[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