[Federal Register Volume 59, Number 25 (Monday, February 7, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-2720] [[Page Unknown]] [Federal Register: February 7, 1994] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Rel. No. 20046; 812-8722] The MainStay Funds, et al.; Application January 31, 1994. AGENCY: Securities and Exchange Commission (``SEC''). ACTION: Notice of Application for Exemption under the Investment Company Act of 1940 (``Act''). ----------------------------------------------------------------------- Applicants: The MainStay Funds (the ``Trust'') and NYLIFE Distributors Inc. (the ``Distributor''), on behalf of all existing and subsequently created series of the Trust and all other registered open-end management investment companies having the Distributor or an entity controlling, controlled by, or under common control with the Distributor as principal underwriter (the ``Funds'').\1\ \1\The Distributor serves as underwriter to the following Funds, which do not presently intend to rely on the requested order and have not signed the application: New York Life Institutional Funds Inc., New York Life Fund, Inc., New York Life MFA Series Fund, Inc., and New York Life VLI Series Fund, Inc. Any such Fund may rely on the order in the future if the Fund determines to issue shares subject to a contingent deferred sales charge (``CDSC'') in accordance with the representations and conditions in the application. --------------------------------------------------------------------------- Relevant Act Sections: Exemption requested under section 6(c) from the provisions of sections 2(a)(32), 2(a)(35), 22(c), and 22(d), and rule 22c-1 thereunder. Summary of Application: Applicants seek an order that would amend certain prior orders (the ``Prior Orders'') issued under section 6(c) of the Investment Company Act of 1940.\2\ The Prior Orders granted an exemption from sections 2(a)(32), 2(a)(35), 22(c), and 22(d) of the Act, and rule 22c-1 thereunder to permit the imposition or waiver of a contingent deferred sales charge (``CDSC'') on certain redemptions. Applicants seek to amend the prior orders to alter the CDSC schedule described in the prior applications, and to add other instances in which the CDSC can be waived. \2\Investment Company Act Release Nos. 15038 (Apr. 3, 1986) (notice) and 15078 (Apr. 30, 1986) (order), and 15718 (May 5, 1987) (notice) and 15758 (May 29, 1987) (order). --------------------------------------------------------------------------- Filing DATE: The application was filed on December 14, 1993 and amended on January 24, 1994. Applicants have agreed to file an additional amendment, the substance of which is reflected in this notice, prior to the issuance of the requested order. Hearing or Notification of Hearing: An order granting the application will be issued unless the SEC orders a hearing. Interested persons may request a hearing by writing to the SEC's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on February 28, 1994, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request such notification by writing to the SEC's Secretary. Addresses: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549. Applicants, 51 Madison Avenue, New York, New York 10010. For Further Information Contact: Courtney S. Thornton, Senior Attorney, at (202) 272-5287, or C. David Messman, Branch Chief, at (202) 272-3018 (Division of Investment Management, Office of Investment Company Regulation). Supplementary Information: The following is a summary of the application. The complete application may be obtained for a fee from the SEC's Public Reference Branch. Applicants' Representations 1. The Trust is an open-end management investment company organized as a Massachusetts business trust. The Trust is a series company, and currently offers shares of thirteen separate series for sale to investors. 2. The Distributor, a wholly-owned subsidiary of New York Life Insurance Company (``New York Life''), acts as administrator, principal underwriter, and distributor to all series of the Trust. 3. The Trust offers shares in nine of its existing series subject to a CDSC. The CDSC is imposed in reliance upon the Prior Orders, which exempt applicants from the provisions of sections 2(a)(32), 2(a)(35), 22(c), and 22(d), and rule 22c-1 thereunder. Currently, a CDSC of up to 5% is imposed on shares of these series at the time of any redemption by a shareholder that reduces the value of the shareholder's account in the series to an amount that is lower than the amount of all payments by the shareholder for the purchase of shares during the preceding six years. Each of these series has adopted a distribution plan pursuant to rule 12b-1 under the Act. 4. Applicants seek to amend the Prior Orders to permit the Funds to sell shares subject to a CDSC that may vary from the rate and schedule contained in the Prior Orders. No increase in the CDSC amount or extension of the applicable period will apply to shares sold prior to the issuance of an amended order. 5. The CDSC schedule may vary from Fund to Fund. The CDSC will not be imposed on redemptions of shares that were purchased more than a maximum number of years prior to the exemptions, as indicated in the relevant CDSC schedule (the ``CDSC Period''), or on shares derived from reinvestment of distributions. Furthermore, no CDSC will be imposed on an amount that represents an increase in the value of a shareholder's account resulting from capital appreciation above the amount paid for shares purchased during the CDSC Period. As a result, the amount of the CDSC will be calculated as the lesser of the amount that represents a specified percentage of the net asset value of the shares at the time of purchase, or the amount that represents such percentage of the net value of the shares at the time of redemption. In determining the applicability and rate of any CDSC, it will be assumed that a redemption is made first of shares representing capital appreciation, next of shares representing reinvestment of dividends and capital gain distributions, and finally of other shares held by the shareholder for the longest period of time. 6. Applicants also request amendment of the Prior Orders to waive the CDSC for pre-retirement transfers or rollovers from a Fund to another investment sponsored or distributed by New York Life or its subsidiaries, when both the Fund and the other investment are funding vehicles for a single retirement plan. 7. As amended, the order would permit applicants to waive the CDSC for redemptions: (a) Following the death or disability, as defined in section 72 (m)(7) of the Internal Revenue Code of 1986, as amended (the ``Code''), of a shareholder; (b) in connection with distributions permitted to be made under the Code from an individual retirement account (``IRA''), or other retirement and tax-deferred plans; (c) of shares purchased by active or retired officers, directors or trustees, partners, and employees of the Funds, by the Distributor or affiliated companies, by members of the immediate families of such persons, and by dealers having a sales agreement with the Distributor, or any trust, pension, or profit sharing plan for the benefit of such persons; (d) by New York Life or an affiliate thereof; (e) in connection with redemptions of shares made pursuant to a shareholder's participation in any systematic withdrawal plan adopted by a Fund; (f) by accounts established with an initial purchase order of $1 million or more; (g) effected by separate accounts or advisory accounts managed by New York Life or an affiliated company; (h) by tax-exempt employee benefit plans resulting from the adoption of any law or regulation pursuant to which continuation of the investment in the Funds would be improper; (i) effected by registered investment companies in connection with the combination of the investment company with a Fund by merger, acquisition of assets or by any other transaction; (j) by any state, county, or city, or any instrumentality; department, authority or agency thereof, and by trust companies and bank trust departments that are holding shares in a fiduciary capacity; (k) made for the purpose of funding a loan to a participant in a tax-qualified retirement plan permitted to make such loans; (l) on transfers to (i) other funding vehicles sponsored or distributed by New York Life or an affiliated company, or (ii) guaranteed investment contracts, regardless of sponsor, within a retirement plan; (m) made to meet required distributions by a charitable remainder trust under section 664 of the Code; and (n) by living revocable trusts. Applicants believe that these proposed waivers are appropriate because they involve the redemption of shares sold at little or no selling expense to the Funds or the Distributor. 8. In addition to the CDSC waivers described above, no CDSC will be charged in connection with the exercise of an exchange privilege whereby an investor exchanges shares of a Fund for shares of another Fund subject to a CDSC. In such a case, the Fund will add the period for which the shares of the original Fund were held to the holding period of the shares acquired in the exchange for purposes of determining what, if any, CDSC is applicable in the event that such acquired shares are redeemed following the exchange. In the event of redemptions of shares after exchanges, as investor will be subject to the CDSC of the Fund with the longest CDSC period or highest CDSC schedule which may have been owned by him, whichever results in the greatest payment. All exchanges will be effected in accordance with the provisions of section 11(a) and rule 11a-3. 9. Applicants also propose to provide a pro-rata credit for and CDSC paid in connection with a redemption of shares followed by a reinvestment effected within a set number of days, not to exceed 365, of the redemption. The credit will be paid for by the Distributor, not by the Funds. Applicants' Legal Analysis Applicants believe that the implementation of the CDSC in the manner and under the circumstances described above would be fair and in the best interests of shareholders of the Funds. Accordingly, applicants believe that the granting of the order requested herein would be appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Applicants' Condition Applicants agree that, as a condition of granting the requested relief, they will comply with the provisions of proposed rule 6c-10 under the Act (Investment Company Act Release No. 16619 (Nov. 2, 1988)), as such rule currently is proposed and as it may be reproposed, adopted, or amended. For the SEC, by the Division of Investment Management, under delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. 94-2720 Filed 2-4-94; 8:45 am] BILLING CODE 8010-01-M