[Federal Register Volume 61, Number 189 (Friday, September 27, 1996)]
[Notices]
[Pages 50887-50889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24861]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Rel. No. 22243; 812-10270]


The Pilot Funds, et al.; Notice of Application

September 23, 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: The Pilot Funds (``Trust''), on behalf of Pilot Growth 
Fund, Pilot Growth and Income Fund, Pilot Short-Term Diversified Assets 
Fund, and Pilot Diversified Bond Income Fund (``Acquiring Funds''), 
FUNDS IV Trust (``Funds IV''), on behalf of Aggressive Stock 
Appreciation Fund, Stock Appreciation Fund, Value Stock Appreciation 
Fund, Bond Income Fund, Intermediate Bond Income Fund, and Cash Reserve 
Money Market Fund (``Reorganizing Funds''), Boatmen's Trust Company 
(``BTC''), and BANK IV, N.A.

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

SUMMARY OF APPLICATION: Applicants request an order under section 17(b) 
granting an exemption from section 17(a) to permit each Acquiring Fund 
to acquire all of the assets and assume all of the stated liabilities 
of its corresponding Reorganizing Fund or Funds.

FILING DATES: The application was filed on July 25, 1996. Applicants 
have agreed to file an amendment during the notice period, the 
substance of which is included in this notice.

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 October 15, 
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 such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants: Trust, 3435 Stelzer Road, Columbus, Ohio 43219; 
Funds IV, 237 Park Avenue, New York, New York 10019; BTC, 100 North 
Broadway, St. Louis, Missouri 63178; Bank IV, N.A., 100 North Broadway, 
Wichita, Kansas 67202.

FOR FURTHER INFORMATION CONTACT:
Harry Eisenstein, Staff Attorney, at (202) 942-0552, or Mercer E. 
Bullard, Branch Chief, at (202) 942-0564 (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, organized as a Massachusetts business trust, and 
Funds IV, organized as a Delaware business trust, are registered under 
the Act as open-end management investment companies. BTC acts as 
investment adviser to each Acquiring Fund. Bank IV, N.A. acts as 
investment adviser to each Reorganizing Fund, except the Cash Reserve 
Money Market Fund, which is advised by AMR Investment Services, Inc. 
(``AMR''). Bank IV, N.A. and BTC are wholly-owned subsidiaries of 
Boatmen's Bancshares, Inc.
    2. BTC, Bank IV, N.A. and their respective affiliates hold of 
record 99% of the total outstanding shares of each Reorganizing Fund, 
96% of Pilot Growth and Income Fund, and 79% of Pilot Short-Term 
Diversified Assets Fund.\1\ Except with respect to certain defined 
benefit plans sponsored by BTC, Bank IV, N.A. and their affiliates, (a) 
none of BTC, Bank IV, N.A. or any of their affiliates has any economic 
interest in any of such shares, and (b) all such shares being held of 
record by BTC, Bank IV, N.A. and their affiliates are held for the 
benefit of others in a trust, agency or other fiduciary or 
representative capacity. In some instances, any of BTC, Bank IV, N.A. 
and their affiliates may hold or share voting discretion, investment 
discretion

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or both with respect to the shares held of record thereby.
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    \1\ Pilot Growth Fund and Pilot Diversified Bond Income Fund 
have not commenced operations as of the date of this Application and 
do not presently intend to commence operations prior to the 
effectiveness of the proposed transactions.
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    3. Each Acquiring Fund and its corresponding Reorganizing Fund have 
substantially similar investment objectives and policies. Each 
Reorganizing Fund offers two classes of shares, Service Class and 
Premium Class. The Premium Class shares outstanding of each 
Reorganizing Fund represent less than 1% of the outstanding shares of 
each such Fund. All outstanding shares of the Premium Class of each of 
the Reorganizing Funds are held by Furman Selz LLC, which provides 
certain management and administrative services necessary for the 
operation of the Reorganizing Funds. Those Premium Class shares will be 
redeemed prior to the effectiveness of the proposed transactions. 
Service Class shares are offered primarily to persons purchasing 
through a trust investment manager or an account managed or 
administered by Bank IV, N.A.
    4. Each of the Acquiring Funds, except Pilot Short-Term Diversified 
Assets Fund, offers three classes of shares, Class A, Class B and Pilot 
Shares. Pilot Short-Term Diversified Assets Fund offers three classes 
of shares, Administration Shares, Investor Shares, and Pilot Shares. 
Pilot Shares of each Acquiring Fund only are sold to persons or 
entities with trust, fiduciary, custodial or investment management 
accounts with BTC or its affiliates.
    5. Each Acquiring Fund will acquire all of the assets and assume 
all of the stated liabilities of its corresponding Reorganizing Fund or 
Funds in exchange for Pilot Shares of the Acquiring Fund (a 
``Reorganization''). Service Class shares are not subject to an initial 
or contingent deferred sales charge or any redemption or exchange fee. 
The Service Class Shares are subject to a 12b-1 plan which provides for 
a payment of up to .25% of average daily net assets, but these fees 
have been waived. No initial or contingent deferred sales charge, 12b-1 
fee, or account administration fee is imposed on any Pilot Shares.
    6. Immediately after a Reorganization, Pilot Shares of the 
Acquiring Fund will be distributed to shareholders of the corresponding 
Reorganizing Fund. Specifically, shares of Pilot Growth Fund will be 
distributed to shareholders of Aggressive Stock Appreciation Fund, 
shares of Pilot Growth and Income Fund to shareholders of Stock 
Appreciation Fund and Value Stock Appreciation Fund, shares of Pilot 
Short-Term Diversified Assets Fund to shareholders of Cash Reserve 
Money Market Fund, and shares of Pilot Diversified Bond Income Fund to 
shareholders of Bond Income fund and Intermediate Bond Income Fund. The 
number of shares in an Acquiring Fund to be issued in exchange for each 
share of the corresponding Reorganizing Fund will be determined on the 
basis of the relative net asset values per share and the aggregate net 
assets of the Acquiring Fund computed as of the date that 
Reorganization is consummated (``Closing Date'').
    7. The Board of Trustees of each of the Trust and Funds IV approved 
a reorganization agreement on May 21, 1996, and May 10, 1996, 
respectively (``Reorganization Agreement''). Each Board of Trustees, 
including a majority of trustees who are not ``interested persons'' as 
defined in section 2(a)(19) of the Act, found that participation in the 
Reorganizations was in the best interest of each Acquiring Fund and 
Reorganizing Fund, respectively, and that the interests of existing 
shareholders of the Funds would not be diluted as a result of the 
Reorganizations. Each Board of Trustees considered the following 
factors: (a) The Reorganizations will be effected at net asset value; 
(b) unamortized expenses of each Reorganizing Fund as of the Closing 
Date and all other costs of the Reorganizing and Acquiring Fund 
associated with the Reorganizations will be paid by BTC; (c) each 
Reorganizing Fund will distribute all of its taxable income for the 
taxable year ending on or prior to the Closing Date and net capital 
gains realized in such year; (d) shareholders of each Reorganizing Fund 
must approve the Reorganization Agreement; (e) each Reorganization is 
expected to be tax-free to the parties thereto and their shareholders; 
(f) BTC and Bank IV, N.A. have shared investment research and reported 
within a common line of supervision (except to the extent portfolio 
management is performed by AMR) since the merger of their respective 
parent companies; and (g) the investment objectives and policies of 
each Reorganizing Fund and its corresponding Acquiring Fund are 
substantially similar.
    8. BTC has voluntarily agreed to limit through January 31, 1998 the 
actual total operating expense ratio of each Acquiring Fund to the 
actual total operating expense ratio (``Expense Ratio'') of the 
corresponding Reorganizing Fund, as of January 31, 1996. If more than 
one Reorganizing Funds is merging into an Acquiring Fund, the 
Reorganizing Fund having the lower Expense Ratio as of January 31, 1996 
will be the ``corresponding'' Reorganizing Fund for purposes of the 
foregoing sentence.
    9. Either the Trust or Funds IV may terminate the Reorganization 
Agreement (a) on or prior to December 31, 1996, with the consent of the 
other or (b) after that date by either party on written notice at any 
time prior to the consummation of the Reorganizations, if the 
conditions to that party's obligation to perform have not been 
satisfied. The Trust and Funds IV agree not to make any changes to the 
Reorganization Agreement that would have a material adverse effect on 
the application without prior SEC approval.

Applicants' Legal Analysis

    1. Section 17(a) of the Act, in relevant 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 
such registered company, any security or other property.
    2. Section 2(a)(3) of the Act defines the term ``affiliated 
person'' of another person to include any person directly or indirectly 
owning, controlling, or holding with power to vote, five percent or 
more of the outstanding voting securities of such other person.
    3. Rule 17a-8 under the Act 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. Applicants may not rely on rule 17a-8 in connection with the 
Reorganizations because the Acquiring Funs and the Reorganizing Funds 
may be deemed to be affiliated for reasons other than those set forth 
in the rule. As noted above, BTC, Bank IV, N.A. and their affiliates 
hold of record more than 5% of the outstanding shares of each of the 
Reorganizing Funds, Pilot Growth and Income Fund, and Pilot Short-Term 
Diversified Assets Fund.
    5. Section 17(b) of the Act provides that the SEC may exempt a 
transaction from the provisions of section 17(a) if evidence 
establishes that the terms of the proposed transactions, 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.

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    6. Applicants submit that each Reorganization meets the standard 
for relief under section 17(b), in that the terms of each 
Reorganization are reasonable and fair and do not involve overreaching 
on the part of any person concerned; and each Reorganization is 
consistent with the general purposes of the Act and with the policies 
of the respective Acquiring Fund and the corresponding Reorganizing 
Fund.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-24861 Filed 9-26-96; 8:45 am]
BILLING CODE 8010-01-M