[Federal Register Volume 63, Number 76 (Tuesday, April 21, 1998)]
[Notices]
[Pages 19769-19770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10503]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-23116; 812-10228]


New England Funds, L.P. et al.; Notice of Application

April 15, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order pursuant to section 17(d) 
and rule 17d-1 under the Investment Company Act of 1940 (the ``Act'').

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Summary of Application: Applicants request an order that would permit 
funds relying on section 12(d)(1) (E) or (G) of the Act to enter into a 
special servicing agreement.
Applicants: New England Funds, L.P. (``NEF''); New England Funds 
Management, L.P. (``NEFM''); New England Funds Trust I, on behalf of 
its series, New England Balanced Fund, New England Growth Fund, New 
England Value Fund, New England International Equity Fund, New England 
Capital Growth Fund, New England Bond Income Fund, New England Tax 
Exempt Income Fund, New England Government Securities Fund, New England 
Star Advisers Fund, New England Strategic Income Fund, and New England 
Star Worldwide Fund; New England Funds Trust II, on behalf of its 
series, New England Massachusetts Tax Free Income Fund, New England 
High Income Fund, New England Growth Opportunities Fund, New England 
Limited Term U.S. Government Fund, New England Adjustable Rate U.S. 
Government Fund, New England Intermediate Term Tax Free Fund of 
California, and New England Intermediate Term Tax Free Fund of New 
York; New England Funds Trust III, on behalf of its series, New England 
Equity Income Fund (collectively with New England Funds Trusts I, II, 
and III, the ``New England Funds''); and each existing or future open-
end management investment company or series thereof, including TopFund 
Series Trust, that is part of the same group of investment companies as 
the New England Funds under section 12(d)(1)(G)(ii) of the Act and 
which is, or will be, advised by NEFM or any entity controlling, 
controlled by, or under common control with NEFM, or for which NEF or 
any entity controlling, controlled by, or under common control with 
NEF, serves as principal underwriter.
Filing Dates: The application was filed on July 1, 1996, and amended on 
December 5, 1996, May 1, 1997, and September 11, 1997. Applicants have 
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 
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 May 11, 1998, 
and should be accompanied by proof of service on 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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants: New England Funds, L.P., 399 Boylston Street, 
Boston, Massachusetts 02116, c/o Robert E. O'Hare, Esq.

FOR FURTHER INFORMATION CONTACT:
Mary T. Geffroy, Senior Counsel, at (202) 942-0553, or Nadya B. 
Roytblat, Assistant Director, 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).

Applicants' Representatives

    1. Each New England Fund is an open-end management investment 
company registered under the Act. New England Funds are referred to as 
``Underlying Funds.''
    2. NEFM is an investment adviser registered under the Investment 
Advisers Act of 1940 (the ``Advisers Act''). NEFM serves as adviser to 
the New England Funds, except for the New England Growth Fund, which is 
advised by Capital Growth Management, L.P., an investment adviser 
registered under the Advisers Act. NEF is registered as a broker-dealer 
under the Securities Exchange Act of 1934. NEF serves as the principal 
underwriter of the New England Funds, including the New England Growth 
Fund.
    3. TopFund Series Trust will be organized as a Massachusetts 
business trust and registered under the Act as an open-end management 
investment company. The term ``TopFund Series Trust'' refers to each 
existing and future open-end management investment company or any 
series of that company (the ``TopFunds'') that (1) is part of the same 
group of investment companies as the Underlying Funds under section 
12(d)(1)(G)(ii) of the Act and (a) is, or will be, advised by NEFM or 
any entity controlling, controlled by, or under common control with 
NEFM, or (b) for which NEF or any entity controlling, controlled by, or 
under common control with NEF, serves as principal underwriter and (2) 
intends to invest substantially all of its assets in the Underlying 
Funds.\1\ Certain TopFunds will invest in multiple Underlying Funds in 
accordance with section 12(d)(1)(G) of the Act and other TopFunds will 
invest all of their assets in a single Underlying Fund in accordance 
with section 12(d)(1)(E) of the Act. Each TopFund and each Underlying 
Fund will be a multiple class fund in reliance on rule 18f-3 under the 
Act.
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    \1\ The TopFunds may not be Underlying Funds and no TopFund will 
invest in another TopFund.
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    4. Applicants propose to enter into a Special Servicing Agreement 
(the ``Agreement''), which will be among NEFM, TopFund Series Trust, 
NEF, New England Funds Trust I, New England Funds Trust II, and New 
England Funds Trust III. Under the Agreement, the Underlying Fund will 
bear the expenses of a TopFund (other than advisory fees and rule 12b-1 
fees) in proportion to the average daily value

[[Page 19770]]

of the Underlying Fund's shares owned by the TopFund. Payments by an 
Underlying Fund to a TopFund under the Agreement will be a fund-wide 
expense of the Underlying Fund.
    5. Applicants submit that a TopFund, by investing its assets in an 
Underlying Fund, enables the Underlying Fund to spread the Underlying 
Fund's expenses over a larger asset base. Applicants further submit 
that the Underlying Fund may experience savings because it would be 
servicing only one account (i.e., the TopFund), instead of multiple 
accounts of the shareholders of the TopFund. No Underlying Fund will 
bear any expenses of a TopFund that exceed Net Benefits as defined in 
the condition below, to the Underlying Fund from the arrangement.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1(a) under the Act provide 
that an affiliated person of, or a principal underwriter for, a 
registered investment company, or an affiliate of such person or 
principal underwriter, acting as principal, shall not participate in, 
or effect any transaction in connection with, any joint enterprise or 
other joint arrangement in which the registered investment company is a 
participant unless the SEC has issued an order approving the 
arrangement.
    2. Rule 17d-1(b) provides that, in passing upon exemptive requests 
under the rule, the SEC will consider whether participation of the 
investment company in the joint enterprise, joint arrangement, or 
profit-sharing plan on the basis proposed is consistent with the 
provisions, policies, and purposes of the Act and the extent to which 
the participation is on a basis different from or less advantageous 
than that of other participants.
    3. Applicants request relief under section 17(d) and rule 17d-1 to 
permit them to enter into the Agreement in which the Underlying Funds 
may pay certain expenses of the TopFunds. Applicants contend that each 
Underlying Fund will pay a TopFund's expenses only in direct proportion 
to the average daily value of the Underlying Fund's shares owned by the 
TopFund to ensure that expenses of the TopFund are borne 
proportionately and fairly. Applicants also state that prior to an 
Underlying Fund's entering into the Agreement, and at least annually 
thereafter, the board of trustees of the Underlying Funds, including a 
majority of trustees who are not interested persons of the Underlying 
Fund (the ``Board'') will determine that the Agreement will result in 
Net Benefits, as defined in the condition below, to the Underlying 
Fund. In making the annual determination, one of the factors the Board 
will consider is the amount of Net Benefits actually experienced by 
each class of shareholders of the Underlying Fund and the Underlying 
Fund as a whole during the preceding year. For these reasons, 
applicants believe that the requested relief meets the standards of 
section 17(d) and rule 17d-1.

Applicants' Condition

    Applicants agree that the order will be subject to the following 
condition:
    Prior to an Underlying Fund's entering into the Special Servicing 
Agreement and at least annually thereafter, the Board must determine 
that the Special Servicing Agreement will result in quantifiable 
benefits to each class of shareholders of the Underlying Fund and to 
the Underlying Fund as a whole that will exceed the costs of the 
Special Servicing Agreement borne by each class of shareholders of the 
Underlying Fund and by the Underlying Fund as a whole (``Net 
Benefits''). In making the annual determination, one of the factors the 
Board must consider is the amount of Net Benefits actually experienced 
by each class of shareholders of the Underlying Fund and the Underlying 
Fund as a whole during the preceding year. The Underlying Fund will 
preserve for a period of not less than six years from the date of a 
Board determination, the first two years in an easily accessible place, 
a record of the determination and the basis and information upon which 
the determination was made. This record will be subject to examination 
by the SEC and its staff.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-10503 Filed 4-20-98; 8:45 am]
BILLING CODE 8010-01-M