[Federal Register Volume 59, Number 28 (Thursday, February 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3191]
[[Page Unknown]]
[Federal Register: February 10, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 20055; 812-8608]
G.T. Global Growth Series, et al.; Application for Exemption
February 4, 1994.
AGENCY: Securities and Exchange Commission (the ``SEC'' or the
``Commission'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: G.T. Global Growth Series, G.T. Investment Funds, Inc.,
G.T. Investment Portfolios, Inc., and each portfolio thereof, and any
future portfolios thereof that will issue multiple classes of shares
that are identical in all material respects to the classes described in
the application, and any other open-end management investment companies
established or acquired in the future that are in the same ``group of
investment companies'' as that term is defined in rule 11a-3 under the
Act and that issue multiple classes of shares that are identical in all
material respects to the classes described in the application (the
``Funds''), G.T. Capital Management, Inc. (``G.T. Capital''), and G.T.
Global Financial Services, Inc. (``G.T. Global'').
RELEVANT ACT SECTIONS: Order requested under section 6(c) to amend a
previous order that granted relief from sections 2(a)(32, 2(a)(35),
18(f), 18(g), 18(i), 22(c), and 22(d) of the Act and rule 22c-1
thereunder.
SUMMARY OF APPLICATION: Applicants seek an order that would amend a
prior order that permitted the issuance of multiple classes of shares
and the imposition and, under certain circumstances, the waiver, of a
contingent deferred sales charge (``CDSC''). The amended order would
permit applicants to waive the CDSC with respect to certain additional
types of redemptions.
FILING DATE: The application was filed on October 12, 1993 and amended
on January 13, 1994. By supplemental letter dated February 4, 1994,
counsel, on behalf of applicants, agreed to file a further amendment
during the notice period to make certain technical changes. This notice
reflects the changes to be made to the application by such further
amendment.
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 may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549.
Applicants, 50 California Street, San Francisco, California 94111.
FOR FURTHER INFORMATION CONTACT:
Marilyn Mann, Special Counsel, at 504-2259, or Barry D. Miller, Senior
Special Counsel, at 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 at the
SEC's Public Reference Branch.
Applicants Representations
1. The Funds are organized as series of three registered, open-end,
management investment companies: G.T. Global Growth Series, G.T.
Investment Funds, Inc., and G.T. Investment Portfolios, Inc. G.T.
Global Growth Series is a Massachusetts business trust currently
comprised of six operating portfolios: G.T. America Growth Fund, G.T.
Europe Growth Fund, G.T. International Growth Fund, G.T. Japan Growth
Fund, G.T. Pacific Growth Fund, and G.T. Worldwide Growth Fund. G.T.
Investment Funds, Inc. is a Maryland corporation currently comprised of
eight operating portfolios: G.T. Global strategic Income Fund, G.T.
Global Emerging Markets Fund, G.T. Global Government Income Fund, G.T.
Global Growth & Income Fund, G.T. Global High Income Fund, G.T. Global
Health Care Fund, G.T. Latin America Growth Fund, and G.T. Global
Telecommunications Fund. G.T. Investment Funds, Inc. has additional
series which have not yet commenced operations. G.T. Investment
Portfolios, Inc. is also a Maryland corporation currently comprised of
a single operating portfolio: G.T. Global Dollar Fund. G.T. Global
serves as the distributor of the share of each Fund. Shares of the
common stock or beneficial interest of the Funds, as applicable, are
available through brokers or financial institutions that have entered
into agreements with G.T. Global to sell Fund shares. Shares may also
be acquired directly through G.T. Global. G.T. Capital is the
investment manager and administrator for each of the Funds, other than
G.T. Global High Income Fund, for which G.T. Capital is only the
administrator.\1\ From time to time, other Funds may be established
that are managed and administered by G.T. Capital and/or distributed by
G.T. Global.
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\1\G.T. Global High Income Fund seeks its investment objective
by investing all of its investable assets in the Global High Income
Portfolio (``Portfolio''). G.T. Global High Income Fund may withdraw
the investment of the Fund from the Portfolio at any time, if the
Board of Directors of G.T. Investment Funds, Inc. determines it is
in the best interests of the Fund to so do. G.T. Global High Income
Fund pays administration fees directly to G.T. Capital, and bears a
pro rata portion of the investment management and administration
fees paid by the Portfolio to G.T. Capital.
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2. In a prior application, applicants requested an order of the
Commission pursuant to section 6(c) of the Act exempting applicants
from the provisions of sections 2(a)(32), 2(a)(35), 18(f), 18(g),
18(i), 22(c) and 22(d) of the Act and rule 22c-1 thereunder to the
extent necessary to permit the Funds to sell two classes of shares for
the purpose of establishing a dual distribution system (``Dual
Distribution System''), to allow the Funds the ability to impose a CDSC
on redemption of certain shares purchased at net asset value, and to
waive or reduce the CDSC with respect to certain types of redemptions
(the ``Prior Order'').\2\
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\2\Investment Company Act Release Nos. 18961 (Sept. 17, 1992)
(notice) and 19022 (Oct. 14, 1992) (order).
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3. Applicants propose to amend the Prior Order to permit the Funds
to waive the CDSC with respect to the following additional types of
redemptions: (1) Redemptions made in connection with participant-
directed exchanges between options in an employer-sponsored benefit
plan; (2) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (3)
redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of
section 72(t)(2) of the Internal Revenue Code of 1986, as amended (the
``Code''), and the regulations promulgated thereunder; (4) redemptions
made in connection with a distribution from any retirement plan or
account that involves the return of an excess deferral amount pursuant
to section 401(k)(8) or section 402(g)(2) of the Code or the return of
excess aggregate contributions pursuant to section 401(m)(6) of the
Code; (5) redemptions made in connection with a lump-sum distribution
from an employer-sponsored retirement plan, the proceeds of which are
transferred directly to a G.T. Global Individual Retirement Account
(``IRA'') or other G.T. Global retirement account, or are otherwise
invested in Fund shares; (6) redemptions made in connection with a
distribution (from a qualified profit-sharing or stock bonus plan
described in section 401(k) of the Code) to a participant or
beneficiary under section 401(k)(2)(B)(IV) of the Code upon hardship of
the covered employee (determined pursuant to Treas. Reg. Sec. 1.401(k)-
1(d)(2)); (7) redemptions made by full-time employees of financial
institutions that, directly or through their affiliates, have entered
into selling agreements with G.T. Global or that otherwise have an
arrangement with respect to sales of Fund shares with a broker/dealer
that has entered into a selling agreement with G.T. Global, and the
children, siblings and parents of such employees; (8) redemptions made
on behalf of accounts as to which a financial institution or broker/
dealer charges an account management fee, where the financial
institution or broker dealer has entered into an agreement with G.T.
Global regarding such accounts; (9) redemptions made by or for the
benefit of certain states, counties or cities, or any
instrumentalities, departments or authorities thereof; and (10)
redemptions made by any of the companies comprising or affiliated with
the G.T. Group. Each of these additional waivers will apply only to
Class B shares issued subsequent to the issuance of the order.
4. Currently, each Fund offers two classes of shares which are
hereinafter referred to as the ``Class A'' shares and the ``Class B''
shares. The Class A shares of the Funds are currently sold subject to a
traditional front-end sales load and service and distribution fees, in
the aggregate, of up to .50% per annum of the average daily net asset
value of the Class A shares. The Class B shares are currently sold
subject to service and distribution fees, in the aggregate, of up to
1.00% per annum of the average daily net asset value of the Class B
shares, and may be subject to a CDSC upon redemption.
5. In no event will the amount of the CDSC exceed 6% of the
aggregate purchase payments made by an investor for Class B shares of a
Fund, pursuant to the Prior Order. The CDSC is not imposed on
redemptions of Class B shares that were purchased more than six years
prior to the redemptions (``CDSC Period'') or on those Class B shares
derived from reinvestment of dividends/distributions. Likewise, no CDSC
is imposed on an amount that represents an increase in the value of the
shareholder's account resulting from capital appreciation above the
amount paid for Class B shares purchased in the CDSC Period.
6. Applicants also have the ability to impose a CDSC on the
proceeds of certain redemptions of Class A shares initially sold
without a sales charge. Such Class A shares are limited to those sold
at net asset value pursuant to the sales charge waiver for large
purchases. Currently, this waiver applies to sales where the amount of
purchase exceeds $500,000. The CDSC applicable to these Class A shares
is imposed only in the event of a redemption transaction within twenty-
four months following the share purchase and is calculated in the same
manner as the CDSC with respect to the Class B shares described herein.
The amount of the CDSC, however, is limited to 1% of the lower of the
original purchase price or the net asset value of such shares at the
time of redemption. In addition, each of the CDSC waivers or reductions
applicable to the redemptions of Class B shares are also applicable to
redemptions of Class A shares that are otherwise subject to the CDSC.
All references hereafter to Class B shares shall be deemed to include a
reference to Class A shares to the extent that a CDSC is applied to
such shares in the limited circumstances described above.
7. The amount of the CDSC on Class B shares is calculated as the
lesser of the amount that represents a specified percentage of the net
asset value of the Class B shares at the time of purchase, or the
amount that represents such percentage of the net asset value of the
Class B shares at the time of redemption. As a result, no CDSC is
imposed on an amount that represents an increase in the value of the
shareholder's account resulting from capital appreciation above the
amount paid for Class B shares purchased in the CDSC Period. In
determining the applicability and rate of any CDSC, it is assumed that
a redemption is made first of Class B shares representing reinvestment
of the dividends and capital gain distributions, second of Class B
shares held by the shareholder for a period equal to or greater than
the CDSC Period and, finally, of other Class B shares held by the
shareholder for the longest period of time. This results in a charge,
if any, imposed at the lowest possible rate.
8. Currently, pursuant to the Prior Order, the Funds are permitted
to waive or reduce the CDSC (a) on redemptions of Class B shares
following death or disability, as defined in section 72(m)(7) of the
Code, of a shareholder if the redemption is made within one year after
death or disability of the shareholder, as applicable; (b) on
redemptions of Class B shares in connection with distributions from an
IRA or other qualified retirement plan;\3\ (c) on redemptions of Class
B shares purchased by current or retired officers, directors or
trustees, and current or retired employees of the Funds, G.T. Capital,
or G.T. Global or any affiliated company, and by the members of the
immediate families of such persons; (d) on redemptions of Class B
shares made by registered representatives or full-time employees of
brokers and dealers which have entered into dealer agreements with G.T.
Global, and their children, siblings and parents; (e) on redemptions of
Class B shares made pursuant to a shareholder's participation in any
systematic withdrawal plan adopted by a Fund; (f) on redemptions of
Class B shares by large accountholders as described in the prior
application; (g) on redemptions of Class B shares effected by advisory
accounts managed by G.T. Capital or any affiliated company or by any
such affiliated company itself; (h) on certain redemptions of Class B
shares by tax-exempt employee benefit plans;\4\ (i) on redemptions of
Class B shares effected pursuant to each Fund's right to liquidate a
shareholder's account if the aggregate net asset value of shares held
in the account is less than the effective minimum account size; and (j)
on redemptions of Class B shares by banks, trust companies, registered
investment advisers and other financial institutions with trust powers
that use trust funds to purchase shares of a Fund. When the Funds waive
or reduce the CDSC, such waiver or reduction is uniformly applied to
all offerees of the Funds' Class B shares. In waiving or reducing a
CDSC, the Funds comply with the requirements of rule 22d-1 under the
Act. The CDSC is waived or reduced by a Fund as provided in such Fund's
prospectus at the time the investor purchased the shares.
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\3\As described in the prior application, the CDSC may be waived
on redemptions of Class B shares that constitute retirement plan
distributions that are permitted to be made without penalty under
the Code, other than tax-free rollovers or transfers of assets.
\4\As described in the prior application, the Funds may waive
the CDSC in connection with redemptions by tax-exempt employee
benefits plans as a result of the enactment or promulgation of any
law or regulation pursuant to which continuation of the investment
in the Funds would be improper.
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9. In addition, as described in the prior application, if an
investor redeems his Class B shares, pays a CDSC, and subsequently
reinvests all of his proceeds from the redemption in Class B shares of
the same or a different Fund within 365 days from the redemption, the
investor will be credited for the full amount of the CDSC paid at the
time of redemption. If the investor invests less than the full amount
of the proceeds from the redemption, the investor will be credited for
a pro rata amount of the CDSC. The credit will be paid by the
distributor rather than the Fund.
Applicants' Legal Analysis
1. Section 6(c) of the Act provides in part that the Commission, by
order upon application, may conditionally or unconditionally exempt any
person, security or transaction, or any class or classes of persons,
securities or transactions from any provision of the Act, if and to the
extent that such exemption is necessary or 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 submit that their request for an amendment to the Prior
Order as set forth above is consistent with this standard.
2. Applicants believe that the proposed additional CDSC waivers are
fair and in the best interests of the Funds' shareholders. The waiver
of the CDSC under the additional circumstances contemplated would not
adversely affect other shareholders of a Fund. Waiver of the CDSC would
not result in the loss of any revenue to a Fund, since proceeds from
the CDSC will be paid to G.T. Global. Furthermore, as noted above,
since the distribution fees payable by the Class B shares of each Fund
are based on the average daily net assets of the Class B shares of such
Fund, amounts redeemed, including amounts upon which the CDSC is
waived, will be removed from the base upon which the distribution fees
for such class are calculated. In summary, applicants submit that the
waiver of the CDSC in the above additional circumstances will not harm
the Funds or their remaining shareholders or unfairly discriminate
among shareholders or purchasers.
Applicants' Condition
Applicants agree that the order of the Commission granting the
requested relief shall be subject to the following condition:
Applicants will comply with proposed rule 6c-10 under the Act,
Investment Company Act Release No. 16619 (Nov. 2, 1988), as such rule
is currently proposed and as it may be re-proposed, adopted, or
amended.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-3191 Filed 2-9-94; 8:45 am]
BILLING CODE 8010-01-M