposed to amend the proxy rules to set forth
certain disclosure requirements for proxy statements seeking approval
of a Rule 12b-1 Plan and plan amendments.39 These proposed
requirements reflected, in many respects, disclosure currently made in
proxy statements. Commenters generally supported the proposed express
disclosure requirements for Rule 12b-1 Plans, and the Commission is
adopting item 22(d) substantially as proposed.40 Item 22(d)
requires: (i) a description of the proposed action and the reasons
shareholders are being requested to vote on adoption (or amendment) of
a Rule 12b-1 Plan; (ii) disclosure of material differences between the
proposed and the current Rule 12b-1 Plan; (iii) disclosure about
distribution expenses under the plan paid by the fund during the last
fiscal year to the fund's investment adviser, principal underwriter,
administrator, or any of their affiliated persons, and to persons
receiving 10% or more of the fund's aggregate distribution fees; and
(iv) disclosure about the factors the board of directors considered in
recommending adoption of (or amendment to) the Rule 12b-1 Plan.41
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\3\9Rule 12b-1 under the 1940 Act permits the use of fund assets
to finance the distribution of shares under certain conditions, one
of which is shareholder approval of a Rule 12b-1 Plan or amendments
to a Rule 12b-1 Plan that would materially increase the amount spent
for distribution.
\4\0See supra note 9 and accompanying text for a discussion of
proxy statement disclosure concerning approval of Rule 12b-1 Plans
for multiple class funds. See supra note 13 and accompanying text
for a discussion of the term ``distributor'' and related
modifications to item 22(d).
\4\1In addition, when the effect of the action would be to
increase fund expenses, item 22(a) requires inclusion of a
comparative fee table showing the level of fees before and after
adoption of the recommended Rule 12b-1 Plan. Subparagraph (a)(3)(iv)
of item 22.
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G. Annual Report Delivery Requirements
Rule 14a-3(b) [17 CFR 240.14a-3(b)] under the 1934 Act requires
that, when directors are to be elected at an annual or special
shareholder meeting, registrants, including funds, furnish each person
solicited with a proxy statement that is accompanied or preceded by an
annual report to shareholders. Most non-investment company registrants
hold annual meetings to elect directors, and, in many cases, the annual
report delivery requirement under rule 14a-3(b) is the only requirement
that shareholders receive an annual report. Funds, on the other hand,
are subject to express annual (and semi-annual) shareholder reporting
requirements under section 30(d) of the 1940 Act [15 U.S.C. 80a-29(d)]
and rule 30d-1, regardless of whether they hold annual meetings, and
fund shareholder meetings may not coincide with the mailing of the
annual shareholder report.\42\ To clarify the annual report delivery
requirements for funds, the Commission proposed to amend rule 14a-3(b)
to set forth the conditions under which a fund's annual report
previously transmitted to shareholders as required under rule 30d-1
would satisfy the rule.\43\ The Commission requested comment on other
alternatives for the annual report delivery requirement, including
whether it might be appropriate to eliminate the proxy annual report
requirement for funds in light of the reports required to be
transmitted to shareholders semi-annually under rule 30d-1.
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\4\2Funds generally are not required under state law or the 1940
Act to hold annual shareholder meetings. Funds schedule shareholder
meetings as necessary to elect directors, to approve investment
advisory contracts or Rule 12b-1 Plans, or to vote on other matters
requiring shareholder approval.
\4\3As proposed, an annual report transmitted to shareholders
two months before the date of the proxy statement would satisfy the
delivery requirements of rule 14a-3(b). Where more than two months
has elapsed, the rule 14a-3(b) annual report delivery requirement
would be satisfied if: (i) the fund mails the proxy statement at
least 30 days prior to the meeting; (ii) the proxy statement
includes a prominent statement that the most recent annual report
and any subsequent semi-annual report will be delivered to
shareholders, upon written or oral request, without charge; and
(iii) if requested by a shareholder, the annual report and, if
available, the semi-annual report is transmitted within two business
days of the request.
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Several commenters supported the proposed clarification of the
annual report delivery requirement. Other commenters, however, urged
the Commission to eliminate the requirement and to substitute a
requirement that the proxy statement include a legend advising
shareholders that an annual report is available upon request. These
commenters argued that the shareholder reporting requirements of the
1940 Act make the proxy annual report requirement superfluous.
Commenters also noted that the primary effect of the annual report
requirement is to impose restrictions on holding shareholder meetings
because meetings can not be scheduled when the annual report for the
preceding fiscal year is not yet available after the end of the fiscal
year. In some cases, a fund complex may wish to make a combined proxy
mailing for several funds to reduce the expense of the proxy
solicitation; however, a joint proxy statement may be precluded if some
of the funds have different fiscal years for which the annual report is
not available.\44\ These commenters argued that the cost of mailing an
annual report with the proxy statement to new shareholders who have not
received an annual report can be substantial, and these expenses are
borne by the fund's shareholders.
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\4\4In the past, funds have sought relief from the rule 14a-3
annual report delivery requirement when a shareholder vote is
necessary before the annual report is available after the end of the
fund's fiscal year. See Dreyfus California Tax Exempt Bond Fund,
Inc., et al. (pub. avail. June 18, 1994); Dean Witter American Value
Fund, et al. (pub. avail. Nov. 18, 1992).
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The Commission agrees that the costs imposed on funds and their
shareholders outweigh the benefits of requiring that annual reports
accompany a proxy statement. At the time of a proxy solicitation,
shareholders who have recently invested in a fund will have received a
current prospectus and other shareholders will have received either an
annual or semi-annual report within six months of receiving the proxy
statement. In addition, most funds transmit to shareholders quarterly
account statements providing information about fund performance. In
contrast with the timeliness of information provided under the 1940
Act's reporting regime, rule 14a-3(b) requires delivery of a fund
annual report that may be, in some cases, almost twelve months old.
Thus, this requirement has the unintended and anomalous effect of
requiring delivery of an annual report the information in which may
have been superseded by information in a more recent semi-annual
report. Moreover, as applied, the current requirements impose
significant restraints on the timing of shareholder meetings and may
add substantial costs to holding meetings when, for example,
accountants must perform an audit on an expedited basis. Therefore, the
Commission is revising rule 14a-3(b) to eliminate the annual report
delivery requirement for funds.\45\
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\4\5Paragraph (4) of rule 14a-3(b) requires the annual report to
include information concerning changes in and disagreements with
accountants on accounting and financial disclosure required by item
304 of Regulation S-K [17 CFR 229.304]. The Commission is preserving
this requirement for funds by amending the shareholder report
financial statement requirements set forth in rule 30d-1 by
reference to the applicable item in the registration statement forms
(new instruction 4(iv) of item 23 of Form N-1A; new instruction 4(c)
of item 23 of Form N-2; and new instruction 4(iv) to paragraph (a)
of item 27 of Form N-3).
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Item 22(a) requires, in lieu of the annual report, inclusion in the
proxy statement of a statement that the fund's most recent annual and
semi-annual reports are available upon request.\46\ Those shareholders
in need of information contained in the annual report will, therefore,
continue to have access to it.
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\4\6Paragraph (a)(3)(iii) of item 22. This provision also is
applicable to information statements. Rule 14c-3 [17 CFR 240.14c-3],
which requires an annual report to accompany an information
statement concerning the election of directors, also is revised to
eliminate the annual report requirement.
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H. Other Matters
The Commission is adopting two other amendments to the general
proxy provisions. First, the Commission is amending rule 14a-3(e)(2)
[17 CFR 240.14a-3(e)(2)], which relieves funds of the obligation to
deliver proxy and other soliciting materials to shareholders whose
dividend payments are returned as undeliverable, to relieve funds (and
other registrants) of the delivery obligation when dividend
reinvestment confirmations are returned as undeliverable. Second, the
Commission is amending Item 3 of Schedule 14A, which requires a
description of appraisal or similar rights under state law applicable
to any matter being acted upon (i.e., mergers and other fundamental
corporate transactions), to make it expressly inapplicable to open-end
funds.\47\ The 1940 Act, which requires open-end funds to redeem their
securities at net asset value,\48\ supersedes state law appraisal
rights.\49\
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\4\7Instruction 2 to item 3 of Schedule 14A. Closed-end funds
(including closed-end funds that make periodic repurchases of their
shares under rule 22c-3 of the 1940 Act [17 CFR 270.22c-3]), which
do not issue redeemable securities, would continue to be subject to
item 3.
\4\8Rule 22c-1 [17 CFR 270.22c-1] (providing that redeemable
securities must be redeemed at a price based on the current net
asset value next computed after tender of the security for
redemption).
\4\9Investment Company Act Rel. No. 8752 (Apr. 10, 1975) [40 FR
17986 (Apr. 24, 1975)].
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I. Date of Effectiveness
The new amendments to the proxy rules are effective on November 23,
1994. Funds may file, at their option, proxy statements prepared in
accordance with the new rules on or after the effective date. Funds
must comply with the new rules for all proxy statements filed on or
after January 23, 1995. During the transition period between the
effective date and the compliance date, funds should state in the cover
letter submitting the proxy statement whether the proxy statement is
prepared using the new rules.
II. Cost/Benefit of the Proposals
The amendments to the proxy rules, as adopted, are intended to
improve the disclosure provided to fund shareholders in proxy
statements. The amendments are not expected to impose additional
burdens on funds. The amendments eliminate a substantial amount of
``boiler plate'' disclosure regarding matters that may not be relevant
to shareholders. The additional information required by the amendments
is readily available, and the elimination of the annual report
requirement in connection with the proxy statement should provide funds
with greater flexibility in scheduling shareholder meetings and reduce
related expenses.
III. Regulatory Flexibility Act Analysis
A summary of the Initial Regulatory Flexibility Analysis, which was
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 Kathleen K. Clarke, Office of
Disclosure and Adviser Regulation, 450 Fifth Street, N.W., Washington,
D.C. 20549.
IV. Statutory Authority
The Commission is amending the proxy rules under sections 14 [15
U.S.C. 78n] and 23(a) [15 U.S.C. 78(w)] of the 1934 Act and sections
20(a) and 38(a) [15 U.S.C. 39(a)] of the 1940 Act. The authority
citations for the amendments to the rules precede the text of the
amendments.
V. Text of Rule Amendments
List of Subjects in 17 CFR Parts 200, 229, 239, 240, 270, and 274
Authority delegation (Government agencies), Investment companies,
Reporting and recordkeeping requirements, Securities.
For the reasons set out in the preamble, the Commission is amending
title 17, chapter II of the Code of Federal Regulations as follows:
PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND
REQUESTS
1. The authority citation for Part 200 is amended by adding the
following citation:
Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 79t,
77sss, 80a-37, 80b-11, unless otherwise noted.
* * * * *
Section 200.30-5 also is issued under 15 U.S.C. 77f, 77g, 77h,
77j, 78c(b), 78l, 78m, 78n, 78o(d), 80a-8, 80a-20, 80a-24, 80a-29,
80b-3, 80b-4.
Sec. 200.30-5 [Amended]
2. The authority citation following Sec. 200.30-5 is removed.
3. By amending Sec. 200.30-5 to remove and to reserve paragraph
(a)(5).
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934, AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
4. The authority citation for Part 229 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn,
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79e, 79n,
79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise noted.
* * * * *
Sec. 229.401 [Amended]
5. The authority citation following Sec. 229.401 is removed.
6. By amending Sec. 229.401 to add an instruction following
paragraph (e) to read as follows:
Sec. 229.401 (Item 401) Directors, executive officers, promoters and
control persons.
* * * * *
(e) * * *
Instruction to Paragraph (e) of Item 401.
For the purposes of paragraph (e)(2), where the other
directorships of each director or person nominated or chosen to
become a director include directorships of two or more registered
investment companies that are part of a ``fund complex'' as that
term is defined in Item 22(a) of Schedule 14A under the Exchange Act
(Sec. 240.14a-101 of this chapter), the registrant may, rather than
listing each such investment company, identify the fund complex and
provide the number of investment company directorships held by the
director or nominee in such fund complex.
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
7. The authority citation for Part 239 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l,
78m, 78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 79m,
79n, 79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise
noted.
* * * * *
8. By amending Item 3 of Form N-14 (referenced in Sec. 239.23) to
revise the title, to redesignate paragraphs (a) and (b) as paragraphs
(b) and (c), to add paragraph (a), and to revise the third sentence of
redesignated paragraph (b) to read as follows:
Note: The text of Form N-14 does not and these amendments will
not appear in the Code of Federal Regulations.
Form N-14
* * * * *
Item 3. Fee Table, Synopsis Information, and Risk Factors
(a) Include a table showing the current fees for the registrant
and the company being acquired and pro forma fees, if different, for
the registrant after giving effect to the transaction using the
format prescribed in the appropriate registration statement form
under the 1940 Act (for open-end management investment companies,
Item 2 of Form N-1A; for closed-end management investment companies,
Item 3 of Form N-2; and for separate accounts that offer variable
annuity contracts, Item 3 of Form N-3).
(b) * * * As to the registrant and company being acquired,
compare: (1) investment objectives and policies; (2) distribution
and purchase procedures and exchange rights; (3) redemption
procedures; and (4) any other significant considerations. * * *
* * * * *
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
9. The authority citation for Part 240 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p,
78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37,
80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
10. By amending Sec. 240.14a-3 to revise the introductory text of
paragraph (b), to remove the third sentence of paragraph (b)(1), to
remove the phrase ``, other than a registered investment company,''
after the word ``registrant'' in Note 2 to paragraph (b)(1); to remove
and reserve paragraph (b)(12), and to revise paragraph (e)(2) to read
as follows:
Sec. 240.14a-3 Information to be furnished to security holders.
* * * * *
(b) If the solicitation is made on behalf of the registrant, other
than an investment company registered under the Investment Company Act
of 1940, and relates to an annual (or special meeting in lieu of the
annual) meeting of security holders, or written consent in lieu of such
meeting, at which directors are to be elected, each proxy statement
furnished pursuant to paragraph (a) of this section shall be
accompanied or preceded by an annual report to security holders as
follows:
* * * * *
(12) [Reserved]
* * * * *
(e) * * *
(1) * * *
(2) Unless state law requires otherwise, a registrant is not
required to send an annual report or proxy statement to a security
holder if:
(i) An annual report and a proxy statement for two consecutive
annual meetings; or
(ii) All, and at least two, payments (if sent by first class mail)
of dividends or interest on securities, or dividend reinvestment
confirmations, during a twelve month period, have been mailed to such
security holder's address and have been returned as undeliverable. If
any such security holder delivers or causes to be delivered to the
registrant written notice setting forth his then current address for
security holder communications purposes, the registrant's obligation to
deliver an annual report or a proxy statement under this section is
reinstated.
11. By amending Sec. 240.14a-6 to revise the introductory text of
paragraph (i) to read as follows:
Sec. 240.14a-6 Filing requirements.
* * * * *
(i) Fees. At the time of filing the proxy solicitation material,
the persons upon whose behalf the solicitation is made, other than
investment companies registered under the Investment Company Act of
1940, which shall refer to Item 22(a)(2) of Schedule 14A, shall pay to
the Commission the following applicable fee:
* * * * *
12. By amending Sec. 240.14a-101 to add an ``s'' at the end of the
word ``Instruction'' in Item 3, to designate the instruction to Item 3
as 1. and to add an instruction 2., to revise paragraphs (c) and (d) of
Item 7, to revise the last sentence of Item 8 prior to the instruction,
to add an instruction at the end of paragraph (a)(2)(ii)(A) and after
paragraph (b)(1)(ii) of Item 10, and to revise Item 20 to read as
follows:
Sec. 240.14a-101 Schedule 14A. Information required in proxy
statement.
* * * * *
Item 3. Dissenters' right of appraisal.
* * * * *
Instructions. 1. * * *
2. Open-end investment companies registered under the Investment
Company Act of 1940 are not required to respond to this item.
* * * * *
Item 7. Directors and executive officers.
* * * * *
(c) The information required by Item 404(b) of Regulation S-K
(Sec. 229.404 of this chapter).
(d) In lieu of paragraphs (a) through (c) of this Item,
investment companies registered under the Investment Company Act of
1940 shall furnish the information required by paragraphs (1)
through (5) of Item 22(b) of this Schedule 14A.
* * * * *
Item 8. Compensation of directors and executive officers.
* * * In the case of investment companies registered under the
Investment Company Act of 1940 and registrants that have elected to
be regulated as business development companies, furnish the
information required by Item 22(b)(6) of this Schedule.
* * * * *
Item 10. Compensation Plans.
* * * * *
(a) * * *
(2) * * *
(ii) * * *
(A) * * *
Instruction: In the case of investment companies registered under
the Investment Company Act of 1940, furnish the information for
Compensated Persons as defined in Item 22(b)(6) of this Schedule in
lieu of the persons specified in paragraph (a)(3) of Item 402 of
Regulation S-K (Sec. 229.402(a)(3) of this chapter).
* * * * *
(b) * * *
(1) * * *
(ii) * * *
Instruction. In the case of investment companies registered under
the Investment Company Act of 1940, refer to instruction 4 in Item
22(b)(6)(ii) of this Schedule in lieu of paragraph (f)(1) of Item 402
of Regulation S-K (Sec. 229.402(f)(1) of this chapter).
* * * * *
Item 20. Other proposed action. If action is to be taken on any
matter not specifically referred to in this Schedule 14A, describe
briefly the substance of each such matter in substantially the same
degree of detail as is required by Items 5 to 19, inclusive, of this
Schedule, and, with respect to investment companies registered under
the Investment Company Act of 1940, Item 22 of this Schedule.
* * * * *
13. By amending Sec. 240.14a-101 to add Item 22 to read as follows:
Sec. 240.14A-101 Schedule 14A. Information required in proxy
statement.
* * * * *
Item 22. Information required in investment company proxy
statement. (a) General.
(1) Definitions. Unless the context otherwise requires, terms used
in this Item that are defined in Sec. 240.14a-1 (with respect to proxy
soliciting material), in Sec. 240.14c-1 (with respect to information
statements), and in the Investment Company Act of 1940 shall have the
same meanings provided therein and the following terms shall also
apply:
(i) Administrator. The term ``Administrator'' shall mean any
person or persons who provide significant administrative or business
management services to the Fund and shall include any person that has
been or would be identified in response to Item 5 of Form N-1A
(Sec. 274.11A of this chapter), Item 9 of Form N-2 (Sec. 274.11a-1 of
this chapter), or Item 6 of Form N-3 (Sec. 274.11b of this chapter).
(ii) Affiliated broker. The term ``Affiliated Broker'' shall mean
any broker:
(A) That is an affiliated person of the Fund;
(B) That is an affiliated person of such person; or
(C) An affiliated person of which is an affiliated person of the
Fund, its investment adviser, principal underwriter, or Administrator.
(iii) Distribution plan. The term ``Distribution Plan'' shall mean
a plan adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (Sec. 270.12b-1 of this chapter).
(iv) Fund. The term ``Fund'' shall mean a Registrant or, where the
Registrant is a series company, a separate portfolio of the Registrant.
(v) Fund complex. The term ``Fund Complex'' shall mean two or more
Funds that:
(A) Hold themselves out to investors as related companies for
purposes of investment and investor services; or
(B) Have a common investment adviser or have an investment adviser
that is an affiliated person of the investment adviser of any of the
other Funds.
(vi) Parent. The term ``Parent'' shall mean the affiliated person
of a specified person who controls the specified person directly or
indirectly through one or more intermediaries.
(vii) Registrant. The term ``Registrant'' shall mean an investment
company registered under the Investment Company Act of 1940.
(viii) Subsidiary. The term ``Subsidiary'' shall mean an affiliated
person of a specified person who is controlled by the specified person
directly, or indirectly through one or more intermediaries.
(2) Filing fees. In lieu of the fees specified in Sec. 240.14a-6,
at the time of filing the preliminary proxy solicitation material, or,
if no preliminary solicitation material is filed, at the time of filing
the definitive proxy solicitation material, the person upon whose
behalf the solicitation is made shall pay to the Commission a fee of
$125, no part of which shall be refunded.
(3) General disclosure. Furnish the following information in the
proxy statement of a Fund or Funds:
(i) State the name and address of the Fund's investment adviser,
principal underwriter, and Administrator.
(ii) When a Fund proxy statement solicits a vote on proposals
affecting more than one Fund or class of securities of a Fund (unless
the proposal or proposals are the same and affect all Fund or class
shareholders), present a summary of all of the proposals in tabular
form on one of the first three pages of the proxy statement and
indicate which Fund or class shareholders are solicited with respect to
each proposal.
(iii) Unless the proxy statement is accompanied by a copy of the
Fund's most recent annual report, state prominently in the proxy
statement that the Fund will furnish, without charge, a copy of the
annual report and the most recent semi-annual report succeeding the
annual report, if any, to a shareholder upon request, providing the
name, address, and toll-free telephone number of the person to whom
such request shall be directed (or, if no toll-free telephone number is
provided, a self-addressed postage paid card for requesting the annual
report). The Fund should provide a copy of the annual report and the
most recent semi-annual report succeeding the annual report, if any, to
the requesting shareholder by first class mail, or other means designed
to assure prompt delivery, within three business days of the request.
(iv) If the action to be taken would, directly or indirectly,
establish a new fee or expense or increase any existing fee or expense
to be paid by the Fund or its shareholders, provide a table showing the
current and pro forma fees (with the required examples) using the
format prescribed in the appropriate registration statement form under
the Investment Company Act of 1940 (for open-end management investment
companies, Item 2 of Form N-1A (Sec. 239.15A); for closed-end
management investment companies, Item 3 of Form N-2 (Sec. 239.14); and
for separate accounts that offer variable annuity contracts, Item 3 of
Form N-3 (Sec. 239.17a)).
Instructions. 1. Where approval is sought only for a change in
asset breakpoints for a pre-existing fee that would not have
increased the fee for the previous year (or have the effect of
increasing fees or expenses, but for any other reason would not be
reflected in a pro forma fee table), describe the likely effect of
the change in lieu of providing pro forma fee information.
2. An action would indirectly establish or increase a fee or
expense where, for example, the approval of a new investment
advisory contract would result in higher custodial or transfer
agency fees.
3. The tables should be prepared in a manner designed to
facilitate understanding of the impact of any change in fees or
expenses.
4. A Fund that offers its shares exclusively to one or more
separate accounts and thus is not required to include a fee table in
its prospectus (see Item 2(a)(ii) of Form N-1A (Sec. 239.15A))
should nonetheless prepare a table showing current and pro forma
expenses and disclose that the table does not reflect separate
account expenses, including sales load.
(v) If action is to be taken with respect to the election of
directors or the approval of an advisory contract, describe any
purchases or sales of securities of the investment adviser or its
Parents, or Subsidiaries of either, since the beginning of the most
recently completed fiscal year by any director or any nominee for
election as a director of the Fund.
Instructions. 1. Identify the parties, state the consideration,
the terms of payment and describe any arrangement or understanding
with respect to the composition of the board of directors of the
Fund or of the investment adviser, or with respect to the selection
of appointment of any person to any office with either such company.
2. Transactions involving securities in an amount not exceeding
one percent of the outstanding securities of any class of the
investment adviser or any of its Parents or Subsidiaries may be
omitted.
(4) Electronic filings. If action is to be taken with respect to
any transaction described in Items 11, 12, or 14 of this Schedule 14A
and the Fund proxy or information statement is filed electronically,
file after the cover page of the proxy statement a Financial Data
Schedule in accordance with rule 483 of Regulation C (Sec. 230.483 of
this chapter).
(b) Election of directors. If action is to be taken with respect to
the election of directors of the Fund and the solicitation is made by
or on behalf of the Fund or by or on behalf of an investment adviser,
furnish the following information in the proxy statement in addition to
the information (and in the format) required by paragraphs (e) through
(g) of Item 7 of Schedule 14A.
Instructions. 1. Furnish information with respect to a
prospective investment adviser to the extent applicable.
2. If the solicitation is made other than by or on behalf of the
Fund or by or on behalf of an investment adviser, provide only
information as to nominees of the person making the solicitation.
(1) Identify each director or nominee for election as director who
is, or was during the past five years, an officer, employee, director,
general partner, or shareholder of the investment adviser. As to any
director or nominee who is not a director or general partner of the
investment adviser and owns any securities or has, or had during the
past five years, any other material direct or indirect interest in the
investment adviser or any person controlling, controlled by, or under
common control with the investment adviser, describe the nature of such
interest.
(2) Identify each director or nominee who has or had during the
past five years any material direct or indirect interest in the Fund's
principal underwriter or Administrator and describe the nature of such
interest.
(3) Describe briefly, and where practicable, state the approximate
dollar amount, of any material interest, direct or indirect, of any
director or nominee for election as a director of the Fund in any
material transactions since the beginning of the most recently
completed fiscal year, or in any proposed material transactions, to
which the investment adviser, the principal underwriter, the
Administrator, any Parent or Subsidiary of such entities (other than
another Fund), or any Subsidiary of the Parent of such entities was or
is to be a party.
Instructions. 1. Include the name of each person whose interest
in any transaction is described and the nature of the relationship
by reason of which such interest is required to be described. Where
it is not practicable to state the approximate dollar amount of the
interest, indicate the approximate dollar amount involved in the
transaction.
2. As to any transaction involving the purchase or sale of
assets by or to the investment adviser, or the Administrator, state
the cost of the assets to the purchaser and the cost thereof to the
seller if acquired by the seller within two years prior to the
transaction.
3. If the interest of any person arises from the position of the
person as a partner in a partnership, the proportionate interest of
such person in transactions to which the partnership is a party need
not be set forth, but state the amount involved in the transaction
with the partnership.
4. No information need be given in response to this paragraph
with respect to any transaction that is not related to the business
or operations of the Fund and to which neither the Fund nor any of
its Parents or Subsidiaries is a party.
(4) Provide in tabular form, to the extent practicable, the
information required by Items 401, 404 (a) and (c), and 405 of
Regulation S-K (Secs. 229.401, 229.404, and 229.405 of this chapter).
Instructions. 1. Indicate by an asterisk any nominee or director
who is or would be an ``interested person'' within the meaning of
section 2(a)(19) of the Investment Company Act of 1940 and describe
the relationships, events, or transactions by reason of which such
person is deemed an ``interested person.''
2. Separate accounts registered as management investment
companies need not provide any information concerning the officers
of the sponsoring insurance company who are not directly or
indirectly engaged in activities related to the separate account in
response to Item 401 of Regulation S-K.
(5) Describe briefly any material pending legal proceedings, other
than ordinary routine litigation incidental to the Fund's business, to
which any director or nominee for director or affiliated person of such
director or nominee is a party adverse to the Fund or any of its
affiliated persons or has a material interest adverse to the Fund or
any of its affiliated persons. Include the name of the court where the
case is pending, the date instituted, the principal parties, a
description of the factual basis alleged to underlie the proceeding,
and the relief sought.
(6) For all directors, and for each of the three highest-paid
executive officers that have aggregate compensation from the Fund for
the most recently completed fiscal year in excess of $60,000
(``Compensated Persons''):
(i) Furnish the information required by the following table for the
last fiscal year:
Compensation Table
------------------------------------------------------------------------
(3)Pension
or (5)Total
retirement (4)Estimated compensation
(1)Name of (2)Aggregate benefits annual from fund
person,position compensation accrued as benefits and fund
from fund part of upon complex paid
fund retirement to directors
expenses
------------------------------------------------------------------------
Instructions. 1. For column (1), indicate, if necessary, the
capacity in which the remuneration is received. For Compensated
Persons that are directors of the Fund, compensation is amounts
received for service as a director.
2. If the Fund has not completed its first full year since its
organization, furnish the information for the current fiscal year,
estimating future payments that would be made pursuant to an
existing agreement or understanding. Disclose in a footnote to the
Compensation Table the period for which the information is
furnished.
3. Include in column (2) amounts deferred at the election of the
Compensated Person, whether pursuant to a plan established under
Section 401(k) of the Internal Revenue Code [26 U.S.C. 401(k)] or
otherwise, for the fiscal year in which earned. Disclose in a
footnote to the Compensation Table the total amount of deferred
compensation (including interest) payable to or accrued for any
Compensated Person.
4. Include in columns (3) and (4) all pension or retirement
benefits proposed to be paid under any existing plan in the event of
retirement at normal retirement date, directly or indirectly, by the
Fund or any of its Subsidiaries, or by other companies in the Fund
Complex. Omit column (4) where retirement benefits are not
determinable.
5. For any defined benefit or actuarial plan under which
benefits are determined primarily by final compensation (or average
final compensation) and years of service, provide the information
required in column (4) in a separate table showing estimated annual
benefits payable upon retirement (including amounts attributable to
any defined benefit supplementary or excess pension award plans) in
specified compensation and years of service classifications. Also
provide the estimated credited years of service for each Compensated
Person.
6. Include in column (5) only aggregate compensation paid to a
director for service on the board and other boards of investment
companies in a Fund Complex specifying the number of such other
investment companies.
(ii) Describe briefly the material provisions of any pension,
retirement, or other plan or any arrangement other than fee
arrangements disclosed in paragraph (i) pursuant to which Compensated
Persons are or may be compensated for any services provided, including
amounts paid, if any, to the Compensated Person under any such
arrangements during the most recently completed fiscal year.
Specifically include the criteria used to determine amounts payable
under any plan, the length of service or vesting period required by the
plan, the retirement age or other event which gives rise to payments
under the plan, and whether the payment of benefits is secured or
funded by the Fund.
(iii) With respect to each Compensated Person, business development
companies shall include the information required by Items 402(b)(2)(iv)
and 402(c) of Regulation S-K (Secs. 229.402(b)(2)(iv) and
229.402(c) of this chapter).
(c) Approval of investment advisory contract. If action is to be
taken with respect to an investment advisory contract, include the
following information in the proxy statement.
Instruction. Furnish information with respect to a prospective
investment adviser to the extent applicable (including the name and
address of the prospective investment adviser).
(1) With respect to the existing investment advisory contract:
(i) State the date of the contract and the date on which it was
last submitted to a vote of security holders of the Fund, including the
purpose of such submission;
(ii) Briefly describe the terms of the contract, including the rate
of compensation of the investment adviser;
(iii) State the aggregate amount of the investment adviser's fee
and the amount and purpose of any other material payments by the Fund
to the investment adviser, or any affiliated person of the investment
adviser, during the last fiscal year of the Fund;
(iv) If any person is acting as an investment adviser of the Fund
other than pursuant to a written contract that has been approved by the
security holders of the company, identify the person and describe the
nature of the services and arrangements;
(v) Describe any action taken with respect to the investment
advisory contract since the beginning of the Fund's last fiscal year by
the board of directors of the Fund (unless described in response to
paragraph (c)(1)(vi)) of this Item 22); and
(vi) If an investment advisory contract was terminated or not
renewed for any reason, state the date of such termination or non-
renewal, identify the parties involved, and describe the circumstances
of such termination or non-renewal.
(2) State the name, address and principal occupation of the
principal executive officer and each director or general partner of the
investment adviser.
Instruction. If the investment adviser is a partnership with
more than ten general partners, name:
(i) The general partners with the five largest economic
interests in the partnership, and, if different, those general
partners comprising the management or executive committee of the
partnership or exercising similar authority;
(ii) The general partners with significant management
responsibilities relating to the fund.
(3) State the names and addresses of all Parents of the investment
adviser and show the basis of control of the investment adviser and
each Parent by its immediate Parent.
Instructions. 1. If any person named is a corporation, include
the percentage of its voting securities owned by its immediate
Parent.
2. If any person named is a partnership, name the general
partners having the three largest partnership interests (computed by
whatever method is appropriate in the particular case).
(4) If the investment adviser is a corporation and if, to the
knowledge of the persons making the solicitation or the persons on
whose behalf the solicitation is made, any person not named in answer
to paragraph (c)(3) of this Item 22 owns, of record or beneficially,
ten percent or more of the outstanding voting securities of the
investment adviser, indicate that fact and state the name and address
of each such person.
(5) Name each officer or director of the Fund who is an officer,
employee, director, general partner or shareholder of the investment
adviser. As to any officer or director who is not a director or general
partner of the investment adviser and who owns securities or has any
other material direct or indirect interest in the investment adviser or
any other person controlling, controlled by or under common control
with the investment adviser, describe the nature of such interest.
(6) Describe briefly and state the approximate amount of, where
practicable, any material interest, direct or indirect, of any director
of the Fund in any material transactions since the beginning of the
most recently completed fiscal year, or in any material proposed
transactions, to which the investment adviser of the Fund, any Parent
or Subsidiary of the investment adviser (other than another Fund), or
any Subsidiary of the Parent of such entities was or is to be a party.
Instructions. 1. Include the name of each person whose interest
in any transaction is described and the nature of the relationship
by reason of which such interest is required to be described. Where
it is not practicable to state the approximate amount of the
interest, indicate the approximate amount involved in the
transaction.
2. As to any transaction involving the purchase or sale of
assets by or to the investment adviser, state the cost of the assets
to the purchaser and the cost thereof to the seller if acquired by
the seller within two years prior to the transaction.
3. If the interest of any person arises from the position of the
person as a partner in a partnership, the proportionate interest of
such person in transactions to which the partnership is a party need
not be set forth, but state the amount involved in the transaction
with the partnership.
4. No information need be given in response to this paragraph
(c)(6) of Item 22 with respect to any transaction that is not
related to the business or operations of the Fund and to which
neither the Fund nor any of its Parents or Subsidiaries is a party.
(7) Disclose any financial condition of the investment adviser that
is reasonably likely to impair the financial ability of the adviser to
fulfil its commitment to the fund under the proposed investment
advisory contract.
(8) Describe the nature of the action to be taken on the investment
advisory contract and the reasons therefor, the terms of the contract
to be acted upon, and, if the action is an amendment to, or a
replacement of, an investment advisory contract, the material
differences between the current and proposed contract.
(9) If a change in the investment advisory fee is sought, state:
(i) The aggregate amount of the investment adviser's fee during the
last year;
(ii) The amount that the adviser would have received had the
proposed fee been in effect; and
(iii) The difference between the aggregate amounts stated in
response to paragraphs (i) and (ii) of this item (c)(9) as a percentage
of the amount stated in response to paragraph (i) of this item (c)(9).
(10) If the investment adviser acts as such with respect to any
other Fund having a similar investment objective, identify and state
the size of such other Fund and the rate of the investment adviser's
compensation. Also indicate for any Fund identified whether the
investment adviser has waived, reduced, or otherwise agreed to reduce
its compensation under any applicable contract.
Instruction. Furnish the information in response to this
paragraph (c)(10) of Item 22 in tabular form.
(11) Discuss in reasonable detail the material factors and the
conclusions with respect thereto which form the basis for the
recommendation of the board of directors that the shareholders approve
an investment advisory contract. If applicable, include a discussion of
any benefits derived or to be derived by the investment adviser from
the relationship with the Fund such as soft dollar arrangements by
which brokers provide research to the Fund or its investment adviser in
return for allocating fund brokerage.
Instruction. Conclusory statements or a list of factors will not
be considered sufficient disclosure. The discussion should relate
the factors to the specific circumstances of the fund and the
investment advisory contract for which approval is sought.
(12) Describe any arrangement or understanding made in connection
with the proposed investment advisory contract with respect to the
composition of the board of directors of the Fund or the investment
adviser or with respect to the selection or appointment of any person
to any office with either such company.
(13) For the most recently completed fiscal year, state:
(i) The aggregate amount of commissions paid to any Affiliated
Broker; and
(ii) The percentage of the Fund's aggregate brokerage commissions
paid to any such Affiliated Broker.
Instruction. Identify each Affiliated Broker and the
relationships that cause the broker to be an Affiliated Broker.
(14) Disclose the amount of any fees paid by the Fund to the
investment adviser, its affiliated persons or any affiliated person of
such person during the most recent fiscal year for services provided to
the Fund (other than under the investment advisory contract or for
brokerage commissions). State whether these services will continue to
be provided after the investment advisory contract is approved.
(d) Approval of distribution plan. If action is to be taken with
respect to a Distribution Plan, include the following information in
the proxy statement.
Instruction. Furnish information on a prospective basis to the
extent applicable.
(1) Describe the nature of the action to be taken on the
Distribution Plan and the reason therefor, the terms of the
Distribution Plan to be acted upon, and, if the action is an amendment
to, or a replacement of, a Distribution Plan, the material differences
between the current and proposed Distribution Plan.
(2) If the Fund has a Distribution Plan in effect:
(i) Provide the date that the Distribution Plan was adopted and the
date of the last amendment, if any;
(ii) Disclose the persons to whom payments may be made under the
Distribution Plan, the rate of the distribution fee and the purposes
for which such fee may be used;
(iii) Disclose the amount of distribution fees paid by the Fund
pursuant to the plan during its most recent fiscal year, both in the
aggregate and as a percentage of the Fund's average net assets during
the period;
(iv) Disclose the name of, and the amount of any payments made
under the Distribution Plan by the Fund during its most recent fiscal
year to, any person who is an affiliated person of the Fund, its
investment adviser, principal underwriter, or Administrator, an
affiliated person of such person, or a person that during the most
recent fiscal year received 10% or more of the aggregate amount paid
under the Distribution Plan by the Fund;
(v) Describe any action taken with respect to the Distribution Plan
since the beginning of the Fund's most recent fiscal year by the board
of directors of the Fund; and
(vi) If a Distribution Plan was or is to be terminated or not
renewed for any reason, state the date or prospective date of such
termination or non-renewal, identify the parties involved, and describe
the circumstances of such termination or non-renewal.
(3) Describe briefly and state the approximate amount of, where
practicable, any material interest, direct or indirect, of any director
or nominee for election as a director of the Fund in any material
transactions since the beginning of the most recently completed fiscal
year, or in any material proposed transactions, to which any person
identified in response to Item 22(d)(2)(iv) was or is to be a party.
Instructions. 1. Include the name of each person whose interest
in any transaction is described and the nature of the relationship
by reason of which such interest is required to be described. Where
it is not practicable to state the approximate amount of the
interest, indicate the approximate amount involved in the
transaction.
2. As to any transaction involving the purchase or sale of
assets, state the cost of the assets to the purchaser and the cost
thereof to the seller if acquired by the seller within two years
prior to the transaction.
3. If the interest of any person arises from the position of the
person as a partner in a partnership, the proportionate interest of
such person in transactions to which the partnership is a party need
not be set forth but state the amount involved in the transaction
with the partnership.
4. No information need be given in response to this paragraph
(d)(3) of Item 22 with respect to any transaction that is not
related to the business or operations of the Fund and to which
neither the Fund nor any of its Parents or Subsidiaries is a party.
(4) Discuss in reasonable detail the material factors and the
conclusions with respect thereto which form the basis for the
conclusion of the board of directors that there is a reasonable
likelihood that the proposed Distribution Plan (or amendment thereto)
will benefit the Fund and its shareholders.
Instruction. Conclusory statements or a list of factors will not
be considered sufficient disclosure.
14. By amending Sec. 240.14c-3 to revise the introductory text of
paragraph (a) and to remove and to reserve paragraph (a)(2) (the Note
remains unchanged) to read as follows:
Sec. 240.14c-3 Annual report to be furnished security holders.
(a) If the information statement relates to an annual (or special
meeting in lieu of the annual) meeting, or written consent in lieu of
such meeting, of security holders at which directors of the registrant,
other than an investment company registered under the Investment
Company Act of 1940, are to be elected, it shall be accompanied or
preceded by an annual report to security holders:
* * * * *
PART 270--GENERAL RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF
1940
15. 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;
* * * * *
16. By amending Sec. 270.20a-1 to revise the first sentence of
paragraph (a) and to remove paragraph (c) (the instruction remains
unchanged) to read as follows:
Sec. 270.20a-1 Solicitation of proxies, consents, and authorizations.
(a) No person shall solicit or permit the use of his or her name to
solicit any proxy, consent, or authorization with respect to any
security issued by a registered Fund, except upon compliance with
Regulation 14A (Sec. 240.14a-1 of this chapter), Schedule 14A
(Sec. 240.14a-101 of this chapter), and all other rules and regulations
adopted pursuant to Section 14(a) of the Securities Exchange Act of
1934 that would be applicable to such solicitation if it were made in
respect of a security registered pursuant to Section 12 of the
Securities Exchange Act of 1934. * * *
* * * * *
17. By removing and reserving Sec. 270.20a-2, Sec. 270.20a-3, and
Sec. 270.20a-4.
18. By amending Sec. 270.30d-1 to redesignate paragraphs (b), (c),
and (d) as paragraphs (c), (d), and (e) and to add paragraph (b) to
read as follows:
Sec. 270.30d-1 Reports to stockholders of management companies.
* * * * *
(b) If any matter was submitted during the period covered by the
shareholder report to a vote of shareholders, through the solicitation
of proxies or otherwise, furnish the following information:
(1) The date of the meeting and whether it was an annual or special
meeting.
(2) If the meeting involved the election of directors, the name of
each director elected at the meeting and the name of each other
director whose term of office as a director continued after the
meeting.
(3) A brief description of each matter voted upon at the meeting
and the number of votes cast for, against or withheld, as well as the
number of abstentions and broker non-votes as to each such matter,
including a separate tabulation with respect to each matter or nominee
for office.
Instruction. The solicitation of any authorization or consent
(other than a proxy to vote at a shareholders' meeting) with respect
to any matter shall be deemed a submission of such matter to a vote
of shareholders within the meaning of this paragraph (b).
* * * * *
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940
19. The authority citations following Secs. 239.14 and 239.15A are
removed.
20. The authority citation for Part 274 is revised to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78o(d), 80a-8, 80a-24, and 80a-29, unless otherwise noted.
21. The authority citations following Secs. 274.11, 274.11A,
274.11a-1, 274.51, and 274.101 are removed.
22. By amending Item 14 of Form N-1A (referenced in Secs. 239.15A
and 274.11A) to revise the caption for Column (1) in the table in
paragraph (a) to read ``Name, Address, and Age'', to add an instruction
following paragraph (b), and to revise paragraph (c) to read as
follows:
Note: The text of Form N-1A does not and these amendments will
not appear in the Code of Federal Regulations.
Form N-1A
* * * * *
Item 14. Management of the Fund
* * * * *
(b) * * *
Instruction: Where the positions held are the same positions
with two or more registered investment companies that are part of a
``Fund Complex'' as that term is defined in Item 22(a) of Schedule
14A under the Exchange Act, the Registrant may, rather than listing
each Registrant, identify the Fund Complex and provide the number of
such positions held by the identified persons.
(c) Provide the following information for all directors of the
Registrant, all members of the advisory board of the Registrant, and
for each of the three highest paid executive officers or any affiliated
person of the Registrant with aggregate compensation from the
Registrant for the most recently completed fiscal year in excess of
$60,000 (``Compensated Persons'').
(1) Furnish the information required by the following table:
Compensation Table
------------------------------------------------------------------------
(3) Pension (5) Total
or (4) compensation
(2) Aggregate retirement Estimated from
(1)Name of compensation benefits annual registrant
person,position from accrued as benefits and fund
registrant part of fund upon complex paid
expenses retirement to directors
------------------------------------------------------------------------
Instructions. 1. For column (1), indicate, if necessary, the
capacity in which the remuneration is received. For Compensated
Persons that are directors of the Registrant, compensation is
amounts received for service as a director.
2. If the Registrant has not completed its first full year since
its organization, furnish the information for the current fiscal
year, estimating future payments that would be made pursuant to an
existing agreement or understanding. Disclose in a footnote to the
Compensation Table the period for which the information is
furnished.
3. Include in column (2) amounts deferred at the election of the
Compensated Person, whether pursuant to a plan established under
Section 401(k) of the Internal Revenue Code [26 U.S.C. 401(k)] or
otherwise, for the fiscal year in which earned. Disclose in a
footnote to the Compensation Table the total amount of deferred
compensation (including interest) payable to or accrued for any
Compensated Person.
4. Include in columns (3) and (4) all pension or retirement
benefits proposed to be paid under any existing plan in the event of
retirement at normal retirement date, directly or indirectly, by the
Registrant, any of its subsidiaries, or other investment companies
in the Fund Complex. Omit column (4) where retirement benefits are
not determinable.
5. For any defined benefit or actuarial plan under which
benefits are determined primarily by final compensation (or average
final compensation) and years of service, provide the information
required in column (4) in a separate table showing estimated annual
benefits payable upon retirement (including amounts attributable to
any defined benefit supplementary or excess pension award plans) in
specified compensation and years of service classifications. Also
provide the estimated credited years of service for each Compensated
Person.
6. Include in column (5) only aggregate compensation paid to a
director for service on the board and all other boards of investment
companies in a Fund Complex specifying the number of such other
investment companies.
(2) Describe briefly the material provisions of any pension,
retirement, or other plan or any arrangement other than fee
arrangements disclosed in paragraph (1) pursuant to which the
Compensated Persons are or may be compensated for any services
provided, including amounts paid, if any, to the Compensated Person
under any such arrangements during the most recently completed fiscal
year. Specifically include the criteria used to determine amounts
payable under the plan, the length of service or vesting period
required by the plan, the retirement age or other event which gives
rise to payments under the plan, and whether the payment of benefits is
secured or funded by the Registrant.
* * * * *
23. By amending Item 23 of Form N-1A (referenced in Secs. 239.15A
and 274.11A) to remove the ``and'' at the end of Instructions (4)(ii)
and (5)(ii), to remove the period at the end of Instructions 4(iii) and
5(iii) and to add in its place ``; and'', and to add Instructions 4(iv)
and 5(iv) to read as follows:
Form N-1A
* * * * *
Item 23. Financial Statements
* * * * *
Instructions
* * * * *
4. * * *
(iv) the information concerning changes in and disagreements with
accountants and on accounting and financial disclosure required by Item
304 of Regulation S-K (Sec. 229.304 of this chapter).
5. * * *
(v) the information concerning changes in and disagreements with
accountants and on accounting and financial disclosure required by Item
304 of Regulation S-K (Sec. 229.304 of this chapter).
24. By amending Item 18 of Form N-2 (referenced in Secs. 239.14 and
274.11a-1) to revise the caption for Column (1) in the table in
paragraph 1 to read ``Name, Address, and Age'', to add an instruction
following paragraph 2, and to revise paragraph 4 to read as follows:
Note: The text of Form N-2 does not and these amendments will
not appear in the Code of Federal Regulations.
Form N-2
* * * * *
Item 18. Management
* * * * *
2. * * *
Instruction: Where the positions held are the same positions
with two or more registered investment companies that are part of a
``Fund Complex'' as that term is defined in Item 22(a) of Schedule
14A under the Exchange Act, the Registrant may, rather than listing
each fund, identify the Fund Complex and provide the number of
positions held by the identified persons.
3. * * *
4. Provide the following for all directors of the Registrant, all
members of the advisory board of the Registrant, and for each of the
three highest paid executive officers or any affiliated person of the
Registrant with aggregate compensation from the Registrant for the most
recently completed fiscal year in excess of $60,000 (``Compensated
Persons'').
(a) Furnish the information required by the following table:
Compensation Table
------------------------------------------------------------------------
(3) Pension
or (4) (5) Total
(2) Aggregate retirement Estimated compensation
(1)Name of compensation benefits annual from fund
person,position from fund accrued as benefits and fund
part of fund upon complex paid
expenses retirement to directors
------------------------------------------------------------------------
Instructions. 1. For column (1), indicate, if necessary, the
capacity in which the remuneration is received. For Compensated
Persons that are directors of the Registrant, compensation is
amounts received for service as a director.
2. If the Registrant has not completed its first full year since
its organization, furnish the information for the current fiscal
year, estimating future payments that would be made pursuant to an
existing agreement or understanding. Disclose in a footnote to the
Compensation Table the period for which the information is
furnished.
3. Include in column (2) amounts deferred at the election of the
Compensated Person, whether pursuant to a plan established under
Section 401(k) of the Internal Revenue Code [26 U.S.C. 401(k)] or
otherwise for the fiscal year in which earned. Disclose in a
footnote to the Compensation Table the total amount of deferred
compensation (including interest) payable to or accrued for any
Compensated Person.
4. Include in columns (3) and (4) all pension or retirement
benefits proposed to be paid under any existing plan in the event of
retirement at normal retirement date, directly or indirectly, by the
Registrant, any of its subsidiaries, or other companies in the Fund
Complex. Omit column (4) where retirement benefits are not
determinable.
5. For any defined benefit or actuarial plan under which
benefits are determined primarily by final compensation (or average
final compensation) and years of service, provide the information
required in column (4) in a separate table showing estimated annual
benefits payable upon retirement (including amounts attributable to
any defined benefit supplementary or excess pension award plans) in
specified compensation and years of service classifications. Also
provide the estimated credited years of service for each Compensated
Person.
6. Include in column (5) only aggregate compensation paid to a
director for service on the board and all other boards of investment
companies in a Fund Complex specifying the number of such other
investment companies.
(b) Describe briefly the material provisions of any pension,
retirement, or other plan or any arrangement other than fee
arrangements disclosed in paragraph (a) pursuant to which Compensated
Persons are or may be compensated for any services provided, including
amounts paid, if any, to the Compensated Person under any such
arrangements during the most recently completed fiscal year.
Specifically include the criteria used to determine amounts payable
under the plan, the length of service or vesting period required by the
plan, the retirement age or other event which gives rise to payments
under the plan, and whether the payment of benefits is secured or
funded by the Registrant.
(c) With respect to each Compensated Person, business development
companies shall include the information required by Items 402(b)(2)(iv)
and 402(c) of Regulation S-K (Secs. 229.402(b)(2)(iv) and 229.402(c)).
* * * * *
25. By amending Item 23 of Form N-2 (referenced in Secs. 239.14 and
274.11a-1) to remove the ``and'' at the end of Instructions (4)(b) and
(5)(b), to remove the period at the end of Instructions 4(c) and 5(c)
and to add in its place ``; and'', and to add Instructions 4(d) and
5(d) to read as follows:
Form N-2
* * * * *
Item 23. Financial Statements
* * * * *
Instructions
* * * * *
4. * * *
(d) the information concerning changes in and disagreements with
accountants and on accounting and financial disclosure required by Item
304 of Regulation S-K (Sec. 229.304 of this chapter).
5. * * *
(d) the information concerning changes in and disagreements with
accountant and on accounting and financial disclosure required by Item
304 of Regulation S-K (Sec. 239.304 of this chapter).
26. By amending Item 20 of Form N-3 (referenced in Secs. 239.17a
and 274.11b) to revise the caption for Column (1) in the table in
paragraph (a) to read ``Name, Address, and Age'', to add an instruction
following paragraph (b), and to revise paragraph (c) to read as
follows:
Note: The text of Form N-3 does not and these amendments will
not appear in the Code of Federal Regulations.
Form N-3
* * * * *
Item 20. Management
* * * * *
(b) * * *
Instruction: Where the positions held are the same positions
with two or more registered investment companies that are part of a
``Fund Complex'' as that term is defined in Item 22(a) of Schedule
14A under the Exchange Act, the Registrant may, rather than listing
each investment company, identify the Fund Complex and provide the
number of positions held by the identified persons.
(c) Provide the following information for all directors of the
Registrant, all members of the advisory board of the Registrant, and
for each of the three highest paid executive officers or any affiliated
person of the Registrant with aggregate compensation from the
Registrant for the most recently completed fiscal year in excess of
$60,000 (``Compensated Persons'').
(1) Furnish the information required by the following table:
Compensation Table
------------------------------------------------------------------------
(3) Pension (5) Total
or (4) compensation
(2) Aggregate retirement Estimated from
(1)Name of compensation benefits annual registrant
person,position from accrued as benefits and fund
registrant part of fund upon complex paid
expenses retirement to directors
------------------------------------------------------------------------
Instructions. 1. For column (1), indicate, if necessary, the
capacity in which the remuneration is received. For Compensated
Persons that are directors of the Registrant, compensation is
amounts received for service as a director.
2. If the Registrant has not completed its first full year since
its organization, furnish the information for the current fiscal
year, estimating future payments that would be made pursuant to an
existing agreement or understanding. Disclose in a footnote to the
Compensation Table the period for which the information is
furnished.
3. Include in column (2) amounts deferred at the election of the
Compensated Person, whether pursuant to a plan established under
Section 401(k) of the Internal Revenue Code [26 U.S.C. 401(k)] or
otherwise for the fiscal year in which earned. Disclose in a
footnote to the Compensation Table the total amount of deferred
compensation (including interest) payable to or accrued for any
Compensated Person.
4. Include in columns (3) and (4) all pension or retirement
benefits proposed to be paid under any existing plan in the event of
retirement at normal retirement date, directly or indirectly, by the
Registrant, any of its subsidiaries, or any other companies in the
Fund Complex. Omit column (4) where retirement benefits are not
determinable.
5. For any defined benefit or actuarial plan under which
benefits are determined primarily by final compensation (or average
final compensation) and years of service, provide the information
required in column (4) in a separate table showing estimated annual
benefits payable upon retirement (including amounts attributable to
any defined benefit supplementary or excess pension award plans) in
specified compensation and years of service classifications. Also
provide the estimated credited years of service for each Compensated
Person.
6. Include in column (5) only aggregate compensation paid to a
director for service on the board and all other boards of related
Funds in a Fund Complex specifying the number of such other Funds.
7. No information is required to be provided concerning the
officers of the sponsoring insurance company who are not directly or
indirectly engaged in activities related to the separate account.
(2) Describe briefly the material provisions of any pension,
retirement, or other plan or any arrangement other than fee
arrangements disclosed in paragraph (1) pursuant to which Compensated
Persons are or may be compensated for any services provided, including
amounts paid, if any, to the Compensated Person under any such
arrangements during the most recently completed fiscal year.
Specifically include the criteria used to determine amounts payable
under the plan, the length of service or vesting period required by the
plan, the retirement age or other event which gives rise to payments
under the plan, and whether the payment of benefits is secured or
funded by the Registrant.
* * * * *
27. By amending Item 27 of Form N-3 (referenced in Secs. 239.17a
and 274.11b) to remove the ``and'' at the end of Instructions 4(ii) and
5(ii) to paragraph (a), to remove the period at the end of Instructions
4(iii) and 5(iii) to paragraph (a) and to add at the end of the
Instructions ``; and'', and to add Instructions 4(iv) and 5(iv) to read
as follows:
Form N-3
* * * * *
Item 27. Financial Statements
* * * * *
Instructions
* * * * *
4. * * *
(iv) the information concerning changes in and disagreements with
accountants and on accounting and financial disclosure required by Item
304 of Regulation S-K (Sec. 229.304 of this chapter).
5. * * *
(iv) the information concerning changes in and disagreements with
accountants and on accounting and financial disclosure required by Item
304 of Regulation S-K (Sec. 229.304 of this chapter).
* * * * *
Dated: October 13, 1994.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
Note: This appendix to the preamble will not appear in the Code
of Federal Regulations.
Appendix.--Comparative Fee Table
------------------------------------------------------------------------
Existing Proposed
Annual fund operating expenses (as a fee fee
percentage of average net assets) (percent) (percent)
------------------------------------------------------------------------
Management fee................................ 0.52 0.75
12b-1 fees.................................... None None
Other expenses................................ 0.20 0.20
-------------------------
Total fund operating expenses........... 0.72 0.95
------------------------------------------------------------------------
Example
The following illustrates the expenses on a $1,000 investment
under the existing and proposed fees and the expenses stated above,
assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
----------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
----------------------------------------------------------------------------------------------------------------
Existing fee................................................ $8 $24 $42 $95
Proposed fee................................................ 10 31 55 125
----------------------------------------------------------------------------------------------------------------
The purpose of this example and the table is to assist investors in
understanding the various costs and expenses of investing in shares of
the Fund. The example above should not be considered a representation
of past or future expenses of the Fund. Actual expenses may vary from
year to year and may be higher or lower than those shown above.
[FR Doc. 94-25813 Filed 10-18-94; 8:45 am]
BILLING CODE 8010-01-P
