PROPOSED AMENDMENTS TO RULE 17a-8 ON MERGERS OF AFFILIATED INVESTMENT COMPANIES

The Securities and Exchange
Commission today issued proposed amendments to Rule 17a-8 under the
Investment Company Act of 1940.  Rule 17a-8 allows affiliated
investment companies (funds) to merge without obtaining a specific
exemptive order from the Commission.  The proposed amendments are
designed to permit fund mergers that are consistent with the
protection of fund investors, but without the expense and delay of
obtaining individual exemptive orders.

     Expansion of the Rule’s Scope.  Rule 17a-8 currently permits
     affiliated funds to merge only if they are affiliated by
     reason of having common advisers, officers, or directors.  If
     adopted, the amendments would permit all affiliated funds to
     merge without first obtaining an exemptive order.  This change
     would accommodate growing numbers of mergers that currently do
     not fit within Rule 17a-8, and that therefore need to proceed
     under what have become routine Commission orders.

     Board Findings.  Consistent with the current rule, the amended
     rule would, if adopted, rely heavily on the scrutiny of fund
     directors, including independent directors, to determine
     whether the merger is in the best interests of the fund and
     its shareholders.  The proposed amendments would specify
     several factors that the directors must consider, if relevant,
     in approving the merger.  The factors include consideration of
     fund expenses, allocation of merger costs, compatibility of
     assets, and effects on investors’ taxes.

     Mergers with Bank Trust Funds.  If adopted, the rule
     amendments would, for the first time, permit funds to merge
     with affiliated bank common or collective trust funds without
     seeking an exemptive order.

     Shareholder Voting.  If adopted, the proposed amendments
     would, as a condition to the exemption, require: (1)
     shareholders of any fund that would not survive the merger to
     vote on the merger, and (2) subject to certain exceptions,
     large shareholders of a fund holding a vote on the merger who
     are advisers, underwriters, or large shareholders of other
     funds participating in the merger to vote their shares in
     proportion to the securities voted by other shareholders.
     This condition is designed to prevent affiliated persons from
     influencing the terms of the merger to the detriment of
     smaller shareholders.

     The Commission requests comments on the proposed amendments,
including relevant data on costs and benefits of the amendments or
any alternatives to the amendments.  Comments on the proposed
amendments to rule 17a-8 must be submitted to the Commission by
January 18, 2002.