[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