[Federal Register Volume 62, Number 56 (Monday, March 24, 1997)]
[Notices]
[Pages 13915-13918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7282]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22569; 812-10524]


Nations Fund Trust et al.; Notice of Application

March 17, 1997.
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: Nations Funds Trust (``NFT''), Nations Fund, Inc. 
(``NFI''), NationsBanc Advisors, Inc. (``NBAI''), The Pilot Funds 
(``Pilot''), and Boatmen's Trust Company (``Boatmen's'').

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

SUMMARY OF APPLICATION: Applicants request an order under section 17(b) 
for an exemption from section 17(a) to permit certain series of NFT and 
NFI to acquire all of the assets and assume all of the stated 
liabilities of certain series of Pilot. Because of certain 
affiliations, applicants may not rely on rule 17a-8 under the Act.

FILING DATE: The application was filed on February 13, 1997. 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 April 11, 1997, 
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: NFT, NFI, NBAI, and Boatmen's One NationsBank Plaza, 
Charlotte, North Carolina 28255; Pilot, 3435 Stelzer Road, Columbus, 
Ohio, 43219.

FOR FURTHER INFORMATION CONTACT:
John K. Forst, Staff Attorney, at (202) 942-0569, or Mary Kay Frech, 
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 at the 
SEC's Public Reference Branch.

Applicants' Representations

    1. NFT, a Massachusetts business trust, is registered under the Act 
as an open-end management investment company. NFT currently consists of 
thirty-two series, seven of which are the subject of this application: 
Nations Strategic Fixed Income Fund, Nations Disciplined Equity Fund, 
Nations Value Fund, Nations Intermediate Municipal Bond Fund, Nation 
Short-Intermediate Government Fund, Nations Tax Exempt Fund, and 
Nations Municipal Income Fund. NFI, A Maryland corporation, is 
registered under the Act as an open-end management investment company. 
Three of NFI's existing five series and three shell funds are the 
subject of this application: Nations Equity Income Fund, Nations Prime 
Fund, Nations Treasury Fund, Nations Small Company Growth Fund (shell), 
Nations U.S. Government Bond Fund (shell), and Nations International 
Growth Fund (shell) (collectively, these thirteen funds are referred to 
as the ``Acquiring Funds'').
    2. Pilot, a Massachusetts business trust, is registered under the 
Act as an open-end management investment company. Pilot currently 
offers fourteen series: Pilot Diversified Bond Income Fund, Pilot 
Equity Income Fund, Pilot Growth Fund, Pilot Growth and Income Fund, 
Pilot Intermediate Municipal Bond Fund, Pilot Intermediate U.S. 
Government Securities Fund, Pilot International Equity Fund, Pilot 
Missouri Short-Term Tax-Exempt Fund, Pilot Municipal Bond Fund, Pilot 
Municipal Bond Fund, Pilot Short-Term U.S. Treasury Fund, Pilot Small 
Capitalization Equity Fund, Pilot U.S. Government Securities Fund, 
Pilot Short-Term Diversified Assets Fund, and Pilot Short-Term Tax-
Exempt Diversified Fund (collectively, the ``Acquired Funds'').
    3. The investment objectives of each Acquired Fund are 
substantially similar to those of the corresponding Acquiring Fund.
    4. NBAI is the investment adviser to the operating Acquiring Funds. 
NBAI is

[[Page 13916]]

a wholly-owned subsidiary of NationsBank, N.A., which is a wholly-owned 
subsidiary of NationsBank Corporation (``NationsBank''). Boatmen's is 
the investment adviser to the Acquired Funds.
    5. On August 29, 1996, Boatmen's Bancshares, Inc. (``Bancshares''), 
the former parent of Boatmen's, entered into an Agreement and Plan of 
Merger (the ``Merger Agreement'') with NationsBank. The Merger 
Agreement provided that Bancshares will merge with and into a wholly-
owned subsidiary of NationsBank (the ``Holding Company Merger''). The 
Holding Company Merger was consummated on January 7, 1997.
    6. Currently, Boatmen's and its affiliates, which are under common 
control with NBAI, hold of record in their name and in the names of 
their nominees more than 25% of the outstanding voting Securities of 
the Pilot class of shares of a minority of the Acquired Funds. Except 
as noted below, all such securities are held for the benefit of others 
in a trust, agency, custodial, or other fiduciary or representative 
capacity. Except for Boatmen's ownership for its own account as of 
December 31, 1996, of more than 5%, but less than 10% of the Pilot 
class of the Pilot Municipal Bond Fund, neither Boatmen's, NBAI, or any 
affiliate of NBAI owns an economic interest in these securities.
    7. Shares of Nations Prime Fund, Nations Tax Exempt Fund, and 
Nations Treasury Fund (the ``Nations Money Market Funds'') are divided 
into six classes of shares: Primary A Shares, Primary B Shares, 
Investor A Shares, Investor B Shares, Investor C Shares, and Daily 
Shares. Shares of all other Acquiring Funds (the ``Nations Non-Money 
Market Funds'') are divided into five classes of shares: Primary A 
Shares, Primary B Shares. Investor A Shares, Investor C Shares, and 
Investor N Shares. Primary A Shares, Daily Shares, and Investor B 
Shares are the only share classes of Nations Money Market Funds 
involved in the proposed reorganization. Primary A Shares, Investor A 
Shares, and Investor N Shares are the only share classes of Nations 
Non-Money Market Funds involved in the proposed reorganization.
    8. Shares of the Acquiring Funds are distributed by Stephens Inc. 
(``Stephens''), a registered broker-dealer. Stephens receives no 
compensation in connection with the distribution of Primary A Shares of 
the Acquiring Funds. Each Acquiring Fund's Investor A Share class has 
adopted a distribution plan pursuant to rule 12b-1 under the Act. This 
distribution plan provides for a payment of up to 0.25% (on an 
annualized basis) of the average daily net asset value of the Investor 
A Shares of the Non-Money Market Funds. The Acquiring Funds have 
approved shareholder servicing plans and distribution plans with 
respect to Investor B and Daily Shares of the Nations Money Market 
Funds and Investor N Shares of the Nations Non-Money Market Funds. 
Payments under the shareholder servicing plans may not exceed 0.25% (on 
an annualized basis) of the average daily net asset value of these 
shares. Payments under the distribution plans may not exceed 0.75% of 
the average daily net asset value of each Nations Non-Money Market 
Fund's Investor N Shares, or 0.10% of the Investor B Shares and 0.45% 
of the Daily Shares of the Nations Money Market Funds.
    9. Shares of Pilot Missouri Short-Term Tax-Exempt Fund, Pilot 
Short-Term Diversified Assets Fund, Pilot Short-Term Tax-Exempt Fund, 
and Pilot Short-Term U.S. Treasury Fund (the ``Pilot Money Market 
Funds'') are divided into three classes of shares: Pilot Shares, 
Investor Shares, and Administration Shares. The other Acquired Funds 
(the ``Pilot Non-Money Market Funds'') are divided into three classes 
of shares: Pilot Shares, Class A Shares, and Class B Shares.
    10. Shares of the Acquired Funds are distributed by Pilot Fund 
Distributors, Inc. (``PFD''), a registered broker-dealer. Certain 
classes of the Acquired Funds have adopted distribution plans pursuant 
to rule 12b-1 under the Act. Under these plans, PFD receives payments 
for distribution and support services. Payments under the distribution 
plan for Class A Shares may not exceed 0.25% (on an annual basis) of 
the average daily net assets. Payments under the distribution plan for 
Class B Shares may not exceed 1.00% (on an annual basis) of the average 
daily net assets.\1\ Pilot Administration Shares have an account 
administration fee of 0.25% and Pilot Investor Shares have a rule 12b-1 
fee of 0.50% to be paid to PFD in connection with distribution and 
administration of such shares. Pilot Shares are not subject to any rule 
12b-1 fees.
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    \1\ Not more than 0.25% of such assets will be used to 
compensate service organizations for personal services provided to 
Class B shareholders and/or the maintenance of shareholder accounts. 
Not more than 0.75% of such assets will be paid to PFD as 
reimbursement for distribution activities.
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    11. Pilot Shares, Administrative Shares, and Investor Shares of the 
Acquired Funds are offered at net assets value. Class A Shares of the 
Acquired Funds are offered at a public offering price that includes a 
maximum front-end sales load between 4.00% and 4.50%. Class B Shares of 
the Acquired Funds are offered at net asset value with a sliding-scale 
deferred sales load. The Acquired Funds' shareholders will pay no 
front-end or contingent deferred sales charges after the 
reorganization. Shares of all classes of the Acquiring Funds are 
offered at net asset value.
    12. Pilot has entered into a separate agreement and plan of 
reorganization (each a ``Plan'' and, collectively, the ``Plans'') with 
each of NFT and NFI, providing for the transfer of all of the assets 
(and subject to the assumption of the stated liabilities) of each of 
Pilot Diversified Bond Income Fund, Pilot Equity Income Fund, Pilot 
Growth Fund, Pilot Growth and Income Fund, Pilot Intermediate Municipal 
Bond Fund, Pilot Intermediate U.S. Government Securities Fund, Pilot 
International Equity Fund, Pilot Municipal Bond Fund, Pilot Short-Term 
U.S. Treasury Fund, Pilot Small Capitalization Equity Fund, Pilot U.S. 
Government Securities Fund, and Pilot Short-Term Diversified Assets 
Fund to Nations Strategic Fixed Income Fund, Nations Equity Income 
Fund, Nations Disciplined Equity Fund, Nations Value Fund, Nations 
Intermediate Municipal Bond Fund, Nations Short-Intermediate Government 
Fund, Nations International Growth Fund (shell), Nations Municipal 
Income Fund, Nations Treasury Fund, Nations Small Company Growth Fund 
(shell), Nations U.S. Government Bond Fund (shell), and Nations Prime 
Fund, respectively, in exchange for shares of designated classes of 
each corresponding Acquiring Fund. Pursuant to these Plans, both Pilot 
Missouri Short-Term Tax-Exempt Fund and Pilot Short-Term Tax-Exempt 
Diversified Fund will be reorganized into the Nations Tax Exempt Fund. 
Pilot Money Market Fund shareholders of Pilot Shares, Investor Shares, 
and Administration Shares will receive Primary A, Daily, and Investor B 
Shares, respectively, of Nations Money Market Funds. Shareholders of 
Pilot Non-Money Market Fund Pilot Shares, Class A Shares, and Class B 
Shares will receive Primary A, Investor A, and Investor N Shares, 
respectively, of Nations Non-Money Market Funds. The aggregate net 
asset value of Acquiring Fund shares to be issued to shareholders of an 
Acquired Fund will equal the value of the aggregate net assets of the 
Acquired Fund as of the close of business on the business day 
immediately prior to the closing. Shares of the Acquiring Funds will be

[[Page 13917]]

distributed pro rata to shareholders of each Acquired Fund in 
liquidation of the Acquired Fund. Thereafter, each of the Acquired 
Funds and Pilot will be dissolved.
    13. The board of trustees of NFT and the board of directors of NFI, 
including the disinterested trustees/directors, considered and 
unanimously approved the respective Plan on February 6, 1997. The board 
of trustees of Pilot, including the disinterested trustees, considered 
and unanimously approved the Plans at meetings held on January 31, 1997 
and February 5, 1997. Each of the boards has determined, with respect 
to their funds, that participation in the reorganizations is in the 
best interests of each of the Acquired Funds and the Acquiring Funds, 
and that the interests of shareholders will not be diluted as a result 
of the reorganizations.
    14. Each board based its decision to approve the Plans on a number 
of factors, including: (a) The compatibility of each Acquired Fund's 
investment objective, policies and restrictions with those of its 
corresponding Acquiring Fund; (b) the terms and conditions of the 
reorganizations and whether they would result in a dilution of the 
existing shareholders' interests; (c) the conditioning of the 
reorganizations on receipt of a legal opinion confirming the absence of 
any adverse federal tax consequences to the Acquired Funds or their 
shareholders resulting from the reorganizations; (d) the similarities 
between the Acquired Funds' and the Acquiring Funds' respective 
distribution, administrative, transfer agency, shareholder service and 
custody arrangements, and the relative performance of each of the 
Acquired and Acquiring Funds; (e) the potential expense savings, 
economies of scale, reduced per-share expenses, and benefits to the 
portfolio management process that could result from combining the 
assets and operations of the Acquired Funds and the Acquiring Funds; 
and (f) information regarding expense ratios of the Acquired Funds and 
the Acquiring Funds.
    15. Combined prospectus/proxy statements describing the relevant 
reorganizations were filed with the SEC on February 20, 1997, and will 
be mailed to shareholders of each Acquired Fund on or about March 20, 
1997. Applicants anticipate that special meetings of shareholders of 
the Acquired Funds will be held on or about April 21, 1997 and, subject 
to shareholder approval, the reorganizations will be completed on or 
about May 2, 1997.
    16. Approximately $450,000 of the expenses incurred in connection 
with the reorganizations will be allocated to the Acquiring Funds 
following consummation of the reorganizations (the ``Allocated 
Amount''). NBAI will absorb all expenses of the reorganizations other 
than the Allocated Amount. In addition, NBAI has committed to maintain 
current (after waiver) expense ratios for all Acquiring Fund classes 
for a period of at least two years after the closing, absent 
extraordinary circumstances or a reduction in fund assets that impacts 
fee levels (the Expense Commitment). This Expense Commitment will cause 
NBAI, in effect, to absorb approximately $320,000 of the Allocated 
Amount through additional fee waivers. NBAI also will absorb the 
portion of the remaining Allocated Amount that otherwise would be borne 
by current Pilot Fund shareholders by making a capital contribution of 
$31,000 to the Pilot Funds prior to the closing. After NBAI absorbs 
this $351,000, approximately $99,000 of expenses will be borne by 
current Nations Fund shareholders.
    17. Applicants agree not to make any material changes to the Plans 
that affect representations in the application without the prior 
approval of the SEC staff.

Applicants' Legal Analysis

    1. Section 17(a) of the Act provides, in pertinent part, that it is 
unlawful for any affiliated person of a registered investment company, 
or any affiliated person of such person, acting as principal, knowingly 
(a) to sell any security or other property to such registered company, 
or (b) to purchase from such registered company any security or other 
property. Section 17(b) provides that the SEC may exempt a transaction 
from 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.
    2. Section 2(a)(3) of the Act, in pertinent part, defines the term 
``affiliated person'' of another person to include (a) any person 
owning, controlling, or holding with power to vote, 5% or more of the 
outstanding voting securities of such other person; (b) any person 5% 
or more of whose outstanding voting securities are owned, controlled, 
or held with the power to vote by such other person; (c) any person 
controlling, controlled by, or under common control with, such other 
person; and (d) if such other person is an investment company, any 
investment adviser thereof.
    3. Rule 17a-8 under the Act exempts from section 17(a) mergers, 
consolidations, or purchases or sales of substantially all of the 
assets of registered investment companies that may be affiliated 
persons solely by reason of having a common investment adviser, common 
directors/trustees, and/or common officers provided that certain 
conditions are satisfied.
    4. The reorganizations may not be exempt from the prohibitions of 
section 17(a) pursuant to rule 17a-8 because the Acquiring Funds and 
the Acquired Funds may be affiliated for reasons other than those set 
forth in the rule. As a result of the Holding Company Merger, Boatmen's 
and NBAI are both under common control of NationsBank. Currently, 
Boatmen's and its affiliates hold of record in their name and in the 
names of their nominees more than 25% of the outstanding voting 
securities of the Pilot class of a minority of the Acquired Funds. 
Because of this record ownership and the beneficial ownership of more 
than 5% of the Pilot Class of the Pilot Municipal Bond Fund, each 
Acquiring Fund may be deemed an affiliated person of an affiliated 
person of the corresponding Acquired Fund, and vice versa, for reasons 
not based solely on their common adviser, common directors/trustees, 
and/or common officers.
    5. Applicants believe that the terms of the proposed 
reorganizations satisfy the standards of section 17(b). The boards of 
trustees and directors of NFT, NFI, and Pilot have determined that 
participation in the reorganizations is in the best interests of the 
Acquiring Funds, the Acquired Funds and their shareholders, and that 
the interests of the shareholders will not be diluted as a result of 
the reorganizations. Applicants further submit that the terms of the 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
party; the investment objectives, policies, and restrictions of each 
Acquired Fund are compatible with and substantially similar to each 
respective Acquiring Fund's investment objectives, policies, and 
restrictions; and, the reorganization and the granting of the requested 
order is appropriate in the public interest and consistent with the 
protection of investors and the purposes fairly intended by the 
policies and provisions of the Act.


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    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 97-7282 Filed 3-21-97; 8:45 am]
BILLING CODE 8010-01-M