[Federal Register Volume 59, Number 25 (Monday, February 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2721]
[[Page Unknown]]
[Federal Register: February 7, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20044; 812-8672]
North American Funds, et al.; Application
January 31, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: North American Funds and NASL Financial Services, Inc.
(``NASL Financial''), on behalf of themselves and any other open-end
investment company which is or may become a member of NASL Financial's
``group of investment companies'' as that phrase is defined in rule
11a-3 under the Act (the ``Other Funds'') and which issues two or more
classes of shares that have different voting rights and expense
allocations as described in the application and/or impose a contingent
deferred sales charge (``CDSC'') on redemptions of shares.\1\ North
American Funds and the Other Funds are collectively referred to herein
as the ``Fund.''
\1\Existing funds that intend to rely on the requested order
have been named as applicants. Other existing funds that are members
of the same ``group of investment companies'' do not presently
intend to rely on the requested order but may do so in the future if
they subsequently decide to offer multiple classes of shares and/or
impose a CDSC in accordance with the representations and conditions
of the application.
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RELEVANT ACT SECTIONS: Order requested under section 6(c) for
exemptions from sections 2(a)(32), 2(a)(35), 18(f)(1), 18(g), 18(i),
22(c), and 22(d) of the Act and rule 22c-1 thereunder.
SUMMARY OF APPLICATION: Applicants seek an order to permit the Fund to
issue two or more classes of shares representing interests in the same
portfolios of securities, assess a CDSC on redemptions of certain
shares, and waive the CDSC in certain instances.
FILING DATES: The application was filed on November 8, 1993 and amended
on January 10, 1994. By letter dated January 31, 1994, counsel, on
behalf of the applicants, has agreed to file a further amendment, the
substance of which is incorporated herein, during the notice period.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on February 25,
1994, and should be accompanied by proof of service on applicants, in
the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons who wish to
be notified of the date of a hearing may request notification by
writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549.
Applicants, North American Security Life Insurance Company, 116
Huntington Avenue, Boston, Massachusetts 02116, Attention: John D.
DesPrez III, Esq.
For Further Information Contact: Mary Kay Frech, Staff Attorney, at
(202) 272-7648, or Elizabeth G. Osterman, Branch Chief, at (202) 272-
3016 (Division of Investment Management, Office of Investment Company
Regulation).
Supplementary Information: The following is a summary of the
application. The complete application is available for a fee from the
SEC's Public Reference Branch.
Applicants' Representations
A. The Multi-Class Arrangement
1. North American Funds is a registered open-end diversified
management investment company, organized as a Massachusetts business
trust. It currently has the following portfolios. Global Growth Fund,
Growth Fund, Growth and Income Fund, Asset Allocation Fund, Strategic
Income Fund, Investment Quality Bond Fund, U.S. Government Securities
Fund, National Municipal Bond Fund, California Municipal Bond Fund, and
Money Market Fund (together with the investment portfolios of the Other
Funds, the ``Series''). NASL Financial is a wholly-owned subsidiary of
North American Security Life Insurance Company, a Delaware stock life
insurance company. NASL Financial serves as the distributor (the
``Distributor'') of the Fund's shares and as the investment adviser
(the ``Adviser'') to the Fund.
2. The Series currently offer a single class of shares at net asset
value plus, in the case of all Series except the Money Market Fund, a
front-end sales charge. The sales charge is waived for share purchases
totalling more than $100,000 and less than $1 million, but such shares
are subject to a CDSC.\2\ Share purchases totalling $1 million or more
are not subject to a sales charge or any CDSC. Pursuant to the Fund's
rule 12b-1 distribution plan, shares of each Series (except for the
Money Market Fund) currently are subject to a distribution fee of up to
1.00% of their average annual net assets, depending upon the Series.
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\2\Pursuant to an existing order, applicants are authorized to
assess a CDSC on redemptions of certain shares of the Series within
twelve months of purchases (the ``Existing CDSC''). Investment
Company Act Release Nos. 19029 (Oct. 15, 1992) (notice) and 19088
(Nov. 10, 1992) (order). The Existing CDSC will be continued only
for shares sold prior to the date on which a registration statement
establishing multiple classes of shares in accordance with the order
requested by the application is declared effective.
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3. Applicants propose to offer three classes of shares initially,
designated as ``Class A'' shares, ``Class B'' shares, and ``Class C''
shares. Applicants propose to reclassify the existing class of shares
of certain of the Series as Class A shares and the existing class of
shares of certain of the other Series as Class C shares. Each
reclassified share will bear the identical distribution and service
fees after such reclassification as it did before the reclassification,
and would not be subject to any increase in such fees or to any new or
increased redemption charges as a result of the reclassification. The
Fund in the future may create an unlimited number of classes of shares,
the terms of which may differ from the Class A, Class B, and Class C
shares only in accordance with the characteristics described in the
application.
4. Class A shares (except for the Money Market Fund and except as
described in the next sentence) will be offered at net asset value plus
a front-end sales load, and will be subject to a maximum distribution
fee of up to .10% and a service fee of up to .25% of their respective
average annual net assets. Class A shares of the National Municipal
Bond Fund and the California Municipal Bond Fund will be subject to a
service fee of up to .15% of their respective average annual net assets
and will not be subject to any distribution fee. Except with respect to
certain shares reclassified as Class A shares and subject to the
Existing CDSC, Class A shares will not be subject to any CDSC
arrangement.
5. Class B shares will be offered for purchases of $250,000 or
less. Class B shares will be sold at net asset value, subject to a
CDSC, described below. Class B shares of each Series (except for the
Money Market Fund) will be subject to a distribution fee of up to .75%
and a service fee of up to .25% of their average net asset value.
6. Class C shares will be sold at net asset value. Except with
respect to certain shares reclassified as Class C shares and subject to
the Existing CDSC, it is anticipated that Class C shares will not be
subject to a front end sales load or CDSC. Class C share of each Series
(except for the Money Market Fund) will be subject to a distribution
fee of up to .75% and a service fee of up to .25% of their average net
asset value.\3\
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\3\Applicants in all cases will comply with Article III, Section
26 of the NASD's Rules of Fair Practice as it relates to the maximum
amount of asset-based sales charges and service fees that may be
imposed by an investment company.
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7. In the future, the Fund, on behalf of a Series or class thereof,
may enter into non-rule 12b-1 shareholder services agreements
(``Shareholder Services Plan'') with certain financial institutions
(which may include banks), securities dealers, and other industry
professionals providing for the performance of certain services. In the
event that a Series or class thereof is subject to both a rule 12b-1
distribution plan and a Shareholder Services Plan, services provided
under one plan will augment, rather than duplicate, services provided
under the other plan.
8. Each class of a Series will represent interests in the same
portfolio of investments, and will be identical in all respects except
for: (a) The compensation and other arrangements permitted by different
distribution plans and Shareholder Services Plans for each class; (b)
voting rights with respect to any matter specifically affecting that
class, including the distribution plan and Shareholder Services Plan
for that class and expenses related to the cost of holding shareholder
meetings necessitated by the exclusive voting rights with respect to
the distribution plan of each class (and, if applicable, Shareholder
Services Plan), except as provided in condition 16 below; (c) the
impact of any expenses directly attributable to that class, as
described in the following paragraph (``Class Expenses''); (d) any
differences in distributions and/or net asset value per share resulting
from differences in Class Expenses; (e) any differences in features for
purchasing, redeeming, exchanging, or converting shares of each class
and/or in distribution arrangements for the offer and sale of such
shares; and (f) the designation of classes.
9. Class Expenses may include the following: (a) Distribution plan
fees (including service fees) or Shareholder Services Plan fees; (b)
transfer and shareholder servicing agent fees and shareholder servicing
costs; (c) professional fees relating solely to a particular class; (d)
trustees fees, including independent counsel fees relating solely to a
particular class; (e) printing and postage expenses for materials
distributed to shareholders of a particular class; (f) Blue Sky and SEC
registration fees relating solely to a particular class; and (g)
shareholder meeting expenses for meetings of a particular class.
10. Expenses that are attributable to a particular Series but not
to a particular class (``Series Expenses'') will be allocated based on
the net assets of each class.
11. Class A shares on which a sales charge has been paid will be
exchangeable at net asset value for Class A shares of any other Series
(including the Money Market Fund), but not for Class B or Class C
shares. Class B shares will be exchangeable at net asset value for
Class B shares of any other Series (including the Money Market Fund),
but not for Class A or Class C shares. No Class B CDSC will be imposed
on shares acquired by exchange where the exchanged shares would not
have been assessed a CDSC upon redemption. Class C shares will be
exchangeable at net asset value for Class C shares of any other Series
(including the Money Market Fund), but not for Class A or Class B
shares. In the future, applicants may permit exchanges of shares of any
class of a Series for shares of the same class of other open-end
investment companies sponsored by the Adviser or the Distributor that
hold themselves out as related companies for purposes of investment and
investor services. Applicants will comply with rule 11a-3 as to any
exchanges.
12. All Class B shares, other than those purchased through the
reinvestment of dividends and distributions, will automatically convert
to Class A shares on the basis of the relative net asset values of the
two classes six years after the end of the calendar month in which the
shareholder's order to purchase was accepted. All Class C shares, other
than those purchased through the reinvestment of dividends and
distributions, will automatically convert to Class A shares on the
basis of the relative net asset values of the two classes not later
than ten years after the end of the calendar month in which the
shareholder's order to purchase was accepted. For purposes of
calculating the holding period, Class B (or Class C, as the case may
be) shares will be deemed to have been issued on the sooner of the date
on which the issuance of the Class B (or Class C) shares occurred, or
for Class B (or Class C) shares obtained through an exchange or series
of exchanges, the date on which the issuance of the original Class B
(or Class C) shares occurred. Shares purchased through the reinvestment
of dividends and other distributions in respect of Class B (or Class C)
shares will be treated as Class B (or Class C) shares, except that each
time any Class B (or Class C) shares in the shareholders account (other
than those purchased through the reinvestment of dividends and other
distributions) convert to Class A, an equal pro rata portion of the
Class B (or Class C) shares purchased through the reinvestment of
dividends and other distributions also will convert to Class A. The
portion will be determined by the ratio that the shareholder's Class B
(or Class C) shares converting to Class A bears to the shareholder's
total Class B (or Class C) shares not acquired through dividends and
distributions. Of the initial classes of shares, only Class B and Class
C will have a conversion feature (additional classes created in the
future also may have a conversion feature).
B. The CDSC Arrangement
1. The Fund proposes to implement a CDSC arrangement for Class B
shares (the ``Class B CDSC''). If Class B shares are redeemed within
six years after the end of the calendar month in which a purchase order
was accepted, a CDSC will be imposed by applying a specified percentage
ranging from 1% to 5% to the lesser of the aggregate net asset value of
the shares at the time of purchase, or the aggregate net asset value of
the shares at the time of redemption. The existing schedule may be
modified in the future, and other schedules with different percentages
and periods may apply to different classes created in the future. Any
variations in the CDSC schedule will be set forth in the applicable
prospectus. Any change in the terms of the CDSC would not affect shares
already issued unless the change resulted in terms more favorable to
the holders of such shares.
2. No Class B CDSC will be imposed on (a) redemptions of shares
held for more than six years after the end of the calendar month in
which the purchase order was accepted, (b) amounts representing an
increase in the value of a shareholder's account due to increases in
the net asset value per share, or (c) shares acquired through
reinvestment of income dividends or capital gains distributions. In
determining the rate of any applicable CDSC, it will be assumed that a
redemption is made first of shares that are not subject to the Class B
CDSC and then of shares held for the longest period of time. This will
result in the CDSC being imposed at the lowest possible rate.
3. Applicants may waive the Class B CDSC in the following
instances: (a) Retirement distributions to participants or
beneficiaries from (i) retirement plans qualified under section 401(a)
of the Internal Revenue Code (``Code''), (ii) Code section 403(b)(7)
plans, (iii) deferred compensation plans under Code section 457, and
(iv) other employee benefit plans, following retirement, termination of
employment, as the result of a loan made by a retirement plan that
permits loans, as the result of the hardship of a plan participant (to
the extent permitted by the Code), and/or the attainment of age 59\1/2\
of a plan participant (if such payments are made pursuant to a
systematic withdrawal plan where the payments do not exceed the then
applicable effective maximum free withdrawal amount, annually of the
value of the account); (b) distributions from IRAs prior to and/or
following the attainment of age 59\1/2\ (if such payments are made
pursuant to a systematic withdrawal plan where the payments do not
exceed the then effective maximum free withdrawal amount, annually of
the value of the account); (c) redemptions made following the death or
disability (as defined in the Code) of a shareholder; (d) distributions
and redemptions made automatically and periodically pursuant to a
systematic withdrawal plan where the payments do not exceed the then
effective maximum free withdrawal amount, annually of the value of the
account; (e) a tax-free return of excess contributions made to any
retirement plan; (f) the combination of the Fund or any Series of the
Fund with any other investment company by merger, acquisition of
assets, or otherwise; and (g) redemptions effected pursuant to the
Series' right to liquidate a shareholder's account if the aggregate net
asset value of shares held in the account is less than the then
applicable effective minimum account size. If any of the waiver
categories are offered and subsequently discontinued, appropriate
disclosure will be made in the applicable prospectus and investors who
purchased their shares prior to such change will continue to be
entitled to such CDSC waivers. In addition, if a Fund waives or reduces
a CDSC, such waiver or reduction will be uniformly applied to all
shares in the specified category.
4. A shareholder will be credited with any CDSC paid in connection
with a redemption of any Class B shares followed by a reinvestment in
Class B shares of such Series or another Series within a time period
specified in the current prospectus of the Fund, currently anticipated
to be 90 days after such redemption. The credit will be paid by the
Distributor.
Applicants' Legal Analysis
1. Applicants request an order exempting them from the provisions
of sections 18(f)(1), 18(g), and 18(i) of the Act to the extent that
the proposed issuance and sale of various classes of shares
representing interests in the Fund might be deemed: (a) To result in a
``senior security'' within the meaning of section 18(g), the issuance
and sale of which would be prohibited by section 18(f)(1); and (b) to
violate the equal voting provisions of section 18(i).
2. Applicants believe that the proposed multi-class arrangement
will better enable the Fund to meet the competitive demands of today's
financial services industry. Under the multi-class arrangement, an
investor will be able to choose the method of purchasing shares that is
most beneficial given the amount of his or her purchase, the length of
time the investor expects to hold his or her shares, and other relevant
circumstances. The proposed arrangement would permit the Fund to
facilitate both the distribution of its securities and provide
investors with a broader choice as to the method of purchasing shares
without assuming excessive accounting and bookkeeping costs or
unnecessary investment risks.
3. Applicants believe that the proposed allocation of expenses and
voting rights relating to the rule 12b-1 plans (and any Shareholder
Services Plans adopted in the future) in the manner described is
equitable and would not discriminate against any group of shareholders.
In addition, applicants assert that such arrangements should not give
rise to any conflicts of interest because the rights and privileges of
each class of shares are substantially identical.
4. Applicants believe that the proposed multi-class arrangement
does not present the concerns that section 18 of the Act was designed
to address. The multi-class arrangement will not increase the
speculative character of the shares of the Fund. The multi-class
arrangement does not involve borrowing, nor will it affect the Fund's
existing assets or reserves, and does not involve a complex capital
structure. Nothing in the multi-class arrangement suggests that it will
facilitate control by holders of any class of shares.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. Each class of shares will represent interests in the same
portfolio of investments of the Series, and be identical in all
respects, except as set forth below. The only differences among the
classes of shares of a Series will relate solely to: (a) The impact of
the disproportionate payments made under the distribution plans and any
Shareholder Services Plans; (b) the method of allocating certain Class
Expenses which are limited to (i) transfer and shareholder servicing
agent fees and shareholder servicing costs, (ii) professional fees
relating solely to one class, (iii) trustees fees, including
independent counsel fees, relating solely to one class, (iv) printing
and postage expenses for materials distributed to current shareholders,
(v) Blue Sky and SEC registration fees, (vi) shareholder meeting
expenses, and (vii) any other incremental expenses subsequently
identified that should be properly allocated to one class which shall
be approved by the SEC pursuant to an amended order; (c) the fact that
the class will vote separately with respect to any matter specifically
affecting that class, including without limitation rule 12b-1
distribution plans and Shareholder Services Plans, except as provided
in condition 16; (d) the different exchange privileges of the classes
of shares; (e) designation of each class of shares of the Series; and
(f) certain classes that impose a rule 12b-1 fee may be able to convert
to a class with a lower rule 12b-1 fee.
2. The trustees of the Fund, including a majority of the
independent trustees, will approve the system of the offering of the
various classes of shares. The minutes of the meetings of the trustees
regarding deliberations of the trustees with respect to the approvals
necessary to implement the multi-class arrangement for any Series will
reflect in detail the reasons for the trustees' determinations that the
system is in the best interests of that Series and its shareholders.
3. On an ongoing basis, the trustees of the Fund, pursuant to their
fiduciary responsibilities under the Act and otherwise, will monitor
the Fund for the existence of any material conflicts between the
interests of the classes of outstanding shares. The trustees, including
a majority of the independent trustees, shall take such action as is
reasonably necessary to eliminate any such conflicts that may develop.
The Adviser and Distributor of the Fund will be responsible for
reporting any potential or existing conflicts to the trustees. If a
conflict arises, the Adviser and Distributor at its own cost will
remedy such conflict up to and including establishing a new registered
management investment company.
4. The trustees of the Fund will receive quarterly and annual
statements concerning distribution and shareholder servicing
expenditures complying with paragraph (b)(3)(ii) of rule 12b-1, as it
may be amended from time to time. In such statements, only expenditures
properly attributable to the sale or servicing of a particular class of
shares will be used to justify any distribution or servicing fee
charged to that class. Expenditures not related to the sale or
servicing of a particular class will not be presented to the trustees
to justify any fee attributable to that class. The statements,
including the allocations upon which they are based, will be subject to
the review and approval of the independent trustees in the exercise of
their fiduciary duties.
5. Dividends paid with respect to each class of shares of a Series,
to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day, and will be in the same
amount, except that distribution plan fees or Shareholder Services Plan
fees and Class Expenses (listed in condition 1) applicable to a class
will be borne exclusively by that class.
6. Any Shareholder Services Plan will be adopted and operated in
accordance with the procedures set forth in rule 12b-1(b) through (f)
as if the expenditures made thereunder were subject to rule 12b-1,
except that shareholders need not enjoy the voting rights specified in
rule 12b-1.
7. The methodology and procedures for calculating the net asset
value and dividends and distributions of the various classes and the
proper allocation of expenses among the classes has been reviewed by an
expert (the ``Expert'') who has rendered a report to the applicants, a
copy of which has been provided to the staff of the SEC, that such
methodology and procedures are adequate to ensure that such
calculations and allocations will be made in an appropriate manner. The
Expert, or an appropriate substitute Expert, will monitor, on an
ongoing basis, the manner in which the calculations and allocations are
being made and based on that review, will render at least annually a
report to the Fund that the calculations and allocations are being made
properly. The reports of the Expert shall be filed as part of the
periodic reports filed with the SEC pursuant to sections 30(a) and
30(b)(1) of the Act. The work papers of the Expert with respect to such
reports, following request by the Fund (which the Fund agrees to
provide), will be available for inspection by the SEC staff upon the
written request to the Fund for such work papers by a senior member of
the SEC's Division of Investment Management, limited to the Director,
an Associate Director, the Chief Accountant, the Chief Financial
Analyst, an Assistant Director, and any Regional Administrators or
Associate and Assistant Administrators. The initial report of the
expert is a ``report on policies and procedures placed in operation''
and the ongoing reports will be ``reports on policies and procedures
placed in operation and tests of operating effectiveness'' as defined
and described in SAS No. 70 of the AICPA, as it may be amended from
time to time, or in similar auditing standards as may be adopted by the
AICPA from time to time.
8. Applicants have adequate facilities in place to ensure
implementation of the methodology and procedures for calculating the
net asset value and dividends and distributions of the various classes
of shares and the proper allocation of expenses among the classes of
shares. This representation has been concurred with the Expert in the
initial report referred to in condition 7 above and will be concurred
with by the Expert, or an appropriate substitute Expert, on an ongoing
basis at least annually in the ongoing reports referred to in condition
7 above. Applicants will take immediate corrective measures if this
representation is not concurred in by the Expert, or appropriate
substitute Expert.
9. The prospectus of the Fund will contain a statement to the
effect that a salesperson and any other person entitled to receive
compensation for selling or servicing Fund shares may receive different
compensation with respect to one particular class of shares over
another.
10. The Series will disclose the respective expenses, performance
data, distribution arrangements, services, fees, sales loads, deferred
sales loads, and exchange privileges applicable to each class of shares
in every prospectus, regardless of whether all classes of shares are
offered through each prospectus. The Series will disclose the
respective expenses and performance data applicable to all classes of
shares in every shareholder report. The shareholders reports will
contain, in the statement of assets and liabilities and statement of
operations, information related to the Series as a whole generally and
not on a per class basis. Each Series' per share data, however, will be
prepared on a per class basis with respect to all classes of shares of
such Series. To the extent any advertisement or sales literature
describes the expenses or performance data applicable to any class of
shares, it will also disclose the respective expenses and/or
performance data applicable to all classes of shares. The information
provided by applicants for publication in any newspaper or similar
listing of the Series' net asset value and public offering price will
present each class of shares separately.
11. The Distributor will adopt compliance standards as to when
shares of a particular class may appropriately be sold to particular
investors. Applicants will require all persons selling shares of the
Fund to agree to conform to these standards.
12. The conditions pursuant to which the exemptive order is granted
and the duties and responsibilities of the trustees of the Fund with
respect to the multi-class arrangement will be set forth in guidelines
which will be furnished to the trustees as part of the materials
setting forth the duties and responsibilities of the trustees.
13. Applicants acknowledge that the grant of the exemptive order
requested by the application will not imply SEC approval,
authorization, or acquiescence in any particular level of payments that
may be made pursuant to the rule 12b-1 distribution plans or a
Shareholder Service Plan in reliance on the exemptive order.
14. The initial determination of the Class Expenses that will be
allocated to a particular class and any subsequent changes thereto will
be reviewed and approved by a vote of the trustees of the Fund
including a majority of the independent trustees. Any person authorized
to direct the allocation and disposition of monies paid or payable by
the Fund to meet Class Expenses shall provide to the trustees, and the
trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were
made.
15. Any class of shares with a conversion feature (``Purchase
Class'') will convert into another class (``Target Class'') of shares
on the basis of the relative net asset values of the two classes,
without the imposition of any sales load, fee, or other charge. After
conversion, the converted shares will be subject to an asset-based
sales charge and/or service fee (as those terms are defined in Article
III, Section 26 of the NASD's Rules of Fair Practice), if any, that in
the aggregate are lower than the asset-based sales charge and service
fee to which they were subject prior to the conversion.
16. If the Fund implements any amendment to its rule 12b-1 plans
(or, if presented to shareholders, adopts or implements any amendment
of a Shareholder Services Plan) that would increase materially the
amount that may be borne by the Target Class shares under the plan,
existing Purchase Class shares will stop converting into Target Class
shares unless the Purchase Class shareholders, voting separately as a
class, approve the proposal. The trustees shall take such action as is
necessary to ensure that existing Purchase Class shares are exchanged
or converted into a new class or shares (``New Target Class''),
identical in all material respects to the Target Class as it existed
prior to implementation of the proposal, no later than the date such
shares previously were scheduled to convert into Target Class shares.
If deemed advisable by the trustees to implement the foregoing, such
action may include the exchange of all existing Purchase Class shares
for a new class (``New Purchase Class''), identical to existing
Purchase Class shares in all material respects except that New Purchase
Class shares will convert into New Target Class shares. A New Target
Class or New Purchase Class may be formed without further exemptive
relief. Exchanges or conversions described in this condition shall be
effected in any manner that the trustees reasonably believe will not be
subject to federal taxation. In accordance with condition 3, any
additional cost associated with the creation, exchange, or conversion
of New Target Class shares or New Purchase Class shares shall be borne
solely by the Adviser and Distributor. Purchase Class shares sold after
the implementation of the proposal may convert into Target Class shares
subject to the higher maximum payment, provided that the material
features of the Target Class plan and the relationship of such plan to
the Purchase Class shares are disclosed in an effective registration
statement.
17. Applicants will comply with the provisions of proposed rule 6c-
10 under the Act, Investment Company Act Release No. 16619 (Nov. 2,
1988), as such rule is currently proposed and as it may be reproposed,
adopted, or amended.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2721 Filed 2-4-94; 8:45 am]
BILLING CODE 8010-01-M
