[Federal Register Volume 63, Number 148 (Monday, August 3, 1998)]
[Notices]
[Pages 41304-41306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20560]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23332; 812-10754]
Great Plains Funds, et al.; Notice of Application
July 27, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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RELEVANT ACT SECTIONS: Order requested under section 12(d)(1)(J) of the
Act for an exemption from section 12(d)(1) of the Act, and under
sections 6(c) and 17(b) of the Act for an exemption from section 17(a)
of the Act.
SUMMARY OF APPLICATION: Applicants request an order that would permit
them to implement a ``fund of funds'' arrangement. The fund of funds
would invest in funds in the same group of investment companies and in
other funds within the limits of section 12(d)(1)(F) of the Act.
Applicants also seek an exemption from the sales load limitation in
section 12(d)(1)(F) of the Act.
APPLICANTS: Great Plains Fund (the ``Trust'') and First Commerce
Investors, Inc. (the ``Adviser'').
FILING DATES: The application was filed on August 13, 1997, and amended
on May 15, 1998 and July 14, 1998. Applicants have agreed to file an
amendment during the notice period, the substance of which is reflected
in this notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on August 21, 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 who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW., Washington, DC 20549. Great Plains Funds, 5800 Corporate
Drive, Pittsburgh, PA 15237-7010. First Commerce Investors, Inc., 610
NBC Center, Lincoln, NB 68508.
FOR FURTHER INFORMATION CONTACT: Kathleen L. Knisely, Staff Attorney,
at (202) 942-0517, or Nadya B. Roytblat, Assistant Director, at (202)
942-0564 (Office of Investment Company Regulation, Division of
Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Branch (tel. 202-942-8090).
Applicants' Representations
1. The Trust is registered as an open-end management investment
company under the Act and currently consists of five portfolios: Great
Plains Equity Fund, Great Plains Premier Fund, Great Plains
International Equity Fund, Great Plains Intermediate Bond Fund, and
Great Plains Tax-Free Bond Fund. The portfolios are advised by the
Adviser, which is registered under the Investment Advisers Act of 1940.
2. Applicants request relief to permit certain portfolios of the
Trust (the ``Portfolios'') to invest in certain other portfolios of the
Trust (the ``Underlying Portfolios'') that are in the same group of
investment companies as the Portfolios.\1\ Applicants also request
relief to permit the Portfolios to invest in other registered open-end
management investment companies that are not part of the same group of
investment companies as the Portfolios (the ``Other portfolios'') in
accordance with section 12(d)(1)(F) of the Act discussed below.\2\ The
Portfolios also
[[Page 41305]]
will invest a portion of their assets directly in securities (``Direct
Investments''). With respect to Portfolio's investment in Other
Portfolios, applicants also seek an exemption from the sales load
limitation in section 12(d)(1)(F) of the Act. Applicants believe that
the proposed structure of the Portfolios will provide a consolidated
and efficient means through which investors can have access to a
comprehensive investment vehicle.
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\1\ Initially, the Great Plains Equity Fund will be the only
Portfolio investing in an Underlying Portfolio, which will be the
Great Plains International Equity Fund.
\2\ Applicants also request relief for each registered open-end
management investment company that currently, or in the future, is
part of the same ``group of investment companies'' as the Trust as
defined in section 12(d)(1)(G)(ii) of the Act. All registered open-
end management investment companies which currently intend to rely
on the order are named as applicants. Any registered open-end
management investment company that relies on the order in the future
will do so only in accordance with the terms and conditions of the
application.
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Applicants' Legal Analysis
Section 12(d)(1) of the Act
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. Section 12(d)(1)(B) of the Act
provides that no registered open-end investment company may sell its
securities to another investment company if the sale will cause the
acquiring company to own more than 3% of the acquired company's voting
stock, or if the sale will cause more than 10% of the acquired
company's voting stock to be owned by investment companies.
2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1)
shall not apply to the securities of an acquired company purchased by
an acquiring company if: (i) the acquiring company and the acquired
company are part of the same group of investment companies; (ii) the
acquiring company holds only securities of acquired companies that are
part of the same group of investment companies, government securities,
and short-term paper; (ii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) by a securities association registered under section 15A of the
Securities Exchange Act of 1934, or the Commission; and (iv) the
acquired company has a policy that prohibits it from acquiring
securities of registered open-end investment companies or registered
unit investment trusts in reliance on section 12(d)(1)(F) or (G).
Section 12(d)(1)(G)(ii) defines the term ``group of investment
companies'' to mean any two or more registered investment companies
that hold themselves out to investors as related companies for purposes
of investment and investor services. Because the Portfolios will invest
in shares of the Other Portfolios and make Direct Investments, they
cannot relay on the exemption from section 12(d)(1)(A) and (B) afforded
by section 12(d)(1)(G).
3. Section 12(d)(1)(F) of the Act provides that section 12(d)(1)
shall not apply to an acquiring company if the company and its
affiliates own no more than 3% of an acquired company's securities,
provided that the acquiring company does not impose a sales load of
more than 1.5% on its shares. In addition, the section provides that no
acquired company is obligated to honor any acquiring company redemption
request in excess of 1% of the acquired company's securities during any
period of less than 30 days, and the acquiring company must vote its
acquired company shares either in accordance with instructions from its
shareholders or in the same proportion as all other shareholders of the
acquired company. The Portfolios will invest in Other Portfolios in
reliance on section 12(d)(1)(F). if the requested relief is granted,
shares of the Portfolios will be sold with a sales load that exceeds
1.5%.
4. Section 12(d)(1)(J) provides that the Commission may exempt
persons or transactions from any provision of section 12(d)(1) if and
to the extent such exemption is consistent with the public interest and
the protection of investors.
5. Applicants request relief under section 12(d)(1)(J) of the Act
from the limitations of sections 12(d)(1)(A) and (B) to permit the
Portfolios to invest in the Underlying Portfolios and the Portfolios to
sell shares to the public with a sales load that exceeds 1.5%.
6. Applicants state that the Portfolios' investments in the
Underlying Portfolios do not raise the concerns about undue influence
that sections 12(d)(1)(A) and (B) were designed to address. Applicants
further state that the proposed conditions would appropriately address
any concerns about the layering of sales charges or other fees. The
Portfolios will invest in Other Portfolios only within the limits of
section 12(d)(1)(F). Applicants believe that an exemption from the
sales load limitation in that section is consistent with the protection
of investors because applicants' proposed sales load limit would cap
the aggregate sales charges of both the Portfolio and the Other
Portfolio in which it invests. Applicants have agreed, as a condition
to the relief, that any sales charges, asset-based distribution and
service fees relating to the Portfolios' shares, when aggregated with
any sales charges, asset-based distribution and service fees paid by
the Portfolios relating to its acquisition, holding, or disposition of
shares of the Underlying Portfolios and Other Portfolios, will not
exceed the limits set forth in Rule 2830 of the NASD Conduct Rules.
Section 17(a) of the Act
7. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company from selling securities to,
or purchasing securities from, the company. Section 2(a)(3) of the Act
defines an ``affiliated person'' of another person to include: (a) any
person that directly or indirectly owns, controls, or holds with power
to vote 5% or more of the outstanding voting securities of the other
person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote by the other person; (c) any person directly or
indirectly controlling, controlled by, or under common control with the
other person; (d) if the other person is an investment company, any
investment adviser of that company. Applicants submit that the
Portfolios and Underlying Portfolios may be deemed to be affiliated
persons of one another by virtue of being under common control of the
Adviser, or because the Portfolios own 5% or more of the shares of an
Underlying Portfolio. Applicants state that purchases and redemptions
of shares of the Underlying Portfolios by the Portfolios could be
deemed to be principal transactions between affiliated persons under
section 17(a).
8. Section 17(b) provides that the Commission shall exempt a
proposed transaction from section 17(a) if evidence establishes that
(a) the terms of the proposed transaction, including the consideration
to be paid or received, are reasonable and fair and do not involve
overreaching; (b) the proposed transaction is consistent with the
policies of the registered investment company involved; and (c) the
proposed transaction is consistent with the general purposes of the
Act.
9. Section 6(c) of the Act provides that the Commission may exempt
persons or transactions from any provision of the Act if such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act. Applicants request an exemption under
sections 6(c) and 17(b)
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to permit the Portfolios to purchase and redeem shares of the
Underlying Portfolios.
10. Applicants believe that the terms of the proposed transactions
will be reasonable and fair and will not involve overreaching because
shares of Underlying Portfolios will be sold and redeemed at their net
asset values. Applicants also state that the investment by the
Portfolios in the Underlying Portfolios will be effected in accordance
with the investment restrictions of the Portfolios and will be
consistent with the policies as set forth in the registration statement
of the Portfolios.
Applicants' Conditions
Applicants agree that the order granting the requested relief shall
be subject to the following conditions:
1. Each Portfolio and each Underlying Portfolio will be part of the
same ``group of investment companies,'' as defined in section
12(d)(G)(ii) of the Act.
2. No Underlying Portfolio or Other Portfolio will acquire
securities of any other investment company in excess of the limits
contained in section 12(d)(1)(A) of the Act, except to the extent that
such Underlying Portfolio or Other Portfolio (a) receives securities of
another investment company as a dividend or as a result of a plan of
reorganization of a company (other than a plan devised for the purpose
of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed
to have acquired) securities of another investment company pursuant to
exemptive relief from the Commission permitting such Underlying
Portfolio or Other Portfolio to (i) acquire securities of one or more
affiliated investment companies for short-term cash management
purposes; or (ii) engage in interfund borrowing and lending
transactions.
3. Any sales charges, distribution-related fees, and service fees
relating to the shares of the Portfolios, when aggregated with any
sales charges, distribution-related fees, and service fees paid by the
Portfolios relating to its acquisition, holding, or disposition of
shares of the Underlying Portfolios and Other Portfolios, will not
exceed the limits set froth in rule 2830 of the NASD Conduct Rules.
4. Before approving any advisory contract under section 15 of the
Act, the board of trustees of a Portfolio, including a majority of the
trustees who are not ``interested persons,'' as defined in section
2(a)(19) of the Act, will find that the advisory fees charged under the
contract are based on services provided that are in addition to, rather
than duplicative of, services provided under any Underlying Portfolio
or Other Portfolio advisory contract. This finding, and the basis upon
which the finding was made, will be recorded fully in the minute books
of the Portfolio.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-20560 Filed 7-31-98; 8:45 am]
BILLING CODE 8010-01-M