[Federal Register Volume 61, Number 97 (Friday, May 17, 1996)]
[Notices]
[Pages 24968-24970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12386]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC--21952; 812-10064]


Emerging Markets Growth Fund, Inc. et al.; Notice of Application

May 10, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANTS: Emerging Markets Growth Fund, Inc. (``EMGF''), New World 
Investment Fund (``NWIF''), IBM Retirement Plan Trust (``Trust I''), 
and General Motors Employees Global Group pension Trust (``Trust II'').

RELEVANT ACT SECTIONS: Order requested under section 17(b) of the Act 
granting an exemption from section 17(a).

SUMMARY OF APPLICATION: Applicants request an order to permit EMGF to 
acquire all of the assets of NWIF. Because of certain affiliations, the 
two funds may not rely on rule 17a-8 under the Act.

FILING DATES: The application was filed on March 28, 1996 and amended 
on May 9, 1996.

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

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mail. Hearing requests should be received by the SEC by 5:30 p.m. on 
June 4, 1996, and should be accompanied by proof of service on the 
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 notification by 
writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants: EMGF and NWIF c/o The Capital Group Companies, Inc. 
11100 Santa Monica Boulevard, Los Angeles, California 90025; and Trust 
I and Trust II c/o Chase Manhattan Bank, N.A., Chase Metro Tech Center, 
Brooklyn, New York 11245.

FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, or Alison E. 
Baur, Branch Chief, at (202) 942-0564 (Office of Investment Company 
Regulation, Division of Investment Management).

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. EMGF is a closed-end management investment company organized as 
a Maryland corporation and registered under the Act. NWIF is a closed-
end management investment company organized as a Massachusetts business 
trust and registered under the Act. Capital International, Inc. (the 
``Adviser'') serves as investment adviser to EMGF and NWIF. The Adviser 
is an indirect, wholly-owned subsidiary of The Capital Group Companies, 
Inc.
    2. The International Business Machines Corporation established 
Trust I to provide monthly income to eligible retired employees. 
General Motors Corporation (``GM'') created Trust II for the benefit of 
certain employee benefit plans of GM and its subsidiaries. Trust I and 
Trust II each owns greater than 5% of the outstanding shares of each of 
EMGF and NWIF.
    3. Applicants propose that NWIF (the ``Acquired Fund'') be combined 
with and into EMGF (the ``Acquiring Fund'' and together with the 
Acquiring Fund, the ``Funds'') in a tax-free reorganization (the 
Reorganization''). In the Reorganization, the Acquiring Fund will 
acquire all of the assets and liabilities, of the Acquired Fund in 
exchange for shares of the Acquiring Fund, which then will be 
distributed pro rata to former shareholders of the Acquired Fund. The 
transfer of the assets of the Acquired Fund to the Acquiring Fund, and 
in exchange the issuance of the Acquired Fund's shares, will be based 
on the relative net asset values of each of the Funds as of the close 
of the New York Exchange on the last business day immediately preceding 
the effective date of the Reorganization. Each Fund will bear its own 
expenses in connection with the Reorganization.
    4. Shares of the Acquired Fund are offered to the public on a 
continuous basis to investors meeting the Acquired Fund's investor 
suitability and minimum purchase requirements. The Acquiring Fund's 
investor suitability requirement provides that each prospective 
investor that is a ``company'', as defined in the Act, must have total 
assets in excess of $5 million. Each prospective investor that is a 
natural person must be an ``accredited investor'' within the meaning of 
Regulation D under the Securities Act of 1933. Shares of the Acquired 
Fund are offered to the public on a continuous basis under the same 
conditions and subject to the same suitability limitations.
    5. At a meeting on January 26, 1996, the board of directors of the 
Acquiring Fund, including the disinterested directors, approved the 
Reorganization. Also on January 26, 1996, the board of trustees of the 
Acquired Fund, including the disinterested trustees, approved the 
Reorganization. Each board made the findings required under rule 17a-8 
and determined that participation in the Reorganization is in the best 
interests of its registered investment company and that the interests 
of existing shareholders of its registered investment company will not 
be diluted as a result of its effecting the Reorganization. Such 
findings, and the basis upon which such findings were made, are 
recorded fully in the minute books of each registered investment 
company. In addition, the board of trustees of the Acquired Fund 
considered (a) the potential benefits of the Reorganization to the 
shareholders of the Acquired Fund, (b) the investment objectives, 
policies, restrictions, and investment holdings of the Funds, (c) the 
terms and conditions of the Reorganization that might affect the price 
of the outstanding shares of the Acquired Fund, and (b) the direct or 
indirect costs to be incurred by the Acquired Fund or shareholders 
thereof.
    6. In considering the compatibility of the two Funds, the boards 
noted that the investment objectives of the Funds are similar, in that 
both Funds seek capital appreciation and income. The principal 
difference in objectives is that the Acquired Fund concentrates its 
investments in Latin American countries, and is permitted to invest a 
greater percentage of its assets in debt securities, while the 
Acquiring Fund invests in a broader range of emerging market countries, 
with a greater percent of its assets in equity securities. 
Nevertheless, the Acquiring Fund's investment policies permit it to 
invest in substantially all of the securities in which the Acquired 
Fund may invest.
    7. The expected advantages of the Reorganization include: the 
benefit to shareholders of the Acquired Fund of the Acquiring Fund's 
lower expense ratio; the elimination of certain duplicative expenses of 
separate funds, such as separate audit and legal fees; a larger asset 
base; and enhanced liquidity and portfolio diversification. In 
addition, shareholders of the Acquiring Fund should benefit from the 
Reorganization in that it will permit the Acquiring Fund to acquire 
portfolios securities in the amount of the assets of the Acquired Fund 
without incurring the expenses that would normally be associated with 
purchasing such securities in the open market. The Adviser estimates 
the potential cost savings to the Acquiring Fund to be $344,000.
    8. The consummation of the Reorganization is subject to certain 
conditions, including that the parties shall have received from the SEC 
the order requested herein, and the receipt of an opinion of tax 
counsel that the Reorganization will qualify as a tax-free 
reorganization under the Internal Revenue Code of 1986 and will not 
result in the recognition of any taxable gain or loss to the Acquiring 
Fund or the Acquired Fund, or to any shareholders thereof. In addition, 
applicants agree not to make any material changes to the reorganization 
agreement that affect the application without the prior approval of the 
SEC. Applicants also agree not to waive, amend, or modify any provision 
of the reorganization agreement that is required by state or federal 
law in order to effect the Reorganization.
    9. A registration statement on Form N-14 with respect to the 
Reorganization will be filed with the SEC. A special meeting of 
shareholders of the Acquired Fund will be held to consider and act upon 
the Reorganization.

Applicants' Legal Analysis

    1. Section 17(a), in pertinent part, prohibits an affiliated person 
of a registered investment company, or any affiliated person of such a 
person, acting as principal, from selling to or purchasing from such 
registered company, or any company controlled by

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such registered company, any security or other property.
    2. Section 2(a)(3)(A) of the Act provides that any person directly 
or indirectly owning, controlling, or holding with power to vote 5% or 
more of the outstanding voting securities of any other person is an 
affiliated person of that person. Section 2(a)(3)(B) provides that any 
person 5% or more of whose outstanding voting securities are directly 
or indirectly owned, controlled, or held with power to vote by another 
person is an affiliated person of that person.
    3. Rule 17a-8 exempts from the prohibitions of section 17(a) 
mergers, consolidations, or purchases or sales of substantially all of 
the assets of registered investment companies that are affiliated 
persons solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided that certain conditions set 
forth in the rule are satisfied.
    4. As noted above, the Funds have a common investment adviser. 
Thus, the Reorganization would be exempt from the provisions of section 
17(a) by virtue of rule 17a-8, but for the fact that the Funds may be 
affiliated for reasons other than those set forth in the rule. As 
previously stated, Trust I and Trust II each owns more than 5% of the 
outstanding voting securities of each of the Funds. Because of this 
greater than 5% holding, Trust I and Trust II each is an affiliated 
person of each of the Funds under section 2(a)(3)(A) and each of the 
Funds is an affiliated person of each of Trust I and Trust II under 
section 2(a)(3)(B). Therefore, the Acquiring Fund is an affiliated 
person of an affiliated person of the Acquired Fund and vice versa.
    5. Section 17(b) provides that the SEC may exempt a transaction 
from the provisions of section 17(a) if evidence establishes that the 
terms of the proposed transaction, including the consideration to be 
paid, are reasonable and fair and do not involve overreaching on the 
part of any person concerned, and that the proposed transaction is 
consistent with the policy of the registered investment company 
concerned and with the general purposes of the Act.
    6. Applicants submit that the Reorganization meets the standards 
for relief under section 17(b), in that the terms of the 
Reorganization, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned; the Reorganization is consistent with the investment 
policy of the Funds; and the Reorganization is consistent with the 
general purposes of the Act. In addition, applicants submit that each 
board made the determinations under rule 17a-8 that the Reorganization 
is in the best interests of its registered investment company and that 
the interests of existing shareholders of its registered investment 
company will not be diluted as a result of its effecting the 
Reorganization.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-12386 Filed 5-16-95; 8:45 am]
BILLING CODE 8010-01-M