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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.
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.
EFFECTIVE DATE: The new amendments to the proxy rules are
effective on November 23, 1994. 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, N.W., Mail Stop 10-6, Washington, D.C. 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CFR 270.20a-2 through 20a-4], which are rescinded;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.
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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.
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TABLE OF CONTENTS
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . 4
I. DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . 4
A. Item 22 of Schedule 14A: Reorganization of
Disclosure Rules . . . . . . . . . . . . . . . . . 5
B. General Provisions: Item 22(a) . . . . . . . . . . 6
1. Proxy Statement Format; Summary Table . . . . 6
2. Definitions . . . . . . . . . . . . . . . . . 7
3. Comparative Fee Table . . . . . . . . . . . . 8
4. Voting Results . . . . . . . . . . . . . . . . 9
C. Election of Directors . . . . . . . . . . . . . . . 10
D. Management Compensation . . . . . . . . . . . . . . 11
E. Approval of Investment Advisory Contract . . . . . 14
1. General Partners of the Investment Adviser . . 15
2. Material Factor Discussion . . . . . . . . . . 16
F. Approval of Distribution Plan . . . . . . . . . . . 16
G. Annual Report Delivery Requirements . . . . . . . . 17
H. Other Matters . . . . . . . . . . . . . . . . . . . 20
I. Date of Effectiveness . . . . . . . . . . . . . . . 20
II. COST/BENEFIT OF THE PROPOSALS . . . . . . . . . . . . . 20
III. REGULATORY FLEXIBILITY ACT ANALYSIS . . . . . . . . . . 21
IV. STATUTORY AUTHORITY . . . . . . . . . . . . . . . . . . 21
V. TEXT OF RULE AMENDMENTS . . . . . . . . . . . . . . . . 21
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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.
A. Item 22 of Schedule 14A: Reorganization of Disclosure
Rules
-[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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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.
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]-
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
-[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.
-[5]- The disclosure requirements in item 22 also are
applicable to information statements prepared in
accordance 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.
-[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
(continued...)
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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.
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]-
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
-[7]-(...continued)
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)].
-[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)].
-[10]- See 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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underwriter. The Proposing Release requested comment on whether
the definition should include groups of funds with common
administrators.
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.
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]-
3. Comparative Fee Table
As proposed, item 22(a) would require fund proxy statements
seeking approval of proposals that would increase fees or
-[11]- Rule 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").
-[12]- Subparagraph (a)(1)(v) of item 22.
-[13]- Proposed 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.
-[14]- See infra section I.F.
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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]-
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
-[15]- Subparagraph (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.
-[16]- Rules 20a-2(a)(1)-(4) and 20a-2(a)(9) [17 CFR 270.20a-
2(a)(1)-(4) and (9)].
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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.
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)].
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.
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]-
-[17]- Rule 20a-2(a)(6) [17 CFR 270.20a-2(a)(6)].
-[18]- Rule 20a-2(a)(7)[17 CFR 270.20a-2(a)(7)].
-[19]- Rule 20a-2(a)(5) [17 CFR 270.20a-2(a)(5)].
-[20]- Subparagraphs (b)(1) and (2) of item 22.
-[21]- Subparagraph (b)(5) of item 22.
-[22]- Item 7(b) of Schedule 14A requires this information by
reference to item 401(e) of Regulation S-K.
-[23]- Instruction 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
(continued...)
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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]-
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
-[23]-(...continued)
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.
-[24]- Item 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)].
-[25]- The 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.
-------------------- BEGINNING OF PAGE #11 -------------------
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]-
-[26]- The 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.
-[27]- Funds 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.
-[28]- Subparagraph (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).
(continued...)
-------------------- BEGINNING OF PAGE #12 -------------------
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]-
requiring only disclosure of the amount and percentage
of brokerage commissions paid to affiliates of the
investment adviser;-[30]-
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
eliminating the requirement that the proxy statement
contain a certified balance sheet of the investment
adviser.-[32]-
Commenters generally endorsed these modifications, and the
Commission is adopting them as proposed.-[33]-
-[28]-(...continued)
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).
-[29]- Current 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).
-[30]- Subparagraph (c)(13) of item 22.
-[31]- Subparagraph (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.
-[32]- In 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 fulfil its commitment to the fund
under the investment advisory contract.
-[33]- The Commission also is adopting, as proposed, an
additional disclosure requirement concerning investment
(continued...)
-------------------- BEGINNING OF PAGE #13 -------------------
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.
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]-
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
-[33]-(...continued)
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.
-[34]- Investment Company Act Rel. No. 20472 (Aug. 11, 1994)
[59 FR 42187 (Aug. 17, 1994)].
-[35]- Rule 20a-2(b)(1) [17 CFR 270.20a-2(b)(1)] incorporating
rule 20a-2(a)(2).
-[36]- Subparagraph (c)(2) of item 22.
-------------------- BEGINNING OF PAGE #14 -------------------
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]-
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
-[37]- Section 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.
-[38]- The 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 IV.B.3.
-[39]- Rule 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.
-[40]- See 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).
-------------------- BEGINNING OF PAGE #15 -------------------
board of directors considered in recommending adoption of (or
amendment to) the Rule 12b-1 Plan.-[41]-
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.
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
-[41]- In 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.
-[42]- Funds 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.
-[43]- As 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.
-------------------- BEGINNING OF PAGE #16 -------------------
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.
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]-
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]-
-[44]- In 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).
-[45]- Paragraph (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).
-[46]- Paragraph (a)(3)(iii) of item 22. This provision also
is applicable to information statements. Rule 14c-3
(continued...)
-------------------- BEGINNING OF PAGE #17 -------------------
Those shareholders in need of information contained in the annual
report will, therefore, continue to have access to it.
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]-
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.
-[46]-(...continued)
[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.
-[47]- Instruction 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.
-[48]- Rule 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).
-[49]- Investment Company Act Rel. No. 8752 (Apr. 10, 1975)
[40 FR 17986 (Apr. 24, 1975)].
-------------------- BEGINNING OF PAGE #18 -------------------
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.
200.30-5 [Amended]
2. The authority citation following 200.30-5 is removed.
3. By amending 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.
* * * * *
229.401 [Amended]
5. The authority citation following 229.401 is removed.
6. By amending 229.401 to add an instruction following
paragraph (e) to read as follows:
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 ( 240.14a-101 of this chapter), the registrant may, rather
than listing each such investment company, identify the fund
-------------------- BEGINNING OF PAGE #19 -------------------
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
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 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:
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:
-------------------- BEGINNING OF PAGE #20 -------------------
* * * * *
(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 240.14a-6 to revise the introductory text
of paragraph (i) to read as follows:
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 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:
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 ( 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.
* * * * *
-------------------- BEGINNING OF PAGE #21 -------------------
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 ( 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 ( 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 240.14a-101 to add Item 22 to read as
follows:
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 240.14a-1 (with
respect to proxy soliciting material), in 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 ( 274.11A of this chapter), Item 9 of Form N-2
( 274.11a-1 of this chapter), or Item 6 of Form N-3 ( 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 ( 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:
-------------------- BEGINNING OF PAGE #22 -------------------
(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
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 ( 239.15A); for closed-end
management investment companies, Item 3 of Form N-2 ( 239.14);
and for separate accounts that offer variable annuity contracts,
Item 3 of Form N-3 ( 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
-------------------- BEGINNING OF PAGE #23 -------------------
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 (
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 ( 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
-------------------- BEGINNING OF PAGE #24 -------------------
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 ( 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
-------------------- BEGINNING OF PAGE #25 -------------------
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
---------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Annual Total
Person, Compensa- Retirement Benefits Upon Compensation
Position tion From Benefits Retirement From
Registrant Accrued As Registrant
Part of and Fund
of Fund Complex Paid
Expenses 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 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.
-------------------- BEGINNING OF PAGE #26 -------------------
(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 (
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.
-------------------- BEGINNING OF PAGE #27 -------------------
(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
-------------------- BEGINNING OF PAGE #28 -------------------
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) 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.
-------------------- BEGINNING OF PAGE #29 -------------------
(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.
-------------------- BEGINNING OF PAGE #30 -------------------
(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 240.14c-3 to revise the introductory text
of paragraph (a) and to remove and to reserve paragraph (a)(2) to
read as follows:
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 270.20a-1 to revise the first sentence of
paragraph (a) and to remove paragraph (c) to read as follows:
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 ( 240.14a-1 of this chapter),
Schedule 14A ( 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 270.20a-2, 270.20a-3, and
270.20a-4.
18. By amending 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:
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.
-------------------- BEGINNING OF PAGE #31 -------------------
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 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 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
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
---------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Annual Total
Person, Compensa- Retirement Benefits Upon Compensation
Position tion From Benefits Retirement From
Registrant Accrued As Registrant
Part of and Fund
of Fund Complex Paid
Expenses to Directors
---------------------------------------------------------------
-------------------- BEGINNING OF PAGE #32 -------------------
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
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
* * * * *
-------------------- BEGINNING OF PAGE #33 -------------------
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 ( 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 ( 229.304 of this
chapter).
24. By amending Item 18 of Form N-2 (referenced in
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
---------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Annual Total
Person, Compensa- Retirement Benefits Upon Compensation
Position tion From Benefits Retirement From
Registrant Accrued As Registrant
Part of and Fund
of Fund Complex Paid
Expenses 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
-------------------- BEGINNING OF PAGE #34 -------------------
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 (
229.402(b)(2)(iv) and 229.402(c)).
* * * * *
25. By amending Item 23 of Form N-2 (referenced in
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
-------------------- BEGINNING OF PAGE #35 -------------------
required by Item 304 of Regulation S-K ( 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 ( 239.304 of this
chapter).
26. By amending Item 20 of Form N-3 (referenced in
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").
-------------------- BEGINNING OF PAGE #36 -------------------
(1) Furnish the information required by the following
table:
COMPENSATION TABLE
---------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Annual Total
Person, Compensa- Retirement Benefits Upon Compensation
Position tion From Benefits Retirement From
Registrant Accrued As Registrant
Part of and Fund
of Fund Complex Paid
Expenses 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.
-------------------- BEGINNING OF PAGE #37 -------------------
(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
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 ( 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 ( 229.304 of this
chapter).
* * * * *
By the Commission.
Jonathan G. Katz
Secretary
October 13, 1994
-------------------- BEGINNING OF PAGE #38 -------------------
Note: This appendix to the preamble will not appear in the
Code of Federal Regulations.
APPENDIX
COMPARATIVE FEE TABLE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Existing Fee Proposed
Fee
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.