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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 239, 270, 274 and 275

Release No. 33-7212, IC-21341, IA-1518, File No. S7-25-95

RIN  3235-AG27

Personal Investment Activities of Investment Company Personnel
and Codes of Ethics of Investment Companies and their Investment
Advisers and Principal Underwriters

AGENCY:  Securities and Exchange Commission

ACTION:  Proposed amendments to rules and forms

SUMMARY:  The Commission is proposing amendments to the rule
under the Investment Company Act of 1940 that prohibits
investment company personnel from engaging in fraudulent acts in
connection with their personal transactions in securities held or
to be acquired by the investment company, and requires an
investment company and its investment adviser and principal
underwriter to adopt codes of ethics reasonably designed to
prevent such acts.  The amendments would increase the oversight
role of an investment company's board of directors with respect
to the codes of ethics applicable to the investment company,
improve the manner in which investment company personnel report
their personal securities transactions to their employers, and
clarify certain provisions of the rule (including the scope of
its anti-fraud provision).  Related proposed amendments would
require an investment company to provide information about its
policies concerning personal investment activities in its
prospectus.  The Commission also is proposing conforming changes
to the rule under the Investment Advisers Act of 1940 that
requires an investment adviser to maintain records of its
advisory representatives' personal transactions in securities. 
The proposed amendments are intended to enhance board of director
oversight of the policies governing personal transactions in
securities by investment company personnel and to make available
to the public additional information about these policies.

DATES:  Comments must be received on or before [insert date sixty
days after date of publication in the Federal Register].

ADDRESSES:  Comments should be submitted in triplicate to
Jonathan G. Katz, Secretary, Securities and Exchange Commission,
450 Fifth Street, N.W., Stop 6-9, Washington, D.C. 20549.  All
comment letters should refer to File No. S7-25-95.  All comments
received will be available for public inspection and copying in
the Commission's Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549.

FOR FURTHER INFORMATION CONTACT:  David M. Goldenberg, Senior
Counsel, or Kenneth J. Berman, Assistant Director, at (202) 942-
0690, Office of Regulatory Policy, Division of Investment
Management, 450 Fifth Street, N.W., Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION:  The Commission today is requesting
public comment on proposed amendments to rule 17j-1 [17 CFR
270.17j-1] under the Investment Company Act of 1940 [15 U.S.C.
80a-1 et. seq.] (the "Investment Company Act"), rule 204-2 [17
CFR 275.204-2] under the Investment Advisers Act of 1940 [15
U.S.C. 80b-1 et. seq.] (the "Advisers Act"), Forms N-1A [17 CFR
239.15A, 274.11A], N-2 [17 CFR 239.14, 274.11a-1], N-3 [17 CFR
239.17a, 274.11b] and N-5 [17 CFR 239.24, 274.5] under the
Investment Company Act and the Securities Act of 1933 [15 U.S.C.
77a-77aaa] (the "Securities Act") and Form N-8B-2 [17 CFR 274.12]
under the Investment Company Act.  

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TABLE OF CONTENTS

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . .
I.   BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . .
     A.  Section 17(j) and Rule 17j-1 . . . . . . . . . . . . . .
     B.  Recent Developments Concerning Personal Investment
          Activities  . . . . . . . . . . . . . . . . . . . . . .
II.       DISCUSSION  . . . . . . . . . . . . . . . . . . . . . .
     A.  Role of Fund Boards  . . . . . . . . . . . . . . . . . .
          1.  Initial Reviews and Annual Reports  . . . . . . . .
          2.  Unit Investment Trusts  . . . . . . . . . . . . . .
          3.  Alternative Approaches  . . . . . . . . . . . . .  
     B.  Reports by Access Persons  . . . . . . . . . . . . . . .
          1.  Initial Reports . . . . . . . . . . . . . . . . . .
          2.  Scope of Reporting Requirements . . . . . . . . . .
          3.  Review of Reports . . . . . . . . . . . . . . . . .
          4.  Duplicate Broker Reports  . . . . . . . . . . . . .
     C.  Disclosure of Personal Investing Policies  . . . . . . .
     D.  Applicability of Rule 17j-1 to Options and
          Convertible Securities  . . . . . . . . . . . . . . . .
     E.  Other Amendments . . . . . . . . . . . . . . . . . . . .
          1.  Money Market Instruments  . . . . . . . . . . . . .
          2.  Beneficial Ownership  . . . . . . . . . . . . . . .
          3.  Conforming Amendments to Advisers Act Rules . . . .
III. GENERAL REQUEST FOR COMMENTS . . . . . . . . . . . . . . . .
IV.       COST/BENEFIT ANALYSIS . . . . . . . . . . . . . . . . .
V.   SUMMARY OF REGULATORY FLEXIBILITY ANALYSIS . . . . . . . . .
VI.  STATUTORY AUTHORITY  . . . . . . . . . . . . . . . . . . . .
TEXT OF PROPOSED RULE AND FORM AMENDMENTS . . . . . . . . . . . .

EXECUTIVE SUMMARY

     Conflicts of interest between investment company ("fund")
personnel (such as portfolio managers) and their funds can arise
when these persons buy or sell securities for their own accounts
("personal investment activities").  These conflicts arise
because fund personnel have the opportunity to profit from
information about fund transactions, often to the detriment of
fund investors.  Rule 17j-1 under the Investment Company Act
addresses these conflicts of interest by: (i) prohibiting
fraudulent, deceptive or manipulative acts by fund affiliates and
certain other persons in connection with their personal
transactions in securities held or to be acquired by the fund;
(ii) requiring funds and their investment advisers and principal
underwriters (collectively, "rule 17j-1 organizations") to adopt
codes of ethics containing provisions reasonably necessary to
prevent their "access persons" (generally, those fund personnel
involved in the portfolio management process) from engaging in
conduct prohibited by the rule; and (iii) requiring access
persons to report their personal securities transactions to the
appropriate rule 17j-1 organization.  The rule also imposes
certain recordkeeping requirements.

     The Commission's Division of Investment Management
("Division") recently completed its first detailed study of fund
policies concerning personal investment activities since rule
17j-1 was adopted in 1980.-[1]-  In the report on its study, the
Division recommended several of the amendments to rule 17j-1 that
the Commission is proposing today.

     The proposed amendments are designed to improve the
regulation of personal investment activities in three respects. 

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[1]-     DIVISION OF INVESTMENT MANAGEMENT, SEC, PERSONAL
          INVESTMENT ACTIVITIES OF INVESTMENT COMPANY PERSONNEL
          (1994) ("PIA Report").

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First, the proposals would enhance the oversight of personal
investment activities by (i) requiring management of a fund and
of its investment adviser and principal underwriter, at least
annually, to provide the fund's board of directors with a report
describing issues arising during the previous year under the
codes of ethics applicable to the fund and (ii) requiring access
persons to provide the appropriate rule 17j-1 organization with
information about securities owned by them at the time they
become access persons.

     Second, the proposed amendments are designed to provide the
public with additional information about fund policies concerning
personal investment activities.  The Commission is proposing to
require that a fund's prospectus disclose whether or not the fund
permits its personnel to invest in securities, including
securities that may be purchased or held by the fund.  In
addition, a fund would have to file with the Commission copies of
all codes of ethics applicable to the fund as exhibits to its
registration statement.

     Third, the proposed amendments would tailor rule 17j-1 to
make its scope more consistent with its purpose.  The proposed
amendments would (i) clarify that transactions involving certain
securities related to securities in which a fund invests (such as
debt securities convertible into stock in which the fund invests)
are subject to the rule's anti-fraud provision, (ii) specify that
money market funds and money market instruments are not subject
to the rule's requirements concerning codes of ethics and
transaction reporting, and (iii) clarify the meaning of the term
"beneficial ownership" for purposes of the rule's reporting
requirements for access persons.  The Commission also is
proposing certain conforming changes to the recordkeeping
provisions applicable to investment advisers in rule 204-2 under
the Advisers Act.

I.   BACKGROUND

     When fund personnel buy or sell securities for their
personal accounts, conflicts of interest with fund investors may
arise.  For example, in performing their day-to-day
responsibilities, fund personnel may have access to information
about impending fund transactions that they could use for their
own benefit.  A fund manager also could profit if the manager
causes a fund to purchase or hold portfolio securities in order
to protect or strengthen the manager's personal investments in
these securities.

     Beginning in the early 1960s, Congress and the Commission
sought to devise a regulatory scheme to effectively address these
potential conflicts.-[2]-  These efforts culminated in the
enactment of section 17(j) of the Investment Company Act in 1970
and the adoption by the Commission of rule 17j-1 under the
Investment Company Act in 1980.-[3]-

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[2]-     See, e.g., Report of the Securities and Exchange
          Commission on the Public Policy Implications of
          Investment Company Growth, H.R. Rep. No. 2337, 89th
          Cong., 2d Sess. 200 (1966) ("PPI Report").  In the PPI
          Report, the Commission expressed its concern about the
          "ever present danger" of conflicts of interest that
          arises when fund personnel engage in personal trading. 
          Id. at 195.  The Commission noted a 1963 report that
          had found "widespread" insider trading of fund
          portfolio securities by fund personnel.  Id. at 196. 

-[3]-     Abusive personal investment activities by fund access
          persons are prohibited not only by section 17(j) and
                                                   (continued...)

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     A.  Section 17(j) and Rule 17j-1

     Section 17(j) of the Investment Company Act makes it
unlawful for persons affiliated with a rule 17j-1 organization
(i.e., a fund or its investment adviser or principal
underwriter), in connection with the purchase or sale of
securities held or to be acquired by the fund, to engage in any
fraudulent, deceptive or manipulative act or practice in
contravention of rules and regulations adopted by the Commission.
Section 17(j) authorizes the Commission to adopt rules to address
the conflicts of interest presented by personal securities
trading by these persons, including rules requiring the adoption
of codes of ethics by funds and their investment advisers and
principal underwriters.

     In 1980, the Commission adopted rule 17j-1.-[4]-  The rule,
which has not been amended since its adoption, prohibits
fraudulent, deceptive or manipulative acts by persons affiliated
with a fund or its investment adviser or principal underwriter in
connection with their personal transactions in securities held or
to be acquired by the fund.-[5]-  The rule also (i) requires rule
17j-1 organizations to adopt codes of ethics containing
provisions reasonably necessary to prevent "access persons"-[6]-
from engaging in such fraudulent, deceptive or manipulative acts,
(ii) requires access persons to report their personal securities
transactions to the rule 17j-1 organizations of which they are
access persons at least quarterly, and (iii) requires rule 17j-1
organizations to maintain certain records and to make those
records available for inspection by the Commission.

     Congress gave the Commission the authority to mandate that
codes of ethics restrict or prohibit certain activities of access
persons and other employees.  The Commission recognized when
adopting rule 17j-1, however, that no single set of guidelines

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[3]-(...continued)
          rule 17j-1, but also by other provisions of the federal
          securities laws.  For example, a fund manager who buys
          or sells securities for his or her own account ahead of
          the fund ("front running") or makes investment
          decisions for the fund with the intent to benefit
          personally may violate the anti-fraud provisions of
          section 17(a) of the Securities Act and section 10(b)
          of the Securities Exchange Act of 1934 [15 U.S.C. 78a
          et. seq.] ("Exchange Act") and rule 10b-5 thereunder. 
          The manager also may violate section 17(d) of the
          Investment Company Act and rule 17d-1 thereunder if the
          manager purchases or sells the same securities as the
          fund he or she manages in a joint transaction or
          arrangement.  The manager also could violate section
          206 of the Advisers Act if the manager's personal
          trading defrauds or operates as a fraud on the fund.

-[4]-     Prevention of Certain Unlawful Activities With Respect
          To Registered Investment Companies, Investment Company
          Act Release No. 11421 (Oct. 31, 1980), 45 FR 73915
          ("Adopting Release").

-[5]-     Rule 17j-1(a).

-[6]-     As defined in rule 17j-1(e), "access persons" generally
          include officers, directors and any employees who
          participate in the selection of a fund's portfolio
          securities or who have access to information regarding
          a fund's impending purchases or sales of portfolio
          securities.

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would be appropriate for all funds.  The Commission stated in the
release adopting the rule that "as a matter of policy the
Commission believes the introduction and tailoring of ethical
restraints on the behavior of persons associated with an
investment company can best be left in the first instance to the
directors of the investment company."-[7]-  The rule therefore
does not require that codes of ethics contain any specific
restrictions or prohibitions.  Additionally, while the rule does
require access persons to report their personal securities
transactions, it does not place restrictions on the timing or
nature of those transactions, other than the general restrictions
of the rule's anti-fraud provision.

     B.  Recent Developments Concerning Personal Investment
Activities

     The personal investment activities of fund personnel
received renewed attention early in 1994 after an investment
adviser to several funds dismissed a well-known portfolio
manager, alleging that he had failed to report a number of his
personal securities transactions as required under both the
Investment Company Act and the Advisers Act.-[8]-  At about the
same time, the media reported that the country's largest fund
complex had amended its rules on personal investment activities
in response to certain trading practices.-[9]-  These
developments drew further media and congressional attention to



--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[7]-     Adopting Release, supra note 4, at 73916.  The need for
          flexibility was explicitly recognized by Congress.  The
          House and Senate Reports that accompanied section 17(j)
          noted that:

          The ability to deal with [personal
          securities] transactions by rule is intended
          to permit the Commission to draw flexible
          guidelines to prohibit persons affiliated
          with investment companies, their advisers and
          principal underwriters, from engaging in
          securities transactions for their personal
          accounts when such transactions are likely to
          conflict with the investment programs of
          their companies.

     H.R. Rep. No. 1382, 91st Cong., 2d Sess. 28 (1970) ("House
     Report"); S. Rep. No. 184, 91st Cong., 1st Sess. 29 (1969)
     ("Senate Report").

-[8]-     See, e.g., Robert McGough and Sara Calian, Invesco
          Funds Fires Kaweske, A Star Manager, WALL ST. J., Jan.
          6, 1994, at C1; Chris Wloszczyna, Invesco Funds Fires
          Portfolio Manager, USA TODAY, Jan. 6, 1994, at 2B; Jay
          Mathews, Invesco Fires Manager Over Trade Reports,
          WASH. POST, Jan. 7, 1994, at G2.  The Commission
          instituted an enforcement action in federal district
          court against the portfolio manager in February 1995,
          alleging, among other things, violations of rule
          17j-1(c) under the Investment Company Act.  SEC v. John
          J. Kaweske, Civil Action No. 95-N-296 (D. Colo. filed
          Feb. 6, 1995).

-[9]-     See, e.g., Brett D. Fromson, Fund Managers' Own Trades
          Termed a Potential Conflict; Biggest Mutual Fund Firm
          Tightens Rules, WASH. POST, Jan. 11, 1994, at A1.

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the ethical standards in the fund industry.-[10]-  In response to
the concerns raised, the Division initiated a study of rule 17j-1
and the personal investment activities of portfolio managers and
other fund employees.  The Division released a report on its
study (the "PIA Report") in September 1994.-[11]-

     The Division studied the personal investment activities of
622 fund managers employed by thirty companies that, in the
aggregate, managed 1,053 mutual funds with total assets of $521
billion.  The Division concluded that the existing regulatory
framework governing the personal investment activities of fund
personnel generally has worked well, but can be improved in
certain respects.  The Division recommended that the Commission
amend rule 17j-1 to further protect fund shareholders by (i)

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[10]-    See, e.g., Tom Petruno, When It Comes to Fund Industry,
          Public Trust Must Be A Mutual Issue, L.A. TIMES, Jan.
          12, 1994, at D1; Steve Bailey and Aaron Zitner, Mutual
          Fund Managers Come Under Scrutiny, BOST. GLOBE, Jan.
          16, 1994, at A1; Susan Antilla, Fund Managers Testing
          the Rules, N.Y. TIMES, Jan. 23, 1994, Section 3, at 15;
          Geoffrey Smith, Mutual Funds:  The Rules on Insider
          Trading, Please, BUS. WK., Jan. 31, 1994, at 60.  See
          also Letter from Edward J. Markey, Chairman,
          Subcommittee on Telecommunications and Finance of the
          House Committee on Energy and Commerce, to Arthur
          Levitt, Jr., Chairman, U.S. Securities and Exchange
          Commission (Jan. 11, 1994).

-[11]-    See supra note 1.  The fund industry also responded to
          the concerns.  The Investment Company Institute
          ("ICI"), an association of funds representing 95% of
          total fund assets under management in the United
          States, organized an Advisory Group on Personal
          Investing ("ICI Advisory Group").  The ICI Advisory
          Group, which consisted of six industry representatives,
          conducted a review of practices and standards governing
          personal investing by fund personnel.  See ICI, REPORT
          OF THE ADVISORY GROUP ON PERSONAL INVESTING (1994)
          ("ICI Report").  The ICI Report stated that most codes
          of ethics reviewed by the Advisory Group exceeded the
          requirements of rule 17j-1, but recommended that funds
          adopt additional measures regarding conflicts of
          interest and personal securities transactions in order
          to preserve the confidence of investors.  Id. at iii,
          v.  The ICI's board of governors recommended that all
          rule 17j-1 organizations adopt the recommendations
          contained in the ICI Report.

     The ICI subsequently conducted a survey of its members to
     determine whether the fund industry had adopted the
     recommendations made in the ICI Report.  Eighty-five percent
     of the ICI's member funds responded to the survey.  ICI,
     REPORT TO THE DIVISION OF INVESTMENT MANAGEMENT, U.S.
     SECURITIES AND EXCHANGE COMMISSION: IMPLEMENTATION OF THE
     INSTITUTE'S RECOMMENDATIONS ON PERSONAL INVESTING (1995)
     ("ICI Survey").  The ICI Survey indicated that more than a
     majority of the funds responding to the survey had adopted
     most of the ICI Advisory Group's recommendations, either in
     full or as adapted to meet each fund's unique business
     activities, structure and operations.  As discussed below in
     Part II.A.3, the Commission is seeking comment whether to
     incorporate any of the ICI Advisory Group's recommendations
     into rule 17j-1.

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enhancing the oversight of personal investment policies by fund
boards, (ii) making it easier for funds to monitor the personal
securities transactions of fund personnel, and (iii) making
available to the public additional information about fund
policies on personal investment.  The Commission agrees with the
conclusions contained in the PIA Report and is proposing
amendments that will effect these recommendations.-[12]-

II.       DISCUSSION

     A.  Role of Fund Boards

          1.  Initial Reviews and Annual Reports

     The board of directors or trustees of a fund has a
significant oversight role with respect to the personal
investment activities of fund personnel.-[13]-  The board is
responsible for ensuring that the fund establishes a code of
ethics that satisfies the requirements of rule 17j-1.-[14]-  The
Commission is proposing two amendments to rule 17j-1 that would
facilitate ongoing board oversight of codes of ethics.  First,
the proposed amendments would require a fund's board to
affirmatively approve the fund's code and review the codes of any
investment adviser or principal underwriter whose services it




--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[12]-    The Division made three additional recommendations in
          the PIA Report.  First, the Division recommended that
          the National Association of Securities Dealers, Inc.
          ("NASD") consider adopting a rule requiring its members
          (i) to notify a fund or investment adviser whenever an
          employee opens an account with the member, and (ii)
          upon request, to provide duplicate copies of the
          employee's trade confirmations and account statements
          to the fund or adviser.  Second, the Division
          recommended that the NASD review the applicability of
          its "free-riding" rules (which prohibit NASD members
          from selling "hot issue" securities to their employees)
          to fund personnel.  Finally, the Division recommended
          in the PIA Report that Congress amend section 17(j) to
          expand the Commission's rulemaking authority to define
          and proscribe fraud to include transactions that
          involve financial instruments that are not securities.

     The NASD has advised the Division that its Investment
     Companies Committee has considered and decided not to act on
     the Division's recommendations to the NASD.  The Committee
     concluded that the NASD does not have a mechanism to ensure
     compliance with a new rule requiring a member to notify a
     fund or investment adviser when an employee opens an account
     with the member.  The Committee also concluded that, in the
     absence of a pattern of abuses involving personal investment
     activities, amendments to its "free-riding" rules would not
     be appropriate.

-[13]-    All references in this Release to boards of directors
          include boards of trustees for funds organized as
          business trusts.

-[14]-    As part of its oversight role, the board also is
          responsible for monitoring the operation of the code,
          including making amendments as may be necessary or
          appropriate in light of any violations of the code and
          changing circumstances generally.  See PIA REPORT,
          supra note 1, at 34.

-------------------- BEGINNING OF PAGE #8 -------------------

seeks to retain for the fund.-[15]-  Second, the proposed
amendments would require management of a fund and of its
investment adviser and its principal underwriter to provide the
board, at least annually, with reports describing issues arising
during the previous year under the codes of ethics applicable to
the fund.-[16]-

     Although rule 17j-1 currently requires every fund to have a
code of ethics, the rule does not explicitly require a fund's
board to take any actions regarding the fund's code or other
codes of ethics applicable to the fund.  The Commission believes
that the rule should be more explicit concerning the role of fund
boards.  The Commission has refrained from requiring by rule that
codes of ethics contain specific restrictions, prohibitions or
other provisions, preferring instead that each board establish an
appropriate code for its fund.  Additionally, a code of ethics
that is tailored to the specific characteristics of a fund is
fundamental to assuring that access persons do not engage in
fraudulent or unethical conduct.  It therefore is appropriate
that the rule explicitly require a fund's board to have a
continuing role in overseeing the application of these policies.

     The standard for the board to apply when approving the
fund's code or reviewing the code of an investment adviser or
principal underwriter would be whether the code contains such
provisions as are reasonably necessary to prevent access persons
from violating rule 17j-1's anti-fraud provision.-[17]-  The
factors that the board should consider when making this
determination will necessarily vary depending upon the investment
objectives and policies of the fund, as well as the organization
and activities of the fund's investment adviser and principal
underwriter.  Thus, the Commission is not proposing to include in
the rule a list of the factors a board should consider in
assessing a code of ethics.  The Commission believes, however,
that the consideration of certain basic issues may be
particularly important for all funds.

     As an initial matter, the board should consider whether
personal investing by fund personnel is consistent with the
interests of fund shareholders and should be permitted. 
Additionally, the board should determine whether the code
establishes clear criteria for determining whether a security is
"being considered for purchase" by the fund.-[18]-  Such criteria

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[15]-    Proposed amendment to rule 17j-1(b).  The codes of
          ethics of a fund's investment adviser and principal
          underwriter may be of greater importance than those of
          the fund because the investment adviser and principal
          underwriter typically employ most of the personnel
          involved in fund management.

-[16]-    Proposed rule 17j-1(b)(2).

-[17]-    Proposed rule 17j-1(b)(1)(ii).

-[18]-    Paragraph (e)(6) of rule 17j-1 defines "security held
          or to be acquired" by a fund to mean any security
          which, within the most recent 15 days, (i) is or has
          been held by the fund, or (ii) is being or has been
          considered by the fund or its investment adviser for
          purchase.  When adopting rule 17j-1, the Commission
          indicated that "the mechanics of setting parameters for
          determining when a transaction is `being considered' by
          a particular investment company can best be resolved by
          the investment company, investment adviser or principal
                                                   (continued...)

-------------------- BEGINNING OF PAGE #9 -------------------

may better enable access persons and compliance personnel to
determine whether certain personal securities transactions may
violate the fund's code or rule 17j-1.-[19]-  These criteria also
may serve to remind fund managers of their duty to avoid taking
advantage of investment opportunities that should be brought to
the attention of the fund.-[20]-  Finally, a board should
consider the extent to which the code addresses the potential
violations of rule 17j-1 that may occur when a fund access person
purchases or sells securities held by another fund in the same
complex.-[21]-

     Under the proposed amendments, the board also likely will
wish to determine whether the rule 17j-1 organizations have
instituted such procedures as are reasonably necessary to prevent
violations of their codes.  The rule would not mandate any
particular compliance procedures (other than the rule's existing
transaction reporting requirements).-[22]-  A fund board,
however, should consider the necessity of procedures based on the
circumstances of the fund and the other rule 17j-1 organizations.
A board may want to consider, for example, whether the code and
procedures should include a requirement that all access persons
receive prior approval of their personal securities transactions
("pre-clearance").  The board may decide that pre-clearance is a
necessary part of the code in order to prevent persons from
violating the code and rule 17j-1's anti-fraud provision.-[23]- 

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[18]-(...continued)
          underwriter in the codes of ethics required to be
          adopted under the Rule."  Adopting Release, supra note
          4, at 73919.

-[19]-    The board may conclude, for example, that it is
          appropriate to notify a fund's access persons that all
          securities that could be purchased by the fund are
          deemed "being considered" by the fund.  Alternatively,
          the board may determine that a security is "being
          considered" by the fund once a research report relating
          to that security is prepared by, or received by, the
          fund's investment adviser.

-[20]-    See, e.g., In the Matter of Kemper Financial Services,
          Inc., et. al., Investment Advisers Act Release No. 1494
          (June 6, 1995) (investment adviser and portfolio
          manager found to have violated rule 17j-1(a)(3) under
          the Investment Company Act and the anti-fraud provision
          of the Advisers Act by diverting investment
          opportunities belonging to mutual fund clients to a
          profit-sharing plan established for the benefit of the
          adviser's employees); In the Matter of Joan Conan,
          Investment Advisers Act Release No. 1446 (Sept. 30,
          1994) (portfolio manager found to have violated the
          anti-fraud provision of the Advisers Act by
          misappropriating an investment opportunity of clients
          that were unregistered investment funds).

-[21]-    See infra note 45 and accompanying text.

-[22]-    See Part II.B for a description of, and proposed
          amendments to, these reporting requirements.

-[23]-    Although the rule does not require that funds adopt
          pre-clearance procedures, the Commission notes that the
          ICI Advisory Group recommended that funds adopt these
                                                   (continued...)

-------------------- BEGINNING OF PAGE #10 -------------------

The board also may want to consider whether other types of
reporting requirements, in addition to those required by rule
17j-1, are appropriate for the fund.

     The determinations required by the proposed amendments would
need to be made by a majority of the fund's directors, including
a majority of the independent directors (i.e., directors who are
not "interested persons" of the fund).-[24]-  The role of
independent fund directors in policing conflicts of interest is
central to the Investment Company Act.-[25]-  The codes of ethics
applicable to a fund, and the manner in which these codes are
implemented, should be designed to address the fundamental
conflict of interest that results when fund access persons are in
a position to take personal advantage of the knowledge and
opportunities presented because of their positions.  Thus, it is
appropriate for independent directors to have a primary role in
establishing and overseeing the implementation of the policies
that address this conflict.

     The board's involvement in the personal investment policies
applicable to the fund should not cease after the board's initial
approval or review of a code of ethics.  Continued oversight of
the personal investment policies applicable to the fund is in the
interest of shareholders because it subjects these policies to
independent, objective analysis by the "watchdog" for fund
shareholders.-[26]-  The proposed amendments would require the
management of each rule 17j-1 organization to provide the board
with a report, no less frequently than annually, describing
issues arising during the previous year under the codes of ethics
applicable to the fund.  The report would include, but need not
be limited to, details about code violations, sanctions imposed
in response to those violations, procedures initiated or changed
since the last report, and, in the case of the codes of the
investment adviser or principal underwriter, changes to the code
itself.-[27]-  The proposed amendments also would require the
management of each rule 17j-1 organization to certify to the fund
board, no less frequently than annually, that the organization
has adopted such procedures as are reasonably necessary to
prevent access persons from violating the organization's code of

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[23]-(...continued)
          measures.  ICI REPORT, supra note 11, at 42.  The ICI
          Survey indicated that 69% of the funds responding to
          the survey had adopted the ICI Advisory Group's
          recommendation, and an additional 14% had modified the
          recommendation to reflect their own circumstances.  ICI
          SURVEY, supra note 11, at 26.

-[24]-    See 15 U.S.C. 80a-2(a)(19) (definition of "interested
          person" for purposes of the Investment Company Act).

-[25]-    See, e.g., DIVISION OF INVESTMENT MANAGEMENT, SEC,
          PROTECTING INVESTORS:  A HALF CENTURY OF INVESTMENT
          COMPANY REGULATION 266 (1992).   

-[26]-    See id. at 255-56; PIA REPORT supra note 1, at 34.  

-[27]-    Upon receipt and consideration of a report, a fund
          board may in some cases determine that it is necessary
          to amend the fund's code, or to suggest to an
          investment adviser or principal underwriter that it
          consider amending its code.  Reports prepared for, and
          submitted to, fund boards would be required to be
          maintained with the other records required by rule 17j-
          1.

-------------------- BEGINNING OF PAGE #11 -------------------

ethics.-[28]-  The report and certification requirements are
designed to give the board an opportunity to evaluate and ask
questions about the codes applicable to the fund, the manner in
which they have been implemented, and their continued
effectiveness.-[29]-

     The Commission requests comment on the proposed board
review, annual report and certification requirements.  Are there
other effective means of ensuring that boards are giving enough
attention to the personal investment activities of fund
personnel?  Should the rule explicitly require board review when
there have been material changes to a code or procedures, or when
there have been significant or frequent violations of a code?

          2.  Unit Investment Trusts

     Like other funds, unit investment trusts ("UITs") and their
principal underwriters currently are required by rule 17j-1 to
adopt codes of ethics.-[30]-  Because UITs do not have boards of
directors, however, it would be difficult for them to comply with
the proposed amendments in the same manner as other funds.  The
principal underwriter or depositor of a UIT typically employs
most of the persons having access to information concerning the
UIT's securities.  Under the proposed amendments, the initial
approval and review requirement for a UIT would be fulfilled by
either the principal underwriter or depositor for the UIT.  The
principal underwriter or the depositor would review all of the
codes of ethics applicable to the UIT (i.e., the codes of the
principal underwriter and the UIT) and determine whether the
codes meet the standards described above.-[31]-  Because they do
not have boards of directors, UITs would be exempt from the
proposed annual report and certification requirements.  The

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[28]-    Although the proposed amendments would require a report
          and certification to be delivered to the board only
          annually, more frequent reports may be warranted in
          certain instances, such as when there have been
          particularly significant violations of a code or when
          there have been material changes to a code.  In some
          instances, it may be determined that a particular
          violation or change should be reported to the board at
          its next meeting.

-[29]-    In the ICI Report, the ICI Advisory Group made a
          recommendation similar to that proposed by the
          Commission today.  ICI REPORT, supra note 11, at 47.

-[30]-    A UIT is a type of fund that issues redeemable
          securities representing an undivided interest in a
          portfolio of specified securities.  15 U.S.C. 80a-4(2).

          Typically, UITs are created by a sponsor or "depositor"
          that accumulates a portfolio of securities and deposits
          them with a trustee under the terms of a trust
          indenture.  The UIT portfolio is generally unmanaged;
          thus, UITs do not have investment advisers.  The UIT's
          operations are subject to the terms of the trust
          indenture, which specifies the ongoing responsibilities
          of the trustee, the depositor and other third-party
          service providers.  Thus, a UIT does not have a
          corporate-type management structure.  See generally
          Form N-7 for Registration of Unit Investment Trusts
          Under the Securities Act of 1933 and Investment Company
          Act of 1940, Securities Act Release No. 6580 (May 14,
          1985), 50 FR 21282.

-[31]-    Last sentence of proposed rule 17j-1(b)(1)(ii).

-------------------- BEGINNING OF PAGE #12 -------------------

principal underwriter or depositor would still be responsible,
however, for ensuring that the codes of ethics applicable to the
UIT and the related procedures contain provisions reasonably
necessary to prevent access persons from violating rule 17j-1 and
the codes.

     The Commission recognizes that the absence of board review
places the oversight of the operation of codes applicable to the
UIT in the hands of the very people who may face the conflicts of
interest that the rule is designed to address.  The Commission
requests comment whether an independent person or committee
within the organization of the principal underwriter or depositor
should review these codes.  Should, for example, the underwriter
be required to appoint a committee of persons who are not access
persons to approve or review the codes?  In addition, the
Commission requests comment whether there are other investment
companies that, like UITs, should be exempt from the annual
report and certification provisions.
          3.  Alternative Approaches

     As noted above, rule 17j-1 is based on the premise that rule
17j-1 organizations should be primarily responsible for tailoring
specific restrictions and prohibitions on the personal investment
activities of their access persons.  The Division's PIA Report
concluded that this premise continues to be correct.-[32]- 
Nevertheless, comment is requested whether rule 17j-1 should set
more detailed standards for codes of ethics.

     In its report on personal investment activities, the
Investment Company Institute's Advisory Group on Personal
Investing ("ICI Advisory Group") suggested that codes of ethics
should contain certain minimum substantive restrictions on the
activities of access persons and other investment personnel.  The
ICI Advisory Group recommended, among other things, that codes of
ethics prohibit investment personnel from participating in
initial public offerings, receiving short-term trading profits,
receiving gifts from persons with whom the fund has a business
relationship, and purchasing securities during certain "black-
out periods.-[33]-  The ICI Advisory Group did not recommend that
the Commission amend rule 17j-1 to incorporate these
recommendations.  Should the Commission impose any specific
restrictions on the personal investment policies of rule 17j-1
organizations and their access persons?-[34]-

     B.  Reports by Access Persons

          1.  Initial Reports

     The Commission is proposing that rule 17j-1 require that
every access person-[35]- provide a listing (an "initial report")
of all securities directly or indirectly beneficially owned by

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[32]-    PIA REPORT, supra note 1, at 31.

-[33]-    See ICI REPORT, supra note 11.

-[34]-    Some commentators have advocated more comprehensive
          restrictions, such as banning all personal trading by
          fund personnel.  See, e.g., Stan Hinden, Avoiding
          Conflicts - Real and Perceived, WASH. POST, May 22,
          1994, at H3; Mutual Funds Need Tighter Rules, BUS. WK.,
          Feb. 14, 1994, at 134; Susan Antilla, Fund Managers
          Testing the Rules, N.Y. TIMES, Jan. 23, 1994, Section
          3, at 15.  In the PIA Report, the Division concluded
          that a total prohibition on personal investment
          activities by fund personnel is not warranted.  PIA
          REPORT, supra note 1, at 29.

-[35]-    See supra note 6.

-------------------- BEGINNING OF PAGE #13 -------------------

the access person at the time that he or she becomes an access
person.-[36]-  Paragraph (c) of the rule currently requires every
access person to report to the appropriate rule 17j-1
organization, at least quarterly, all transactions in which the
access person has, or by reason of the transaction acquires, any
direct or indirect beneficial ownership in any security
("quarterly reports").-[37]-  A fund, however, may not be able to
monitor effectively the potential conflicts of interest that
arise when an access person invests for his or her own account
unless fund management knows the identity of all securities held
by the access person, including securities acquired before the
person became an access person.-[38]-  For example, without
knowledge of securities owned by an access person, the fund
cannot adequately monitor if, and the extent to which, the access
person may be making trading decisions on behalf of the fund
regarding securities that the access person holds in his or her
own portfolio.-[39]-

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[36]-    Proposed amendments to rule 17j-1(c)(1).  The report
          would be required to be filed within 10 days of the
          event that causes the employee to become an access
          person (e.g., hiring, promotion, change of position). 
          The initial report would list the title of the
          security, its CUSIP number (if any), the number of
          shares held and the principal amount of the security. 
          The Commission also is proposing to amend paragraph
          (c)(2) of the rule to require quarterly reports to
          include the CUSIP number (if any) for each security for
          which a transaction occurs and the date that the report
          is submitted by the access person.  These amendments
          would assist fund compliance personnel and the
          Commission's inspections staff in evaluating compliance
          with the rule's reporting requirements.  See infra note
          38.

-[37]-    See supra note 5.  In many cases, an employee of an
          investment adviser or principal underwriter may
          technically be an access person of both his or her
          employer and the fund.  The staff of the Division has
          taken the position that if in such a case the employer
          is required by rule 17j-1 to have a code of ethics, the
          employee need only be considered an access person of
          the employer and not of the fund.  See Investment
          Company Institute (pub. avail. Mar. 31, 1981).

-[38]-    See PIA REPORT, supra note 1, at 34.  Not only are the
          reports required by rule 17j-1 important to fund
          management, but they also are important to the
          Commission's inspections staff, which reviews these
          reports and codes of ethics during inspections of rule
          17j-1 organizations.

-[39]-    Although rule 17j-1 does not explicitly prohibit an
          access person from making decisions on behalf of a fund
          regarding securities personally owned by the access
          person, the Commission would expect that codes of
          ethics would address this potential conflict of
          interest, and that boards of directors would wish to
          have the ability to track such decisions by access
          persons in order to determine whether these decisions
          are being inappropriately made.  See PIA REPORT, supra
          note 1, at 24 n.74, 35 n.118.  See also In re ML-Lee
                                                   (continued...)

-------------------- BEGINNING OF PAGE #14 -------------------

     It appears to be common practice in the fund industry to
require personnel to disclose personal securities holdings upon
the commencement of employment.-[40]-   Therefore, the initial
report requirement should not create an additional burden for
most rule 17j-1 organizations.  To prevent duplicative reporting,
the amended rule would provide that if an access person has
previously provided information equivalent to that which would be
in an initial report (whether in a single report or over time in
transactional reports), the access person would not be required
to submit an initial report.-[41]-

     The ICI Advisory Group recommended that access persons file
reports listing all of their securities holdings upon
commencement of employment and thereafter annually.-[42]-  The
Commission requests comment whether an annual reporting
requirement by access persons would be helpful to funds.  To what
extent would such a requirement be an undue burden on the persons
required to file the reports?  The Commission also requests
comment whether ten days is the appropriate amount of time for a
new access person to provide an initial report.  Should new
access persons be given additional time (e.g., 15 or 20 days) to
file these reports?

          2.  Scope of Reporting Requirements

     The proposed amendments would require an access person to
list in an initial report every security (as defined in rule
17j-1) beneficially owned by the access person, regardless of
whether the security is connected to a security that the fund
owns or intends or proposes to acquire at the time that the



--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[39]-(...continued)
          Acquisition Fund II, L.P., 848 F. Supp. 527 (D. Del.
          1994) (rule 17j-1 may be violated if an access person
          causes a fund to purchase or sell securities owned by
          that person, particularly when the access person
          expects to personally benefit by the transaction).

-[40]-    The ICI found that 77% of the fund complexes responding
          to its survey require some form of reporting similar to
          that proposed today.  See ICI SURVEY, supra note 11, at
          31.

-[41]-    Proposed paragraph (c)(3)(v) of rule 17j-1.  The
          proposed exception is intended to give rule 17j-1
          organizations flexibility with respect to the initial
          report requirement.  To comply with the exception, the
          applicable rule 17j-1 organization would have to retain
          all of the previously submitted information so that the
          organization could reconstruct the access person's
          securities holdings on the day that he or she became an
          access person.  Additionally, all of the information
          used to reconstruct the access person's holdings would
          have to be maintained for five years from the date that
          the person becomes an access person, in accordance with
          the recordkeeping requirements of paragraph (d) of the
          rule.  Because the proposed exception could require an
          organization relying on the exception to maintain some
          records for a longer period of time than it otherwise
          would, rule 17j-1 organizations may choose to require
          new access persons to submit new initial reports rather
          than rely on the exception.

-[42]-    See ICI REPORT, supra note 11, at 46.

-------------------- BEGINNING OF PAGE #15 -------------------

access person files the initial report.  This approach departs
from an earlier Division position.-[43]-

     In response to inquiries made shortly after the adoption of
rule 17j-1, the staff of the Division took the position that
reports required to be made pursuant to paragraph (c) of the rule
need be made only with respect to transactions in securities that
may be connected to securities that the fund holds or intends or
proposes to acquire.-[44]-  These requests involved specific
funds with investment objectives that permitted them to invest
only in limited types of securities, such as municipal bonds.

     The Commission believes that limiting the scope of the
rule's reporting requirement may result in gaps in a rule 17j-1
organization's oversight of personal investment activities.  For
example, an employee of an investment adviser may violate the
anti-fraud provision of rule 17j-1 by purchasing a security
intended to be acquired by another fund in the same fund complex,
even if the employee was not involved in the decision to purchase
the security on behalf of the fund.  If the employee did not have
to report the transaction because the fund of which the employee
was an access person did not own, and was not intending or
proposing to acquire, the security, the transaction would escape
the attention of fund compliance personnel.  Comprehensive
reporting requirements for both initial and quarterly reports
would enable fund directors to determine whether access persons
are inappropriately benefitting from their relationship with a
fund, investment adviser or principal underwriter.-[45]-  Thus,
if the proposed amendments are adopted, the rule will be
interpreted as requiring quarterly reports to be filed with
respect to transactions in all securities.  The Commission seeks
comment on the effect that these reporting requirements would
have on access persons and funds.-[46]-

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[43]-    See Alterman Investment Fund, Inc. (pub. avail. Sept.
          17, 1981); Minbanc Capital Corp. (pub. avail. Sept. 17,
          1981); MI Fund, Inc. (pub. avail. Sept. 17, 1981).

-[44]-    Id.

-[45]-    See PIA REPORT, supra note 1, at 34 n.116.  A list of
          all securities owned, purchased and sold by an access
          person also may be a necessary element of the written
          policies that a registered investment adviser must
          establish, maintain and enforce, in accordance with
          section 204A of the Advisers Act, to prevent the misuse
          of material, non-public information by the adviser and
          its personnel.

-[46]-    The facts of some recent enforcement actions brought by
          the Commission have demonstrated that the opportunity
          for abusive practices may exist where a portfolio
          manager or other fund insider receives personal
          investing opportunities in connection with his or her
          recommendation that the fund purchase a specific
          security.  See, e.g., United States v. Ostrander, 999
          F.2d 27 (2nd Cir. 1993) aff'g 792 F. Supp. 241
          (S.D.N.Y. 1992); SEC v. Talton R. Embry, Litigation
          Release No. 13777 (Sept. 9, 1993); SEC v. Benalder
          Bayse, Jr., Litigation Release No. 13145 (Jan. 24,
          1992).  The Division staff expressed a similar concern
          in response to no-action requests regarding rule
          204-2(a)(12) under the Advisers Act of 1940, which
          requires records to be kept of the securities
                                                   (continued...)

-------------------- BEGINNING OF PAGE #16 -------------------

          3.  Review of Reports
     Rule 17j-1 currently requires that rule 17j-1 organizations
inform access persons of their duty to make quarterly reports and
to retain these reports in their records.  The Commission is
proposing to amend rule 17j-1 to specify that the procedures
instituted by rule 17j-1 organizations to prevent violations of
the code must include procedures for the review by appropriate
managerial or compliance personnel of reports submitted by access
persons.-[47]-

     The transaction reporting requirements of rule 17j-1 are
intended to keep rule 17j-1 organizations informed of the
personal investment activities of access persons in order for
these organizations to detect potential conflicts of interest and
abusive practices.  This purpose will be served only if the
reports are reviewed.  Procedures that specify not only that
reports will be reviewed but that also assign the responsibility
for review to specified personnel will increase the likelihood
that the purposes of the reporting requirement will be met.

          4.  Duplicate Broker Reports

     It appears to be increasingly common in the fund industry to
require access persons of funds to direct their brokers to
provide their employers with copies of confirmations of their
personal securities transactions and periodic account statements
(collectively, "duplicate broker reports").-[48]-  The Commission
believes that duplicate broker reports can be an appropriate
substitute for quarterly reporting.  The proposed amendments
would provide that, at the option of the appropriate rule 17j-1
organization, access persons may provide duplicate broker reports
in lieu of the quarterly reports.-[49]-

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[46]-(...continued)
          transactions of investment adviser personnel similar to
          the reports required under paragraph (c) of rule 17j-1.

          See American Syndicate Advisors (pub. avail. Oct. 29,
          1986); Financial Independence Advisers, Inc. (pub.
          avail. Oct. 28, 1985).  The change in the Division's
          interpretation would make it easier for fund compliance
          personnel and the Commission's inspections staff to
          identify cases in which fund insiders receive special
          opportunities in connection with their investing on
          behalf of a fund.

-[47]-    Proposed rule 17j-1(b)(1)(i).  The name of the person
          or persons responsible for reviewing these reports
          would be required to be maintained in an easily
          accessible place for five years under proposed
          amendments to paragraph (d)(4) of the rule.

-[48]-    The ICI Advisory Group recommended that funds adopt
          these measures.  ICI REPORT, supra note 11, at 44.  The
          ICI Survey indicated that 70% of fund complexes
          responding to the survey had adopted the ICI Advisory
          Group's recommendations, and that an additional 14% of
          fund complexes responding to the survey had adapted
          these recommendations to their particular
          circumstances.  ICI SURVEY, supra note 11, at 27.

-[49]-    Proposed rule 17j-1(c)(3)(vi).  The duplicate broker
          report would be required to contain the same
          information that would appear on a quarterly report,
          and must be received by the rule 17j-1 organization
          within 10 days after the end of the quarter in which
                                                   (continued...)

-------------------- BEGINNING OF PAGE #17 -------------------

     C.  Disclosure of Personal Investing Policies

     The Commission is proposing that each fund disclose in its
prospectus that the fund and its investment adviser and principal
underwriter have adopted codes of ethics relating to personal
investment activities and whether or not these codes permit fund
personnel to invest in securities (including securities that may
be purchased or held by the fund) for their own accounts.-[50]- 
The fund also would disclose that these codes are on public file
with, and are available from, the Commission.-[51]-

     As noted in the PIA Report, recent press accounts have
suggested that fund shareholders may not fully understand the
potential conflicts of interest faced by fund managers.-[52]- 
The ICI Advisory Group, in recommending prospectus disclosure
concerning fund codes of ethics, stated that the most recent
controversy over personal investing is "in some significant part
a product of insufficient information regarding current practices
and standards."-[53]-  There currently is no requirement that
funds publicly disclose any information about their codes of
ethics, and recent media accounts have suggested that it often is
difficult to obtain this information.-[54]-  The Commission

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[49]-(...continued)
          the transaction takes place.  A duplicate broker report
          that does not contain all of the information required
          by paragraph (c)(2) would satisfy the rule if the
          missing information were contained in the records of
          the appropriate rule 17j-1 organization.

-[50]-    If a fund is not required to have a code of ethics, the
          proposed amendment would not require any prospectus
          disclosure of that fact.  A fund that invests only in
          the securities of another fund (as is the case with
          "master/feeder" funds or variable annuities structured
          as unit investment trusts that invest in an underlying
          fund) would be required to disclose the requested
          information for the fund in which it invests and for
          such fund's investment adviser and principal
          underwriter.  See Letter from Richard C. Breeden,
          Chairman, SEC, to John D. Dingell, Chairman, Committee
          House Committee on Energy and Commerce (Apr. 15, 1992),
          at Part III; Letter from Carolyn B. Lewis, Assistant
          Director, Division of Investment Management, SEC, to
          Registrants (Feb. 22, 1993), at Comment II.H.  The new
          disclosure would be required under proposed amendments
          to Item 5 of Form N-1A, Item 9 of Form N-2, Item 6 of
          Form N-3, Item 3 of Form N-5 and Item 41 of Form
          N-8B-2.

-[51]-    The Commission also is proposing that a fund be
          required to file with the Commission all codes of
          ethics applicable to the fund as exhibits to the fund's
          registration statement.  See infra text accompanying
          note 57.

-[52]-    PIA REPORT, supra note 1, at 13, 33.

-[53]-    ICI REPORT, supra note 11, at 49.

-[54]-    See, e.g., Christopher Phillips, Keeping Your Fund
          Manager Honest, KIPLINGER'S PERS. FIN. MAG., Apr. 1994,
          at 57, 58; John Accola, Only 1 of Top 4 Mutual Fund
          Firms Reveals Ethics Codes, ROCKY MOUNTAIN NEWS, Feb.
                                                   (continued...)

-------------------- BEGINNING OF PAGE #18 -------------------

believes that disclosure concerning the existence of fund
personal investing policies to investors not only would provide
investors with information they may want when making investment
decisions, but also may encourage fund boards to exercise greater
care in considering the contents of codes of ethics applicable to
their funds.

     The Commission believes that the proposed prospectus
disclosure can be brief and clear, and thus it is consistent with
the Commission's efforts to make prospectuses easier to read for
investors.-[55]-  The Commission requests comment whether a more
detailed description should be provided in the Statement of
Additional Information ("SAI") or in the prospectus.  If a fund's
code of ethics conforms to a generally accepted industry norm,
should a statement to that effect be sufficient to satisfy this
requirement?-[56]-  Commenters should indicate how an industry
norm can be identified, and whether divergences from the norm
that reflect the particular situations of the fund should be
disclosed.
     The Commission believes that the codes of ethics applicable
to a fund should be available to the public.  The Commission
therefore is proposing that each fund file all codes of ethics
applicable to it as an exhibit to its registration
statement.-[57]-  Making codes of ethics publicly available will

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[54]-(...continued)
          6, 1994, at 93A.  See also John Accola, Janus First to
          Announce Revised Code of Ethics, ROCKY MOUNTAIN NEWS,
          Jan. 15, 1995, at 98A (describing how the fund group
          provided a general outline of its code after many
          investor requests but had been advised by its attorneys
          not to release the complete document).

-[55]-    See, e.g., Arthur Levitt, Chairman, SEC, Taking the
          Mystery Out of the Marketplace: The SEC's Consumer
          Education Campaign, Remarks before the National Press
          Club (Oct. 13, 1994); Jeffrey M. Laderman, The
          Prospectus Tries Plain Speaking, BUS. WK., Aug. 14,
          1995, at 72; Stan Hinden, Investor Protection, Plain
          and Simple; The SEC Unveils a New Fund Prospectus
          Written in Basic, Understandable Language, WASH. POST,
          July 30, 1995, at H3; Albert B. Crenshaw, SEC Ponders
          How to Make Prospectuses Speak Plainly, WASH. POST,
          Oct. 16, 1994, at H1, H12. 

-[56]-    The ICI Advisory Group recommended certain minimum
          standards for all codes of ethics, such as prohibiting
          fund personnel from investing in initial public
          offerings, receiving short-term trading profits, and
          receiving gifts.  See ICI REPORT, supra note 11.  The
          ICI Survey indicated that a majority of fund complexes
          that responded to the survey are in some manner
          adopting these standards.  See ICI SURVEY, supra note
          11.

-[57]-    If a fund is not required to have a code of ethics
          because it is a money market fund or because its
          investment policies permit it to invest only in
          securities that are exempt from the definition of
          "security" in rule 17j-1(e)(5), the fund would not be
          required to file any code, but would indicate on its
          exhibit list the reason that no code of ethics is being
          filed.  If the fund invests only in the securities of
                                                   (continued...)

-------------------- BEGINNING OF PAGE #19 -------------------

permit the financial press and market professionals to obtain
information about personal investment policies and to disseminate
this information to the public.-[58]-  The Commission requests
comment whether funds should be required to send copies of their
codes of ethics to investors upon request.

     D.  Applicability of Rule 17j-1 to Options and Convertible
Securities

     Paragraph (a) of rule 17j-1 prohibits fraudulent, deceptive
or manipulative acts by fund affiliates and certain other fund
insiders in connection with their personal transactions in
securities held or to be acquired by the fund.  The Commission is
proposing to amend rule 17j-1 to clarify that this anti-fraud
provision applies to any purchase or sale of an option for, or a
security that is exchangeable for or convertible into, a security
that is held or to be acquired by a fund (collectively, "related
securities").-[59]-

     Congress contemplated that the Commission's rules "could
apply to insider trading in the convertible securities, options
and warrants of issuers whose underlying securities are owned by
an investment company with which the insider is
affiliated."-[60]-  The value of a related security often is
directly affected by the value of the underlying security.  A
fund insider who purchases or sells such a related security could
improperly benefit from that transaction to the same extent as an
insider who conducts a similar transaction in the underlying
security.-[61]-  The fact that the transaction involves a related
security rather than the underlying security does not diminish
its potential for providing an improper benefit to the insider at
the expense of the fund and its shareholders.

     The Commission requests comment whether this amendment would
appropriately clarify the scope of the rule.  Should paragraph

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[57]-(...continued)
          another fund (as is the case with "master/feeder"
          funds), the fund would be required to file the codes of
          ethics applicable to the fund in which it invests.  The
          exhibits would be required under proposed amendments to
          Item 24 of Forms N-1A and N-2, Item 28 of Form N-3, the
          Instructions As To Exhibits of Form N-5 and Part IX of
          Form N-8B-2.

-[58]-    Prior to the adoption of Form N-SAR [17 CFR 249.330,
          274.101] in 1985, funds made periodic reports on Form
          N-1R.  Funds were required to file a copy of any codes
          of ethics or other written conflicts policies as
          exhibits to the form.  See, e.g. Prevention of Unlawful
          Activities with Respect to Registered Investment
          Companies, Investment Company Act Release No. 10162
          (Mar. 20, 1978), 43 FR 12721.  Form N-SAR does not
          include a similar requirement.

-[59]-    Proposed amendment to rule 17j-1(e)(6).

-[60]-    House Report, supra note 7, at 28; Senate Report, supra
          note 7, at 29.

-[61]-    Similarly, a fund insider who purchases or sells an
          underlying security when the fund holds or intends to
          purchase the related security could, in some instances,
          improperly benefit from that transaction.  A security
          that underlies an option, warrant or convertible
          security held by a fund generally would be a security
          that is being considered for purchase by the fund.

-------------------- BEGINNING OF PAGE #20 -------------------

(a) of rule 17j-1 incorporate other standards to define the types
of related securities that fall within the scope of the rule,
such as the standard used to determine whether an arrangement
creates a "pecuniary interest" in an equity security for purposes
of section 16 under the Securities Exchange Act of 1934
("Exchange Act")?-[62]-

     E.  Other Amendments

          1.  Money Market Instruments

     Money market instruments and shares of open-end funds would
appear to present little opportunity for the type of improper
trading that rule 17j-1 is intended to cover.-[63]-  The
Commission therefore excepted bankers' acceptances, bank
certificates of deposit, commercial paper and shares of open-end
funds from the definition of "security" for purposes of rule
17j-1.-[64]-  Since the adoption of the rule, the Division has
issued several no-action and interpretive letters generally
restating the Commission's position that all money market
instruments (and not only those specified by the rule) are
excepted from the rule's definition of "security."-[65]-  The
Commission proposes to amend the definition of "security" in the
rule to specifically provide that, in addition to the money
market instruments currently listed, repurchase agreements and
other high quality short-term debt instruments also are excepted



--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[62]-    See rule 16a-1(a)(2) [17 CFR 240.16a-1(a)(2)] under the
          Exchange Act, which provides that certain persons are
          deemed to beneficially own specified equity securities
          if they have a "direct or indirect pecuniary interest"
          in the securities.  The rule defines a pecuniary
          interest in an equity security as "the opportunity,
          directly or indirectly, to profit or share in any
          profit derived from a transaction in the subject
          securit[y]."  The rule includes examples of "indirect
          pecuniary interests," such as a general partner's
          proportionate interest in a portfolio of securities
          held by the partnership, certain performance-based fee
          arrangements, and a person's interest in securities
          held in a trust.  As noted below, this definition is
          being incorporated into the rule's reporting
          provisions.  See infra note 69 and accompanying text.

-[63]-    See Adopting Release, supra note 4, at 73919.

-[64]-    Rule 17j-1(e)(5).  The rule also excepts "securities
          issued by the Government of the United States" from the
          definition.  The proposed amendments would change this
          exception to read "direct obligations of the Government
          of the United States" in order to conform the exception
          to the exception for these securities listed in rules
          204-2(a)(12) and 204-2(a)(13) under the Advisers Act. 
          See infra part II.E.3.  See also, ACM Government Income
          Fund, Inc. (pub. avail. Dec. 15, 1988) (Division staff
          interprets the reference to government securities in
          rule 17j-1(e)(5) to refer only to direct obligations of
          the United States, and not to obligations of
          instrumentalities).

-[65]-    See, e.g., The Mexico Fund, Inc. (pub. avail. Aug. 23,
          1982); The Securities Groups Money Fund, Inc. (pub.
          avail. May 6, 1982); Institutional Liquid Assets (pub.
          avail. July 6, 1981).

-------------------- BEGINNING OF PAGE #21 -------------------

from the definition.-[66]-  The proposed amendments also provide
that money market funds are not required to adopt codes of
ethics.-[67]-  The Commission requests comment whether there are
other types of securities that, like money market instruments,
would appear to present little opportunity for the type of
improper trading that rule 17j-1 is intended to cover, and thus
should be excepted from the definition of "security" for purposes
of the rule.

          2.  Beneficial Ownership

     Rule 17j-1 currently provides that, for purposes of the
reporting requirement of paragraph (c) of the rule, beneficial
ownership should be interpreted in a manner that is consistent
with the way that term is interpreted for purposes of Section 16
of the Exchange Act.  In 1991, the Commission adopted revised
rule 16a-1 under the Exchange Act in part to clarify the meaning
of beneficial ownership for purposes of section 16.-[68]- 
Shortly thereafter, the Division issued a letter stating that the
definition of beneficial ownership provided in newly adopted rule
16a-1(a)(2) under the Exchange Act should be used when
determining beneficial ownership for purposes of paragraph (c) of
rule 17j-1.-[69]-  The Commission proposes to amend rule 17j-1(c)
to incorporate this interpretation.

          3.  Conforming Amendments to Advisers Act Rules

     Under paragraphs (a)(12) and (a)(13) of rule 204-2 under the
Advisers Act, every investment adviser is required to keep
records of the personal securities transactions of the adviser
and its "advisory representatives" (as defined in the rule). 
Although the purposes of these paragraphs are substantially the
same as the purposes of paragraph (c) of rule 17j-1, the two
rules except transactions in different securities from their
respective reporting/recordkeeping requirements.  Currently, the
rule under the Advisers Act excepts from its recordkeeping
requirements only transactions in government securities.-[70]- 

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[66]-    Proposed amendment to rule 17j-1(e)(5).  The Commission
          interprets "high quality short-term debt instrument" to
          mean any instrument having a maturity at issuance of
          less than 366 days and which is rated in one of the
          highest two rating categories by a Nationally
          Recognized Statistical Rating Organization, or which is
          unrated but is of comparable quality.

-[67]-    Proposed amendment to rule 17j-1(b).  This is
          consistent with an interpretive position taken by the
          Division staff that funds that invest only in
          securities that are excepted from the definition of
          "security" in rule 17j-1, and their investment advisers
          and principal underwriters, are not required to adopt
          codes of ethics.  Investment Company Institute (pub.
          avail. Mar. 31, 1981).

-[68]-    See Ownership Reports and Trading by Officers,
          Directors and Principal Security Holders, Securities
          Exchange Act Release No. 28869 (Feb. 8, 1991), 56 FR
          7242.  See also supra note 62.

-[69]-    See Investment Company Institute (pub. avail. July 31,
          1991).

-[70]-    The Division staff has issued several no-action letters
          stating that transactions in shares of funds
          unaffiliated with the investment adviser are exempt
                                                   (continued...)

-------------------- BEGINNING OF PAGE #22 -------------------

The Commission believes the reporting requirements for the two
rules should cover the same securities.  Therefore, the
Commission is proposing to amend rules 204-2(a)(12) and
204-2(a)(13) to except from the recordkeeping requirement
transactions in securities that are (i) direct obligations of the
U.S. Government, (ii) high quality short-term instruments,-[71]-
including but not limited to bankers' acceptances, bank
certificates of deposit, commercial paper and repurchase
agreements, and (iii) shares of registered open-end investment
companies.  The Commission also proposes to incorporate the
definition of beneficial ownership in rule 16a-1(a)(2) under the
Exchange Act into rule 204-2.-[72]-

III. GENERAL REQUEST FOR COMMENTS

     Any interested persons wishing to submit written comments on
the rule and form changes that are the subject of this Release,
to suggest additional changes, or to submit comments on other
matters that might have an effect on the proposals contained in
this Release, are requested to do so.

IV.       COST/BENEFIT ANALYSIS

     Funds and the public would benefit from the proposed
amendments because the amendments would help prevent fraudulent
activity, the costs to the public and shareholders of which could
far exceed the cost of compliance with the proposed amendments.

     The proposed amendments would impose certain additional
costs on rule 17j-1 organizations and their access persons to the
extent that these organizations do not currently require their
access persons to file initial reports listing all securities
held by the access persons, and to the extent the currently
required quarterly reports do not include all securities
transactions by access persons.  Because access persons already
are required by rule 17j-1 to file quarterly reports, however,
the cost to these entities of accommodating initial reports is
estimated to be minimal.  The costs to access persons of
compiling such reports also is estimated to be minimal.

     Funds would incur additional costs for the proposed initial
review of the codes applicable to the funds, the annual report
and certification from fund management, the additional prospectus
disclosure and the filing of applicable exhibits under the
proposed amendments.  However, in certain cases, fund costs would
decrease because the proposed amendments would expand the list of
securities exempt from the recordkeeping requirements.

V.   SUMMARY OF REGULATORY FLEXIBILITY ANALYSIS

     The Commission has prepared an Initial Regulatory
Flexibility Analysis in accordance with 5 U.S.C. 603 regarding
amendments to rule 17j-1 under the Investment Company Act and
rule 204-2 under the Advisers Act, and amendments to fund
registration forms under the Investment Company Act and the
Securities Act.  The analysis notes that the amendments are
designed to improve the regulation of personal investment
activities by enhancing the oversight of these activities by rule

--------- FOOTNOTES ---------

--------- FOOTNOTES ---------
-[70]-(...continued)
          from the recordkeeping requirements of paragraphs
          (a)(12) and (a)(13) of rule 204-2.  See, e.g.,
          Massachusetts Financial Services Co. (pub. avail. Oct.
          6, 1992).  The Division staff also currently takes the
          position that transactions in shares of affiliated
          open-end funds are exempt from the recordkeeping
          requirements.

-[71]-    See supra note 66.

-[72]-    See supra note 69 and accompanying text.

-------------------- BEGINNING OF PAGE #23 -------------------

17j-1 organizations, providing the public with additional
information about fund personal investment policies and making
the scope of rule 17j-1 more consistent with its purpose.  Cost-
benefit information reflected in the "Cost/Benefit Analysis"
section of this Release also is reflected in the analysis.  A
copy of the Initial Regulatory Flexibility Analysis may be
obtained by contacting David M. Goldenberg, Securities and
Exchange Commission, 450 Fifth Street, N.W., Mail Stop 10-2,
Washington, D.C. 20549.

VI.  STATUTORY AUTHORITY

     The Commission is proposing to amend rule 17j-1 pursuant to
the authority set forth in sections 17(j) and 38(a) of the
Investment Company Act [15 U.S.C. 80a-17(j) and 80a-37(a)].  The
amendments to registration forms are proposed pursuant to the
authority set forth in sections 6, 7(a), 10 and 19(a) of the
Securities Act [15 U.S.C. 77f, 77g(a), 77j, 77s(a)], and sections
8(b), 24(a) and 38(a) of the Investment Company Act [15 U.S.C.
80a-8(b), 80a-24(a) and 80a-37(a)].  The amendments to rule 204-
2 under the Advisers Act are proposed pursuant to the authority
set forth in sections 204, 206(4) and 211(a) of the Advisers Act
[15 U.S.C. 80b-4, 80b-6(4) and 80b-11(a).]

TEXT OF PROPOSED RULE AND FORM AMENDMENTS

List of subjects in 17 CFR Parts 239, 270, 274 and 275

     Investment companies, Reporting and recordkeeping
requirements, Securities

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

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

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

     Authority:  15 U.S.C. 80a-1 et seq., 80a-37, 80a-39 unless
otherwise noted;

*    *    *    *    *

     2.  Section 270.17j-1 is revised to read as follows:

Section 270.17j-1 Certain unlawful acts, practices, or courses of
business and requirements relating to codes of ethics with
respect to registered investment companies.

     (a) It shall be unlawful for any affiliated person of or
principal underwriter for a registered investment company, or any
affiliated person of an investment adviser of or principal
underwriter for a registered investment company in connection
with the purchase or sale, directly or indirectly, by such person
of a security held or to be acquired, as defined in this section,
by such registered investment company:

     (1) To employ any device, scheme or artifice to defraud such
registered investment company;

     (2) To make to such registered investment company any untrue
statement of a material fact or omit to state to such registered
investment company a material fact necessary in order to make the
statements made, in light of the circumstances under which they
are made, not misleading;

     (3) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon any
such registered investment company; or

     (4) To engage in any manipulative practice with respect to
such registered investment company.

     (b)(1)(i) Every registered investment company, other than a
money market fund, and each investment adviser of and principal
underwriter for such investment company, shall  have a written
code of ethics containing provisions reasonably necessary to
prevent its access persons from engaging in any act, practice, or
course of business prohibited by paragraph (a) of this section

-------------------- BEGINNING OF PAGE #24 -------------------

and shall use reasonable diligence, and institute procedures
reasonably necessary, including procedures by which the reports
required by paragraph (c) of this section are reviewed by
appropriate management or compliance personnel, to prevent
violations of such code.

     (ii) The board of directors of the investment company shall
approve the code of the investment company.  Prior to retaining
the services of an investment adviser or principal underwriter,
the board of directors shall review the codes of ethics adopted
pursuant to paragraph (b)(1)(i) of this section by such
investment adviser or principal underwriter, and shall receive a
certification from such investment adviser or principal
underwriter that it has adopted such procedures as are reasonably
necessary to prevent access persons from violating such code. 
When approving or reviewing a code of ethics pursuant to this
paragraph (b)(1)(ii), a majority of the directors of the
investment company, including a majority of the directors who are
not interested persons thereof, shall determine whether the code
contains such provisions as are reasonably necessary to prevent
access persons from engaging in any act, practice, or course of
business prohibited by paragraph (a) of this section.  In the
case of a unit investment trust, the approval and review required
by this paragraph (b)(1)(ii) shall be conducted by the principal
underwriter or depositor of such unit investment trust.

     (2) No less frequently than annually, the management of
every investment company (other than a unit investment trust) and
of its investment adviser and principal underwriter shall furnish
to the directors of the investment company a report:

     (i) Describing issues arising under the applicable code of
ethics since the last report to the board, including, but not
limited to, information about violations of the code, sanctions
imposed in response to such violations, changes made to the code
or procedures, and any proposed or recommended changes to the
code or procedures; and 

     (ii) Certifying that the investment company, investment
adviser or principal underwriter, as applicable, has adopted such
procedures as are reasonably necessary to prevent access persons
from violating the code.

     (3) The requirements of paragraphs (b)(1) and (b)(2) of this
section shall not apply to any underwriter:

     (i) Which is not an affiliated person of the registered
investment company or its investment adviser; and

     (ii) None of whose officers, directors or general partners
serves as an officer, director or general partner of such
registered investment company or investment adviser.

     (c)(1) Every access person of a registered investment
company, other than a money market fund, or of an investment
adviser of or principal underwriter for such investment company
shall report to that investment company, investment adviser or
principal underwriter:

     (i) No later than 10 days after the date that such person
becomes an access person, the title, CUSIP number (if any),
number of shares and principal amount with respect to each
security in which the access person had any direct or indirect
beneficial ownership at the time such person became an access
person; and

     (ii) No later than 10 days after the end of a calendar
quarter, the information described in paragraph (c)(2) of this
section with respect to any transactions during that quarter in
any security in which the access person had, or by reason of such
transaction acquired, any direct or indirect beneficial ownership
in the security.

-------------------- BEGINNING OF PAGE #25 -------------------

     (2)  Reports required to be made pursuant to paragraph
(c)(1)(ii) of this section shall contain the following
information:

     (i) The date of the transaction, the title, CUSIP number (if
any) and number of shares, and the principal amount of each
security involved;

     (ii) The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);

     (iii) The price at which the transaction was effected;

     (iv) The name of the broker, dealer or bank with or through
which the transaction was effected; and

     (v) The date that the report is being submitted by the
access person.

     (3) Notwithstanding paragraph (c)(1) of this section, no
person shall be required to make a report:

     (i) With respect to transactions effected for any account
over which such person does not have any direct or indirect
influence or control;

     (ii) If such person is not an "interested person" of a
registered investment company within the meaning of section
2(a)(19) of the Act [15 U.S.C. 80a-2(a)(19)], and would be
required to make such a report solely by reason of being a
director of such investment company, except where such director
knew or, in the ordinary course of fulfilling his official duties
as a director of the registered investment company, should have
known that during the 15-day period immediately preceding or
after the date of the transaction in a security by the director
such security is or was purchased or sold by such investment
company or such purchase or sale by such investment company is or
was considered by the investment company or its investment
adviser;

     (iii) Where the principal underwriter, as to which such
person is an access person:

     (A) Is not an affiliated person of the registered investment
company or any investment adviser of such investment company; and

     (B) Has no officers, directors or general partners who serve
as officers, directors or general partners of such investment
company or any such investment adviser; 

     (iv) Where a report made to an investment adviser would
duplicate information recorded pursuant to Sections
275.204-2(a)(12) or 275.204-2(a)(13) of this chapter;

     (v) Where a report to be made under paragraph (c)(1)(i) of
this section would duplicate information that:

     (A) Already has been provided to the investment company,
investment adviser or principal underwriter; 

     (B) Would enable the investment company, investment adviser
or principal underwriter to reconstruct the person's securities
holdings at the time that the person became an access person; and

     (C) Will be maintained in accordance with the requirements
of paragraph (d)(3) of this section from the date that such
person becomes an access person; or

     (vi) Where a report to be made under paragraph (c)(1)(ii) of
this section would duplicate information contained in a broker
trade confirmation or account statement received by the
investment company, investment adviser or principal underwriter
with respect to such person in the time period required by that
paragraph, provided that all of the information required by
paragraph (c)(2) of this section is contained in such broker
trade confirmation or account statement or is noted in the
records of such investment company, investment adviser or
principal underwriter.

-------------------- BEGINNING OF PAGE #26 -------------------

     (4) Each registered investment company, investment adviser
and principal underwriter to which reports are required to be
made pursuant to this section shall identify all access persons
who are under a duty to make such reports to it and shall inform
such persons of such duty.

     (5) Any report required by paragraph (c)(1) of this section
may contain a statement that the report shall not be construed as
an admission by the person making such report that he or she has
any direct or indirect beneficial ownership in the security to
which the report relates.  For purposes of this section,
beneficial ownership shall be interpreted in the same manner as
it would be under Section 240.16a-1(a)(2) of this chapter in
determining whether a person has beneficial ownership of a
security for purposes of section 16 of the Securities Exchange
Act of 1934 [15 U.S.C. 78p] and the rules and regulations
thereunder.

     (d) Each registered investment company, investment adviser
and principal underwriter which is required to adopt a code of
ethics or to which reports are required to be made by access
persons shall, at its principal place of business, maintain
records in the manner and to the extent set forth in this
paragraph (d), and make such records available to the Commission
or any representative thereof at any time and from time to time
for reasonable periodic, special or other examination:

     (1) A copy of each such code of ethics which is, or at any
time within the past five years has been, in effect shall be
preserved in an easily accessible place.

     (2) A record of any violation of such code of ethics, and of
any action taken as a result of such violation, shall be
preserved in an easily accessible place for a period of not less
than five years following the end of the fiscal year in which the
violation occurs.

     (3)  A copy of each report made by an access person pursuant
to this section, including any information provided in lieu of
such reports pursuant to paragraphs (c)(3)(v) and (c)(3)(vi) of
this section, shall be preserved for a period of not less than
five years from the end of the fiscal year in which it is made,
the first two years in an easily accessible place.

     (4)  A list of all persons who are, or within the past five
years have been, required to make reports pursuant to this
section, and a list of all persons responsible for reviewing such
reports, shall be maintained in an easily accessible place.

     (5)  A copy of each report required by paragraph (b)(2) of
this section shall be maintained for a period of not less than
five years from the date such report is made, the first two years
in an easily accessible place.

     (e) As used in this section:

     (1) Access person means:

     (i) With respect to a registered investment company or an
investment adviser thereof, any director, officer, general
partner, or advisory person, as defined in this section, of such
investment company or investment adviser.
     (ii) With respect to a principal underwriter, any director,
officer, or general partner of such principal underwriter who in
the ordinary course of his business makes, participates in or
obtains information regarding the purchase or sale of securities
for the registered investment company for which the principal
underwriter so acts or whose functions or duties as part of the
ordinary course of his business relate to the making of any
recommendation to such investment company regarding the purchase
or sale of securities.

     (iii) Notwithstanding the provisions of paragraph (e)(1)(i)
of this section, where the investment adviser is primarily
engaged in a business or businesses other than advising

-------------------- BEGINNING OF PAGE #27 -------------------

registered investment companies or other advisory clients, the
term access person shall mean any director, officer, general
partner, or advisory person of the investment adviser who, with
respect to any registered investment company, makes any
recommendation, participates in the determination of which
recommendation shall be made, or whose principal function or
duties relate to the determination of which recommendation shall
be made to any registered investment company;  or who, in
connection with his duties, obtains any information concerning
securities recommendations being made by such investment adviser
to any registered investment company.

     (iv) An investment adviser is "primarily engaged in a
business or businesses other than advising registered investment
companies or other advisory clients" when, for each of its most
recent three fiscal years or for the period of time since its
organization, whichever is lesser, the investment adviser
derived, on an unconsolidated basis, more than 50 percent of its
total sales and revenues and more than 50 percent of its income
(or loss) before income taxes and extraordinary items from such
other business or businesses.

     (2) Advisory person of a registered investment company or an
investment adviser thereof means:

     (i) Any employee of such company or investment adviser (or
of any company in a control relationship to such investment
company or investment adviser) who, in connection with his
regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by a
registered investment company, or whose functions relate to the
making of any recommendations with respect to such purchases or
sales;  and

     (ii) Any natural person in a control relationship to such
company or investment adviser who obtains information concerning
recommendations made to such company with regard to the purchase
or sale of a security.
     (3) Control shall have the same meaning as that set forth in
section 2(a)(9) of the Act [15 U.S.C. 80a-2(a)(9)].

     (4) Purchase or sale of a security includes, inter alia, the
writing of an option to purchase or sell a security.

     (5) Security shall have the meaning set forth in section
2(a)(36) of the Act [15 U.S.C. 80a-2(a)(36)], except that it
shall not include:

     (i) Direct obligations of the Government of the United
States;

     (ii) High quality short-term debt instruments, including but
not limited to bankers' acceptances, bank certificates of
deposit, commercial paper and repurchase agreements; and

     (iii) Shares of registered open-end investment companies.

     (6) Security held or to be acquired by a registered
investment company means:

     (i) Any security as defined in this section which, within
the most recent 15 days:

     (A) Is or has been held by such company; or

     (B) Is being or has been considered by such company or its
investment adviser for purchase by such company; and

     (ii)  Any option to purchase or sell, and any security
convertible into or exchangeable for, a security described in
paragraph (e)(6)(i) of this section.

PART 239 - FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

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

     3.  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,

-------------------- BEGINNING OF PAGE #28 -------------------

79m, 79n, 79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless
otherwise noted.

*    *    *    *    *

     4.  The authority citation for Part 274 continues 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.

     5.  Item 5 of Form N-1A [referenced in Sections 239.15A and
274.11A] is amended by adding paragraph (h) and an instruction to
read as follows:

     Note:  The text of Form N-1A does not, and the amendments to
the form will not, appear in the Code of Federal Regulations.

FORM N-1A

*    *    *    *    *

Item 5.  Management of the Fund

*    *    *    *    *

     (h) a brief statement explaining (i) that the Registrant and
its investment adviser and principal underwriter have adopted
codes of ethics that have been filed with the Commission, (ii)
whether or not these codes of ethics permit personnel subject to
the codes to invest in securities, including securities that may
be purchased or held by the Registrant, and (iii) that
information about how the codes can be inspected or copied at the
Commission's public reference rooms or obtained from the
Commission's headquarters is available through the Commission's
toll-free telephone number, 1-800-SEC-0330.

     Instruction:  A Registrant that is a money market fund or
that otherwise is not required to adopt a code of ethics under
Rule 17j-1 under the 1940 Act [17 CFR 270.17j-1] is not required
to respond to this item.

*    *    *    *    *

     6.  Item 24 of Form N-1A [referenced in Sections 239.15A and
274.11A] is amended by redesignating paragraph (b)(17) as
paragraph (b)(18) and adding paragraph (b)(17) and an instruction
to read as follows:

FORM N-1A

*    *    *    *    *

Item 24.  Financial Statements and Exhibits

*    *    *    *    *

     (b)  *    *    *

     (17)  a copy of all codes of ethics adopted pursuant to Rule
17j-1 under the 1940 Act [17 CFR 270.17j-1] and currently
applicable to the Registrant (i.e., the codes of the Registrant
and its investment advisers and principal underwriters).  If
there are no codes of ethics applicable to the Registrant, state
why (e.g., that the Registrant is a money market fund).

          Instruction:  A Registrant that is a feeder fund must
also file a copy of all codes of ethics applicable to the master
fund.

*    *    *    *    *

     7.  Item 9 of Form N-2 [referenced in Sections 239.14 and
274.11a-1] is amended by removing the word "and" after the
semicolon in paragraph 1.f., removing the period in the last line
of paragraph 1.g. and replacing it with "; and" and adding
paragraph 1.h. and an instruction to read as follows:

     Note:  The text of Form N-2 does not, and the amendments to
the form will not, appear in the Code of Federal Regulations.

FORM N-2

*    *    *    *    *

Item 9.  Management

     1.  General:   *    *    *

     h. Codes of Ethics:  a brief statement explaining (i) that
the Registrant and its investment adviser and principal

-------------------- BEGINNING OF PAGE #29 -------------------

underwriter have adopted codes of ethics that have been filed
with the Commission, (ii) whether or not these codes of ethics
permit personnel subject to the codes to invest in securities,
including securities that may be purchased or held by the
Registrant, and (iii) that information about how the codes can be
inspected or copied at the Commission's public reference rooms or
obtained from the Commission's headquarters is available through
the Commission's toll-free telephone number, 1-800-SEC-0330.

     Instruction

     A Registrant that is not required to adopt a code of ethics
under Rule 17j-1 under the 1940 Act [17 CFR 270.17j-1] is not
required to respond to this item.

*    *    *    *    *

     8.  Item 24 of Form N-2 [referenced in Sections 239.14 and
274.11a-1] is amended by redesignating paragraph 2.r. as
paragraph 2.s. and adding paragraph 2.r. to read as follows:

FORM N-2

*    *    *    *    *

Item 24.  Financial Statements and Exhibits

*    *    *    *    *

     2.   *    *    *

     r.  a copy of all codes of ethics adopted pursuant to Rule
17j-1 under the 1940 Act [17 CFR 270.17j-1] and currently
applicable to the Registrant (i.e., the codes of the Registrant
and its investment advisers and principal underwriters).  If
there are no codes of ethics applicable to the Registrant, state
why (e.g., the Registrant invests only in direct obligations of
the United States Government).

*    *    *    *    *

     9.  Item 6 of Form N-3 [referenced in Sections 239.17a and
274.11b] is amended by adding paragraph (e) and an instruction to
read as follows:

     Note:  The text of Form N-3 does not, and the amendments to
the form will not, appear in the Code of Federal Regulations.

FORM N-3

*    *    *    *    *

Item 6.  Management

*    *    *    *    *

     (e) a brief statement explaining (i) that the Registrant and
its investment adviser and principal underwriter have adopted
codes of ethics that have been filed with the Commission, (ii)
whether or not these codes of ethics permit personnel subject to
the codes to invest in securities, including securities that may
be purchased or held by the Registrant, and (iii) that
information about how the codes can be inspected or copied at the
Commission's public reference rooms or obtained from the
Commission's headquarters is available through the Commission's
toll-free telephone number, 1-800-SEC-0330.

     Instruction:  A Registrant that is a money market fund or
that otherwise is not required to adopt a code of ethics under
Rule 17j-1 under the 1940 Act [17 CFR 270.17j-1] is not required
to respond to this item.

*    *    *    *    *

     10.  Item 28 of Form N-3 [referenced in Sections 239.17a and
274.11b] is amended by redesignating paragraph (b)(17) as
paragraph (b)(18) and adding paragraph (b)(17) to read as
follows:

FORM N-3

*    *    *    *    *

Item 28.  Financial Statements and Exhibits

*    *    *    *    *

     (b)  *    *    *

     (17)  a copy of all codes of ethics adopted pursuant to Rule
17j-1 [17 CFR 270.17j-1] and currently applicable to the

-------------------- BEGINNING OF PAGE #30 -------------------

Registrant (i.e., the codes of the Registrant and its investment
advisers and principal underwriters).  If there are no codes of
ethics applicable to the Registrant, state why (e.g., the
Registrant is a money market fund).

*    *    *    *    *

     11.  Item 3 of Form N-5 [referenced in Sections 239.24 and
274.5] is amended by removing the word "investment" both times
that it appears in the introductory text and adding paragraph (i)
after the instruction to read as follows:

     Note:  The text of Form N-5 does not, and the amendments to
the form will not, appear in the Code of Federal Regulations.

FORM N-5

*    *    *    *    *

Item 3.  Policies with Respect to Security Investments

*    *    *    *    *

     (i) Whether or not the codes of ethics of the registrant and
its investment adviser and principal underwriter permit personnel
subject to the codes to invest in securities, including
securities that may be purchased or held by the registrant.  Also
state that the codes of ethics adopted by the registrant and its
investment adviser and principal underwriter have been filed with
the Commission and that information about how the codes can be
inspected or copied at the Commission's public reference rooms or
obtained from the Commission's headquarters is available through
the Commission's toll-free telephone number, 1-800-SEC-0330.

*    *    *    *    *

     12.  The Instructions As To Exhibits of Form N-5 [referenced
in Sections 239.24 and 274.5] are amended by redesignating
paragraph 13 as paragraph 14 and adding paragraph 13 to read as
follows:

FORM N-5

*    *    *    *    *

INSTRUCTIONS AS TO EXHIBITS

*    *    *    *    *

     13.  A copy of all codes of ethics adopted pursuant to Rule
17j-1 under the 1940 Act [17 CFR 270.17j-1] and currently
applicable to the registrant (i.e., the codes of the registrant
and its investment advisers and principal underwriters).

*    *    *    *    *

     13.  Item 41 of Form N-8B-2 [referenced in Section 274.12]
is amended by adding paragraph (d) to read as follows:

     Note:  The text of Form N-8B-2 does not, and the amendments
to the form will not, appear in the Code of Federal Regulations.

FORM N-8B-2

*    *    *    *    *

     41.  *    *    *    *    *

     (d)  Provide a brief statement explaining (i) that the trust
and its principal underwriter have adopted codes of ethics that
have been filed with the Commission, (ii) whether or not these
codes of ethics permit personnel subject to the codes to invest
in securities, including securities that may be purchased or held
by the trust, and (iii) that information about how the codes can
be inspected or copied at the Commission's public reference rooms
or obtained from the Commission's headquarters is available
through the Commission's toll-free telephone number, 1-800-SEC-
0330.

*    *    *    *    *

     14.  Part IX of Form N-8B-2 [referenced in Section 274.12]
is amended by adding paragraph A.(11) to read as follows:

FORM N-8B-2

*    *    *    *    *

             IX
          EXHIBITS

     A.   *    *    *

-------------------- BEGINNING OF PAGE #31 -------------------

     (11) a copy of all codes of ethics adopted pursuant to Rule
17j-1 under the 1940 Act [17 CFR 270.17j-1] and currently
applicable to the trust (i.e., the codes of the trust and its
principal underwriters).  If there are no codes of ethics
applicable to the trust, state why (e.g., the trust invests only
in direct obligations of the United States Government).

*    *    *    *    *

PART 275 - RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

     15.  The authority citation for Part 275 continues to read,
in part, as follows:

     Authority:  15 U.S.C. 80b-3, 80b-4, 80b-6A, 80b-11, unless
otherwise noted.

     16.  Section 275.204-2 is amended by revising the first
sentence of paragraph (a)(12)(i), redesignating paragraphs
(a)(12)(ii) and (a)(12)(iii) as (a)(12)(iii) and (a)(12)(iv),
adding paragraph (a)(12)(ii), redesignating newly designated
paragraph (a)(12)(iii)(B) as (a)(12)(iii)(C), adding paragraph
(a)(12)(iii)(B), revising the first sentence of paragraph
(a)(13)(i), redesignating paragraphs (a)(13)(ii) and (a)(13)(iii)
as paragraphs (a)(13)(iii) and (a)(13)(iv), adding paragraph
(a)(13)(ii), redesignating newly designated paragraphs
(a)(13)(iii)(B) and (a)(13)(iii)(C) as (a)(13)(iii)(C) and
(a)(13)(iii)(D) and adding new paragraph (a)(13)(iii)(B), to read
as follows:

Section 275.204-2  Books and records to be maintained by
investment advisers.

     (a)  *    *    *

     (12)(i) A record of every transaction (other than
transactions described in paragraph (a)(12)(ii) of this section)
in a security in which the investment adviser or any advisory
representative (as hereinafter defined) of such investment
adviser has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership.  *     *     *

     (ii) Notwithstanding paragraph (a)(12)(i) of this section,
no record need be kept of any transactions:

     (A) Effected in any account over which neither the
investment adviser nor any advisory representative of the
investment adviser has any direct or indirect influence or
control; or

     (B) In securities which are:

     (1) Direct obligations of the Government of the United
States; 

     (2) High quality short-term debt instruments, including but
not limited to bankers' acceptances, bank certificates of
deposit, commercial paper and repurchase agreements; or

     (3) Shares of registered open-end investment companies.

     (iii)     *    *    *

     (B)  The term beneficial ownership shall be interpreted in
the same manner as it would be under Section 240.16a-1(a)(2) of
this chapter in determining whether a person has beneficial
ownership of a security for purposes of section 16 of the
Securities Exchange Act of 1934 [15 U.S.C. 78p] and the rules and
regulations thereunder.

*    *    *    *    *

     (13)(i) Notwithstanding the provisions of paragraph (a)(12)
of this section, where the investment adviser is primarily
engaged in a business or businesses other than advising
registered investment companies or other advisory clients, a
record must be maintained of every transaction (other than
transactions described in paragraph (a)(13)(ii) of this section)
in a security in which the investment adviser or any advisory
representative (as hereinafter defined) of such investment
adviser has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership.     *    *    *

-------------------- BEGINNING OF PAGE #32 -------------------

     (ii) Notwithstanding paragraph (a)(13)(i) of this section,
no record need be kept of any transactions:

     (A) Effected in any account over which neither the
investment adviser nor any advisory representative of the
investment adviser has any direct or indirect influence or
control; or

     (B) In securities which are:

     (1) Direct obligations of the Government of the United
States; 

     (2) High quality short-term debt instruments, including but
not limited to bankers' acceptances, bank certificates of
deposit, commercial paper and repurchase agreements; or

     (3) Shares of registered open-end investment companies.

     (iii)     *    *    *

     (B)  The term beneficial ownership shall be interpreted in
the same manner as it would be under Section 240.16a-1(a)(2) of
this chapter in determining whether a person has beneficial
ownership of a security for purposes of section 16 of the
Securities Exchange Act of 1934 [15 U.S.C. 78p] and the rules and
regulations thereunder.

*    *    *    *    *

By the Commission.

                              Jonathan G. Katz
                              Secretary
September 8, 1995