1 See Memorandum to Accounting/Treasurers Committee No. 36-96 and SEC Rules Committee No. 100-96, dated September 13, 1996.
November 25, 1996
TO: ACCOUNTING/TREASURERS COMMITTEE No. 46-96
SEC RULES COMMITTEE No. 123-96
RE: INSTITUTE COMMENT LETTER ON PROPOSED AMENDMENTS TO RULE
18f-3 AND RULE 12b-1
______________________________________________________________________________
As we previously informed you, the Securities and Exchange Commission has proposed
to amend Rule 18f-3 to expand and clarify the methods a fund may use to allocate income,
gains and losses, and fundwide expenses among its classes.1 The proposed amendments also
would clarify the voting rights of "purchase" class shareholders regarding any proposed
"target" class fee increase. In addition, a proposed amendment to Rule 12b-1 would clarify that
a series funds Rule 12b-1 plan must be severable for each series and that whenever an action is
required with respect to the plan, that action must be taken separately for each series.
The Institute recently submitted the attached comment letter to the SEC. The Institutes
comment letter supports the proposed amendments to the accounting allocation methods
currently available to daily dividend multiple class funds. The comment letter also supports
recognition of the simultaneous equations method as an alternative allocation method under
the rule. The Institutes letter expresses concern with the ability of multiple class funds to
utilize other accounting allocation methods not contained in the rule. The Institutes letter
supports the proposed amendment to make it clear that purchase class shareholders have
voting rights (or the right to a new target class) only with respect to those expense increases
that are submitted separately for approval by target class shareholders. Finally, the comment
letter expresses support for the proposed modification to Rule 12b-1 to clarify that if a
distribution plan covers more than one series of shares, the provisions of the plan must be
severable for each series.
Gregory M. Smith
Director - Operations/
Compliance & Fund Accounting
Attachment