[Federal Register Volume 59, Number 189 (Friday, September 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24170]
[[Page Unknown]]
[Federal Register: September 30, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20572; 812-9034]
Landmark Funds I et al.; Notice of Application
September 23, 1994.
AGENCY: Securities and Exchange Commission (the ``SEC'' or the
``Commission'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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Applicants: Landmark Funds I, Landmark Funds II, Landmark Funds III,
Landmark Fixed Income Funds, Landmark Tax Free Income Funds, Landmark
Multi-State Tax Free Funds, Landmark Premium Funds, Landmark
Institutional Funds I, Landmark Institutional Trust, Landmark Tax Free
Reserves, and Landmark International Equity Fund, including all
existing and future series thereof (the ``Trusts''), and (i) Any future
open-end management investment company (including all series thereof)
for which Citibank, N.A. (``Citibank'') or any company controlling,
controlled by, or under common control with Citibank (a ``Citibank
Company'') is the investment adviser or for which The Landmark Funds
Broker-Dealer Services, Inc. (``LFBDS'') or any company controlling,
controlled by, or under common control with LFBDS (an ``LFBDS
Company'') is the principal underwriter (as that term is defined in
section 2(a)(29) of the Act), (ii) any existing open-end management
investment company (and all existing and future series thereof) not
currently advised by Citibank or a Citibank Company or underwritten by
LFBDS or an LFBDS Company for which Citibank or a Citibank Company in
the future serves as investment adviser or for which LFBDS or an LFBDS
Company in the future serves as principal underwriter and (iii) any
existing or future open-end management investment company (including
all existing and future series thereof) not currently advised by
Citibank or a Citibank Company that invests all of the investable
assets of such company or any of its series in a management investment
company for which Citibank or a Citibank Company is the investment
adviser (the investment companies described in (i), (ii), and (iii),
together with the Trusts, are referred to collectively as the
``Funds''), Citibank, and LFBDS.
Relevant Act Sections: Order requested under section 6(c) for
exemptions from section 18(f), 18(g), 18(i), 2(a)(32), 2(a)(35), 22(c),
and 22(d) of the Act and rule 22c-1 thereunder.
Summary of Application: Applicants seek an order (i) To permit the
Funds to issue multiple classes of shares representing interests in the
same portfolio of securities (the ``Multiple Distribution System'');
and (ii) to permit the Funds to assess and, under certain
circumstances, waive, defer, or reduce, a contingent deferred sales
charges (``CDSC'') on certain redemptions of their shares.
Filing Date: The application was filed on June 6, 1994, and amended on
July 20, 1994. By supplemental letter dated September 23, 1994,
counsel, on behalf of applicants, agreed to file an amendment during
the notice period to make certain technical changes. This notice
reflects the changes to be made to the application by such amendment.
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 October 18,
1994, and should be accompanied by proof of service on applicants, in
the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request such notification by writing to
the SEC's Secretary.
Addresses: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549.
The Trusts and LFBDS, 6 St. James Avenue, Boston, Massachusetts 02116.
Citibank, 153 East 53rd Street, New York, NY 10043.
For Further Information Contact: Marilyn Mann, Special Counsel, at
(202) 942-0582, or Barry D. Miller, Senior Special Counsel, at (202)
942-0564 (Division of Investment Management, Office of Investment
Company Regulation).
Supplementary Information: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. Each of the Trusts is a Massachusetts business trust registered
under the Act as an open-end management investment company. Some of the
Trusts consist of multiple series each of which has separate investment
objectives and policies and segregated assets. Each Trust, and each
Trust on behalf of its series, if any, has either: (i) Entered into an
investment advisory agreement with Citibank, or (ii) invested all of
the investable assets of the Trust or series in another open-end
management investment company that has entered into an investment
advisory agreement with Citibank (such management investment company
referred to herein as a ``HubSM Portfolio''). Each of the Trusts
has adopted an Administrative Services Plan that provides that the
Trust may obtain the services of an administrator, a transfer agent, a
custodian, a fund accounting agent (in the case of those Trusts for
which the custodian does not act as fund accounting agent) and one or
more shareholder servicing agents. Pursuant to the Administrative
Services Plan, each Trust has entered into an Administrative Services
Agreement with LFBDS, pursuant to which LFBDS provides non-investment
management, administrative services. Citibank performs sub-
administrative duties for each Trust pursuant to a Sub-Administrative
Services Agreement with LFBDS. LFBDS, a registered broker-dealer, is
the principal underwriter of the Trusts, and shares of each Trust are
currently offered through LFBDS to customers of entities (``shareholder
servicing agents'') that have entered into shareholder servicing
agreements (``Shareholder Servicing Agreements'') with such Trust
pursuant to the Trust's Administrative Services Plan.\1\ Under the
Shareholder Servicing Agreements, financial institutions including
Citibank Companies and securities brokers provide various account and
customer services in connection with the shares. For such services,
each shareholder servicing agent receives a service fee\2\ and a
shareholder servicing fee\3\ from the Trust.
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\1\Each Administrative Services Plan under which a Trust has
entered into a Shareholder Servicing Agreement has been 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, including the voting rights of shareholders specified
therein. Applicants may, however, in the future, seek an amendment
to a Fund's Administrative Services Plan to modify or eliminate the
voting rights granted therein.
\2\Some of the fees paid pursuant to the Shareholder Servicing
Agreements may be deemed to be ``service fees'' as that term is
defined in Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (the ``NASD
rule''). For the purposes of the application, the term ``service
fees'' refers to such fees paid by the Funds to their shareholder
servicing agents for certain services rendered under the Shareholder
Servicing Agreements, and has the meaning given that term in the
NASD rule. The terms ``distribution fee'' and ``rule 12b-1 fee''
mean an ``asset-based sales charge'' as defined in the NASD rule.
\3\As used in the application, ``shareholder servicing fees''
means fees paid by the Funds to their shareholder servicing agents
for providing subaccounting services for Funds shares held
beneficially, providing beneficial owners with statements showing
their positions in the Funds, forwarding shareholder communications,
receiving, tabulating, and transmitting proxies and other similar
services. ``Shareholder servicing fees'' does not refer to service
fees as defined in the NASD Rule.
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2. The shares of the Trusts, except for money market funds, are
currently sold at net asset value (``NAV'') subject to a conventional
front-end sales charge. Each Trust has also adopted a distribution plan
in accordance with rule 12b-1 authorizing it to pay LFBDS a
distribution fee (the ``Distribution Plan'') (collectively, the
Distribution Plans and the Administrative Services Plans are referred
to herein as the ``Plans'').
3. Applicants propose to establish a Multiple Distribution system
enabling each fund to offer investors the option of purchasing shares
with either (a) A front-end sales load (which may vary among the Funds)
(except for sales of $1 million or more which are subject to a CDSC for
the twelve-month period following purchase and except in the case of
the money market funds) and, in most cases, Plans providing for a
distribution fee and/or service fee and/or shareholder servicing fee
(the ``Front-End Load Option'' or ``Class A shares''), (b) without a
front-end sales load but subject to a CDSC (which may vary among the
Funds) and Plans providing for a distribution fee and/or service fee
and/or shareholder servicing fee (the ``Deferred Option'' or ``Class B
shares'), or (c) without a front-end sales load or CDSC, but subject to
Plans providing for a distribution fee and/or service fee and/or
shareholder servicing fee (the ``Level Load Option'' or ``Class C
shares''). It is presently intended that the money market funds other
than Landmark Cash Reserves (``LCR''), a series of Landmark Funds III,
will offer only one class of shares which will be sold without a front-
end load or CDSC but subject to Plans providing for a distribution and/
or service and/or shareholder servicing fee. Any distribution
arrangement of a Fund, including distribution and service fees and
front-end and deferred sales loads, will comply with the NASD rule.
4. Applicants also seek authority to create one or more additional
classes of shares in the future, the terms of which differ from the
Class A, Class B, and Class C shares only in the following respects:
(i) Any such class may bear different distribution, service, and
shareholder servicing fees (or may have no distribution, service, or
shareholder servicing fees) and any other costs relating to
implementing the Plans for such class or an amendment to such Plans
(including obtaining shareholder approval of such Plans or any
amendment thereto), (ii) any such class may bear any incremental
difference in transfer agency fees, (iii) any such class may bear
different class designations, (iv) voting rights on matters which
pertain to the Plans, except as provided in condition 15, (v) any such
class may bear any other incremental expenses subsequently identified
that should be properly allocated to such class which shall be approved
by the Commission pursuant to an amended order, (vi) any such class may
have different conversion features, (vii) any such class may have
different exchange privileges, and (viii) any such class will bear only
those printing and postage expenses (not otherwise payable by a
shareholder servicing agent) relating to preparing and distributing
materials such as shareholder reports, prospectuses, and proxy
statements (hereafter ``Class Expenses'') relating to that class of
shares.
5. After a shareholder's Class B shares remain outstanding for a
specified period of time (not to exceed eight years), they will
automatically convert to Class A shares of the same Fund at the
relative net asset values of each of the classes, and will thereafter
be subject to the lower aggregate distribution, service, and
shareholder servicing fees under the Class A Plans applicable to the
Class A shares. For purposes of conversion to Class A, all shares in a
shareholder's account purchased through the reinvestment of dividends
and other distributions paid in respect of Class B shares will
considered to be held in the separate sub-account. Each time any Class
B shares in the shareholder's account convert to Class A, a
proportional amount of Class B shares in the sub-account will also
convert to Class A.
6. Any other class of shares may provide that shares in that class
(the ``Purchase Class'') will, after a period of time, automatically
convert into another class of shares (the ``Target Class'') on the
basis of the relative net asset values of the two classes, without the
imposition of any sales load, fee, or other charge, provided that,
after conversion, the converted shares would be subject to an asset-
based sales charge and/or service fee (as those terms are defined in
the NASD rule) and/or a shareholder servicing fee, that in the
aggregate are lower than the asset-based sales charge and service fee
and shareholder servicing fee to which the Purchase Class shares were
subject prior to the conversion. Such a conversion feature will be
described in the relevant prospectus. (The term ``Purchase Class''
hereafter refers to any class of shares, including Class B shares, with
a conversion feature).
7. Any conversion of shares of one class to shares of another class
is subject to the continuing availability of a ruling of the Internal
Revenue Service or an opinion of counsel to the effect that the
conversion of shares does into constitute a taxable event under federal
income tax law. Any such conversion may be suspended if such a ruling
or opinion is no longer available.
8. Under the Multiple Distribution System, all expenses incurred by
a Fund will be borne proportionately by each class based on the
relative net assets attributable to each such class, except for the
different: (a) Distribution, service, and shareholder servicing fees,
and any other costs relating to implementing the Plans or an amendment
to such Plans (including obtaining shareholder approval of a Plan or an
amendment to such Plan); (b) Class Expenses; and (c) possibly transfer
agency fees (and any other incremental expense properly attributable to
a class which the Commission shall approve by amended order)
attributable to a class, which will be borne directly by each
respective class.
9. LFBDS or shareholder servicing agents may choose to reimburse or
waive distribution, service, or shareholder servicing fees on certain
classes of a Fund on a voluntary, temporary basis. The amount on such
fees waived or reimbursed by LFBDS or shareholder servicing agents may
vary from class to class. Such fees are by their nature specific to a
given class and may vary from one class to another. Applicants believe
that it is acceptable and consistent with shareholder expectations to
reimburse or waive such fees at different levels for different classes
of the same Fund.
10. In addition, LFBDS, Citibank, or other service contractors may
waive or reimburse certain fees or expenses which do not vary from
class to class but apply equally to all classes of a given Fund (``Fund
expenses'') provided that the same proportionate amount of Fund
expenses are waived or reimbursed for each class of a Fund. Any Fund
expenses that are waived or reimbursed would be credited to each class
of a Fund based on the relative net assets of the classes.
11. To the extent exchanges are permitted, such exchanges will
comply with all applicable provisions of rule 11a-3 under the Act.
12. Applicants also request relief to permit each of the Funds to
assess a CDSC on certain redemptions of certain classes of shares of
such Fund, and, from time to time, as described below, to permit such
Fund to waive, reduce, or defer the CDSC with respect to certain types
of redemptions of such shares. The amount of the CDSC to be imposed
will depend on the amount of time since the investor purchased the
shares being redeemed, as set forth in each Fund's prospectus. The
amount of any applicable CDSC will be based upon the lower of the net
asset value at the time of purchase or at the time of redemption as
required by proposed rule 6c-10(a)(1)(i) under the Act. If a
shareholder holding shares of more than one class does not specify
which class of shares of a Fund are to be redeemed, the following order
of redemption will apply: (a) Shares of a Fund not subject to a CDSC
and subject to the highest distribution and/or service and/or
shareholder servicing fees in effect on the date of redemption will be
redeemed first (provided, however, that if such shares of the Fund are
subject to the same distribution and/or service and/or shareholder
servicing fees then shares of the Fund without a conversion feature
will be redeemed before shares of the Fund with a conversion feature),
then (b) shares of the Fund subject to the lowest CDSC will be
redeemed, provided that if such shares of the Fund are subject to the
same CDSC, shares of the Fund with the highest distribution and/or
service and/or shareholder servicing fees in effect on the date of
redemption will be redeemed first. If such shares of the Fund are
subject to the same distribution and/or service and/or shareholder
servicing fees, then shares of the Fund without a conversion feature
will be redeemed before shares of the Fund with a conversion feature.
13. Applicants also propose to permit LFBDS from time to time to
provide a credit (i.e., a reimbursement) for any CDSC paid by a
redeeming shareholder in connection with a redemption of shares of a
class followed by a reinvestment in any shares of the same class of the
same Fund or, as permitted by LFBDS from time to time, the same class
of another Fund, effected within such number of days of the redemption
as may be specified, from time to time, in a Fund's prospectus (the
``Reinstatement Privilege''). The CDSC credit will be paid by LFBDS.
Upon redemption thereafter, when calculating the amount of the CDSC (if
any), the shares will be deemed to have been held for one continuous
period from purchase through redemption and reinvestment until such
shares are finally redeemed.
14. If the Funds waive, defer, or reduce the CDSC for a particular
class, such waiver, deferment, or reduction will be uniformly applied
to all offerees in a class with similar qualifications. In waiving,
deferring, or reducing a CDSC, the Funds will comply with the
requirements of rule 22d-1. If a Fund that has been waiving, deferring,
or reducing its CDSC for a particular class discontinues such waiver,
deferment, or reduction, (a) such waiver, deferment, or reduction will
continue to apply to shares of such Fund then outstanding, and (b) the
disclosure in that Fund's prospectus relating to that class will be
revised appropriately. No CDSC will be imposed on shares issued prior
to the date of the requested order.
Applicants' Legal Conclusions
1. Applicants request an order under section 6(c) exempting the
Funds' proposed issuance and sale of multiple classes of securities to
the extent that such issuance and sale might be deemed to result in a
``senor security'' within the meaning of section 18(g) of the Act and
be prohibited by section 18(f)(1), and to violate the equal voting
provisions of section 18(i).
2. The creation of multiple classes does not present the concerns
that section 18 was designed to address. The proposed arrangement does
not involve borrowings, affect any Fund's existing assets or reserves,
nor increase the speculative character of any Fund shares. The Funds'
capital structures under the proposed arrangement will not induce any
group of shareholders to invest in higher risk securities to the
detriment of any other group of shareholders since the investment risks
of each Fund will be borne equally by all of its shareholders.
3. Mutuality of risk will be preserved with respect to each class
of shares in a Fund. Further, (a) Since each class of shares will be
redeemable at all times, (b) since no class of shares will have any
preference or priority over any other class in the Fund, and (c) since
the similarities and dissimilarities of the classes of shares will be
disclosed in the Funds' prospectuses, investors will not be given
misleading impressions as to the safety or risk of any class of shares,
and the nature of the shares will not be rendered speculative.
4. The Funds' capital structures under the proposed arrangement
will not enable insiders to manipulate expenses and profits among the
various classes of shares since all the expenses and profits of a
particular Fund (except the different fees of any Plan applicable to a
class of shares, any higher incremental transfer agency fees, Class
Expenses attributable to a class of shares and any other incremental
expense subsequently identified that should be properly allocated to a
particular class which shall be approved by the Commission pursuant to
an amended order) will be borne pro rata by all the shares of the Fund,
irrespective of class, and all shareholders will have equal voting
rights except with respect to matters pertaining to the Plans and
related agreements. The concerns that a complex capital structure may
facilitate control without equity or other investment and may make it
difficult for investors to value the securities of the Funds are not
present.
5. The proposed arrangement will permit the Funds to facilitate
both the distribution of their securities and provide investors with a
broader choice as to the method of purchasing shares without assuming
excessive accounting and bookkeeping costs. Moreover, owners of each
class of shares may be relieved of a portion of the fixed costs
normally associated with investing in mutual funds since such costs
would potentially be spread over a greater number of shares than they
would otherwise.
Applicants' Multiple Class Conditions
Applicants agree that the order of the Commission granting the
requested relief shall be subject to the following conditions:
1. Each class of shares of a Fund will represent interests in the
same portfolio of investments of that Fund, and will be identical in
all respects, except as set forth below. The only differences among the
various classes of shares of the same Fund will relate solely to: (a)
The impact of the different distribution, service, and shareholder
servicing fee payments associated with any Plan relating to a
particular class of shares and any other costs relating to the
implementation of such Plan or any amendment thereto (including
obtaining shareholder approval of such Plan or any amendment thereto)
which will be borne solely by shareholders of such class, any
incremental transfer agency fees attributable solely to a particular
class of shares of the Fund, and any other incremental expenses
subsequently identified that should be properly allocated to one class
and which shall be approved by the Commission pursuant to an amended
order, (b) voting rights on matters which pertain to the Plans, except
as provided in Condition No. 15 below, (c) the different exchange
privileges of each class of shares, (d) the designation of each class
of shares of the Fund, (e) the differences in the conversion features
of each class of shares, and (f) any differences in Class Expenses of
each class of shares.
2. The Board of Trustees of each Fund, including a majority of the
Independent Trustees, will approve the Multiple Distribution System for
a particular Fund prior to its implementation by such Fund. The minutes
of the meetings of the Trustees regarding their deliberations with
respect to the approvals necessary to implement the Multiple
Distribution System will reflect in detail the reasons for the
Trustees' determination that the proposed Multiple Distribution System
is in the best interests of both the Fund and its shareholders.
3. On an ongoing basis, the Boards of Trustees of the Funds,
pursuant to their fiduciary responsibilities under the Act and
otherwise, will monitor each Fund for the existence of any material
conflicts between the interests of the various classes of shares. The
Trustees, including a majority of the Independent Trustees, shall take
such action as is reasonably necessary to eliminate any such conflict
that may develop. Citibank and LFBDS will be responsible for reporting
any potential or existing conflicts to the Trustees. If a conflict
arises, Citibank and LFBDS, at their own cost, will take steps to
remedy such conflict, up to and including establishing a new registered
management investment company.
4. The Trustees of the Funds will receive quarterly and annual
statements concerning distribution, service and shareholder servicing
expenditures complying with paragraph (b)(3)(ii) of rule 12b-1, as
amended from time to time. In these statements, only expenditures
properly attributable to the sale of a particular class of shares or to
the provision of services to holders of such shares will be used to
justify any distribution or service or shareholder servicing fee
attributable to such class. Expenditures not related to the sale or
service of a particular class of shares or to services provided to
holders of such shares 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 of the Funds in the exercise
of their fiduciary duties.
5. Dividends paid by a Fund with respect to each class of its
shares, to the extent any dividends are paid, will be calculated in the
same manner, at the same time, on the same day, and will be in the same
amount, except that (i) Distribution, service and shareholder servicing
payments associated with any Plans relating to a particular class of
shares (any other costs relating to implementing the Plans for such
class or any amendment to such Plan including obtaining shareholder
approval of the Plans for such class or any amendment to such Plans)
will be borne exclusively by that class; (ii) any incremental transfer
agency fees relating to a particular class will be borne exclusively by
that class; (iii) Class Expenses relating to a particular class will be
borne exclusively by that class; and (iv) any other incremental
expenses subsequently identified that should be properly allocated to a
particular class which shall be approved by the Commission pursuant to
an amended order will be borne exclusively by such class.
6. 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 various classes have been
reviewed by an expert (the ``Expert'') who has rendered a report to the
applicants, a copy of which has been filed as Exhibit D to the
application, stating that such methodology and procedures are adequate
to ensure that such calculations and allocations will be made in an
appropriate manner. On an ongoing basis, the Expert, or an appropriate
substitute Expert, will monitor the manner in which the calculations
and allocations are being made and, based upon such review, will render
at least annually a report to the Funds that the calculations and
allocations are being made properly. The reports of the Expert shall be
filed as part of the periodic reports filed with the Commission
pursuant to sections 30(a) and 30 (b)(1) of the Act. The workpapers of
the Expert with respect to such reports, following request by the Funds
(which the Funds agree to make), will be available for inspection by
the Commission staff upon the written request to the Fund for such
workpapers by a senior member of the Division of Investment Management
or of a Regional Office of the Commission, limited to the Director, an
Associate Director, the Chief Accountant, the Chief Financial Analyst,
an Assistant Director and any Regional Administrators or Associate and
Assistant Administrators. The initial report of the Expert is a
``report on the policies and procedures placed in operation'' and the
ongoing reports will be ``reports on policies and procedures placed in
operation and tests of operating effectiveness'' as defined and
described in SAS No. 70 of the 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.
7. The 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 such classes of
shares, and this representation has been concurred with by the Expert
in the initial report referred to in condition no. 6 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 no. 6 above. Applicants agree to take immediate corrective
measures if the Expert, or appropriate substitute Expert, does not so
concur in the ongoing reports.
8. The prospectuses of the Funds 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 over another in the
Fund.
9. LFBDS will adopt compliance standards regarding when a class of
shares may appropriately be sold to particular investors. LFBDS will
require its registered representatives and all broker-dealer firms with
which it enters into selling agreements and all financial institutions
with which it enters into agency agreements regarding the Funds to
agree to conform to such standards.
10. The conditions pursuant to which the exemptive relief is
granted and the duties and responsibilities of the Trustees of the
Funds with respect to the Multiple Distribution System will be set
forth in guidelines that will be furnished to the Trustees as part of
the materials setting forth the duties and responsibilities of the
Trustees.
11. Each Fund will disclose in its prospectus the respective
expenses, performance data, distribution arrangements, services, fees,
sales loads, contingent deferred sales loads, conversion features, 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 shareholder reports of each Fund will
disclose the respective expenses and performance data applicable to
each class of shares. The shareholder reports will contain, in the
statement of assets and liabilities and statement of operations,
information related to the Fund as a whole generally and not on a per
class basis. Each Fund's per share data, however, will be prepared on a
per class basis with respect to the classes of shares of such Fund. To
the extent any advertisement or sales literature describes the expenses
or performance data applicable to any class of shares, it will disclose
the 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 a Fund's net asset value and public
offering prices will present each class of shares separately.
12. The applicant acknowledge that the grant of the exemptive order
requested by the application will not imply Commission approval,
authorization or acquiescence in any particular level of payments that
the Funds may make pursuant to their Plans in reliance on the exemptive
order.
13. Purchase Class shares will convert into Target Class 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) and/or
shareholder servicing fee, if any, that in the aggregate are lower than
the asset-based sales charge and service fee and shareholder servicing
fee to which they were subject prior to the conversion.
14. The initial determination of the Class Expenses, if any, that
will be allocated to a particular class of a Fund and any subsequent
changes thereto will be reviewed and approved by a vote of the Board of
Trustees of the Fund, including a majority of the Independent Trustees.
Any person authorized to direct the allocation and disposition of the
monies paid or payable by the Fund to meet Class Expenses shall provide
to the Board of Trustees, and the Board of Trustees shall review, at
least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
15. If a Fund implements any amendment to its Plans that would
increase materially the amount that may be borne by the Target Class
shares under the Plans, 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 of
shares (``New Target Class''), identical in all material respects to
the Target Class as it existed prior to implementation of the proposal,
no later than the date such 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 the existing Purchase Class shares in all
material respects except that New Purchase Class will convert into New
Target Class. The New Target Class or the New Purchase Class may be
formed without further exemptive relief. Exchanges or conversions
described in this condition shall be effected in a manner that the
Trustees reasonably believe will not be subject to Federal taxation. In
accordance with Condition No. 3, any additional cost associated with
the creation, exchange, or conversion of the New Target Class or the
New Purchase Class shall be borne solely by Citibank and LFBDS.
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.
16. The Administrative 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.
Applicants' CDSC Condition
Applicants agree that any order granting the requested relief shall
be subject to the condition that applicants will comply with the
provisions of proposed rule 6c-10 under the Act (Release No. IC-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. 94-24170 Filed 9-29-94; 8:45 am]
BILLING CODE 8010-01-M
