[Federal Register Volume 62, Number 156 (Wednesday, August 13, 1997)]
[Notices]
[Pages 43383-43384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21365]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22782; 812-10506]


FundManager Portfolios; Notice of Application

August 7, 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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SUMMARY OF APPLICATION: Applicant requests an order under section 
12(d)(1)(J) of the Act that would permit a fund of funds relying on 
section 12(d)(1)(F) to offer its shares to the public with a sales load 
that exceeds the 1.5% limit of section 12(d)(1)(F)(ii).

FILING DATE: The application was filed on January 21, 1997, and 
amendments to the application were filed on April 24, 1997, and June 
23, 1997. Applicant has agreed to file an additional amendment, the 
substance of which is incorporated in this notice, during the notice 
period.

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 
applicant with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on September 2, 
1997, and should be accompanied by proof of service on applicant, 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. Applicant, One Beacon Street, Boston, Massachusetts 02108.

FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Staff Attorney, at (202) 942-0574, 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 at the 
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 
20549 (tel. 202-942-8090).

Applicant

    FundManager Portfolios (the ``Trust''), on behalf of its current 
series, the FundManager Aggressive Growth Portfolio, FundManager Growth 
Portfolio, FundManager Growth with Income Portfolio, FundManager Bond 
Portfolio and FundManager Managed Total Return Portfolio (the ``Current 
Portfolios''), and any series of the Trust created in the future 
(together with the Current Portfolios, the ``Portfolios'').

Applicant's Representations

    1. The Trust is a registered, open-end management investment 
company organized in 1995 as a Delaware business trust. The Trust 
currently consists of five diversified series with differing investment 
objectives.\1\ Prior to February, 1995, the Current Portfolios were 
series of the Republic Funds, which is also an open-end management 
investment company. Prior to April, 1987, the Current Portfolios were 
series of two separate investment companies, FundVest and FundTrust Tax 
Free Trust. The Current Portfolios have been in existence either as 
series of the Trust, the Republic Funds, or their predecessors for more 
than 10 years (except for the Managed Total Return Portfolio which was 
established in 1988) and have operated pursuant to section 12(d)(1)(F) 
of the Act since their inception. Freedom Capital Management 
Corporation (the ``Adviser''), through its M.D. Hirsch Division, acts 
as investment adviser to the Trust. For the fiscal year ended September 
30, 1996, each of the Current Portfolios paid the Adviser a fee at the 
annual rate of 0.50% of net assets.
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    \1\ The Current Portfolios presently invest in shares of open-
end investment companies. Applicant expects to add an additional 
series, the International Portfolio, which will invest in shares of 
registered closed-end investment companies and unit investment 
trusts as well as shares of registered open-end investment 
companies. As of the date of applicant's last amended application, 
the shares of this Portfolio were not being offered to the public.
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    2. Each Portfolio will be designed to provide investors with a 
practical, cost-efficient means of investing in a diversified pool of 
investment companies' securities. Each Portfolio will invest in shares 
of other registered investment companies or series thereof (the 
``Underlying Funds''). Each Portfolio will seek to achieve its 
investment objective by investing in approximately ten to fifteen 
Underlying Funds, although it may invest up to 25% of its total assets 
in any one Underlying Fund. Each of the Underlying Funds will be 
unaffiliated with the Portfolios and will be registered as an 
investment company.
    3. Each Portfolio will invest in both load and no-load Underlying 
Funds. With respect to load funds, a Portfolio will purchase such 
shares pursuant to (a) letters of intent, permitting the Portfolio to 
pay reduced sales charges by aggregating its intended purchase over 
time; (b) rights of accumulation, permitting the Portfolio to pay 
reduced sales charges as it purchases additional shares of an 
Underlying Fund; and (c) the right to pay reduced sales charges by 
aggregating its purchases of several Underlying Funds within a family 
of Underlying Funds. Utilizing these techniques, the majority of the 
Underlying Fund shares purchased by the Current Portfolios during the 
past two years have been purchased without any sales load.
    4. Each of the Current Portfolios offers two classes of shares, the 
Financial Adviser Class shares and the No-Load Class shares, except for 
the Managed Total Return Portfolio, which offers only Financial Adviser 
Class shares. Currently, no sales or service charge is imposed on the 
No-Load Class shares. The only sales or service charges imposed on the 
Financial Adviser Class shares are (1) distribution fees pursuant to 
rule 12b-1 under the Act of up to .50% and (2) fees to service 
organizations of up to .25% for administrative services provided to 
Financial Adviser Class shareholders. Applicant requests relief from 
the sales load restriction of section 12(d)(1)(F)(ii) to permit each 
Portfolio to offer its shares with a sales load in excess of 1.5%. 
Applicant will comply with all other provisions of section 12(d)(1)(F).

[[Page 43384]]

Applicant's Legal Analysis

    1. Section 12(d)(1)(A) of the Act provides that no registered 
investment company may acquire securities of another investment company 
if such securities represent more than 3% of the acquired company's 
outstanding voting stock, more than 5% of the acquiring company's total 
assets, or if such securities, together with the securities of any 
other acquired investment companies, represent more than 10% of the 
acquiring company's total assets.
    2. Section 12(d)(1)(F) of the Act provides that section 12(d)(1) 
does not apply to securities purchased or otherwise acquired by a 
registered investment company if immediately after the purchase or 
acquisition not more than 3% of the total outstanding stock of the 
acquired company is owned by the acquiring company and its affiliated 
persons and the acquiring company does not impose a sales load on its 
shares of more than 1.5%. In addition, no acquired company may be 
obligated to honor any acquiring company's redemption request in excess 
of 1% of the acquired company's securities during any period of less 
than 30 days. The acquiring company also must vote its acquired company 
shares either in accordance with instructions from the acquiring 
company's shareholders or in the same proportion as all other 
shareholders of the acquired company.
    3. Section 12(d)(1)(J) provides that the SEC may exempt any series 
of transactions from any provision of section 12(d)(1) of the Act if 
and to the extent that such exemption is consistent with the public 
interest and the protection of investors. Applicant believes that the 
requested relief meets the standards set forth in section 12(d)(1)(J).
    4. Applicant asserts that section 12(d)(1) is intended to mitigate 
or eliminate actual or potential abuses that might arise when one 
investment company acquires shares of another investment company, 
including the excessive layering of sales charges. Applicant believes 
that its proposal does not present any danger of excessive sales loads. 
If a Portfolio determines to invest in shares of an Underlying Fund 
that bears sales charges or service fees, applicant states that the 
aggregate sales charges or service fees will not exceed the limits set 
forth in rule 2830(d) of the Conduct Rules of the National Association 
of Securities Dealers (``NASD''). Applicant believes that it is 
appropriate to apply the limits on sales charges and service fees by 
the NASD's rules to the proposed arrangement in place of the sales load 
limitation in section 12(d)(1)(F). Further, as discussed above, 
applicant states that the Portfolios intend to structure their 
purchases of Underlying Funds so as to purchase most, if not all, of 
the Underlying Funds without incurring sales charges.
    5. Applicant states that each Portfolio provides investors with the 
opportunity to participate in a professionally selected, diversified 
portfolio of investment company shares in one package and at one sales 
load. Applicant contends that, for many smaller investors, a packaged 
product may be less expensive than direct acquisition and maintenance 
of a comparable portfolio. Applicant submits that the convenience (such 
as ease of acquisition and sale), diversification, professional 
management, and selection of securities justify any administrative 
costs associated with creating such a Portfolio. Applicant also submits 
that Underlying Funds will benefit from the additional economies of 
scale resulting from the sale of a large number of shares to a 
Portfolio, because each Portfolio will be carried on the books as a 
single shareholder account.

Applicant's Conditions

    Applicant agrees that the order granting the requested relief will 
be subject to the following conditions:
    1. Any sales charges or service fees charged with respect to a 
class of shares of a Portfolio, when aggregated with any sales charges 
or service fees paid by the Portfolio with respect to securities of the 
Underlying Funds held by the Portfolio, will not exceed the limits set 
forth in rule 2830(d) of the NASD's Conduct Rules.
    2. Each Portfolio will comply with section 12(d)(1)(F) in all 
respects except for sales load limitation of section 12(d)(1)(F)(ii).

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-21365 Filed 8-12-97; 8:45 am]
BILLING CODE 8010-01-M