[Federal Register Volume 64, Number 81 (Wednesday, April 28, 1999)]
[Notices]
[Pages 22883-22886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10624]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23807; 812-11496]


Nations Fund Trust, et al.; Notice of Application

April 22, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of an application under section 17(b) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 17(a) of 
the Act.

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SUMMARY OF THE APPLICATION:  Applicants request an order to permit 
certain series of Nations Fund Trust (``NFT''), Nations Fund, Inc. 
(``NFT''), Nations Institutional Reserves (``NIR'') and Nations Master 
Investment Trust (``NMIT'') to acquire all of the assets and 
liabilities of all of the series of Pacific Horizon Funds, Inc. 
(``Pacific Horizon'') and Master Investment Trust, Series (``MIT'').


[[Page 22884]]


APPLICANTS: NFT, NFI, NIR, and NMIT, NationsBanc Advisors, Inc. 
(``NBAI''), Pacific Horizon, and MIT.

FILING DATES: The application was filed on February 3, 1999. Applicants 
have agreed to file an amendment to the application, the substance of 
which is reflected 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 12, 1999 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 by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549-0609. Applicants: NFT, NFI, NIR, NMIT and NBAI, One Bank of 
America Plaza, 101 South Tryon Street, Charlotte, NC 28255; Pacific 
Horizon and MIT, P.O. Box 8968, Wilmington, DE 19899.

FOR FURTHER INFORMATION CONTACT: Janet M. Grossnickle, Attorney-
Adviser, (202) 942-0526, or Mary Kay Frech, Branch Chief, (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 from 
the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, 
D.C. 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. Pacific Horizon, a Maryland corporation, and MIT, a Delaware 
business trust, are open-end management series investment companies 
registered under the Act. Pacific Horizon currently offers shares in 
seventeen series (the ``Pacific Horizon Funds''), and MIT currently 
consists of two master portfolios (together with the Pacific Horizon 
Funds, the ``Acquired Funds'').
    2. NFT and NIR, each a Massachusetts business trust, NFI, a 
Maryland corporation, and NMIT, a Delaware business trust, are open-end 
management investment companies registered under the Act. Each company 
offers shares in certain series, some of which constitute the 
``Acquiring Funds'' (together with the Acquired Funds, the ``Funds''). 
NFT offers shares in thirty-nine series, three of which are Acquiring 
Funds. NFI offers shares in nine series, three of which are Acquiring 
Funds. NIR offers shares in five series, four of which are Acquiring 
Funds. NIR is organizing six new shell series, which also will be 
Acquiring Funds.\1\ NMIT has established two shell master portfolios 
which are Acquiring Funds.
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    \1\ A registration statement for the six shell Acquiring Funds 
was filed with the SEC on February 17, 1999 and it is anticipated 
that it will be declared effective on or about May 3, 1999. These 
Acquiring Funds are expected to commerce operations upon the 
consummation of the Reorganization (as defined below).
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    3. Bank of America National Trust and Savings Association (``Bank 
of America'') is the investment adviser to the Acquired Funds. Bank of 
America, a national bank, is exempt from registration under the 
Investment Advisers Act of 1940 (``Advisers Act'') pursuant to section 
202(a)(11)(A) of the Advisers Act. Bank of America is a wholly-owned 
subsidiary of BankAmerica Corporation.
    4. NBAI is registered under the Advisers Act and is the investment 
adviser for the Acquiring Funds. NBAI is a wholly-owned subsidiary of 
BankAmerica Corporation. As of the date of the publication, NBAI, Bank 
of America and their affiliates, all of which are part of a common 
control group (the ``BankAmerica Group''), held of record, in their 
name and in the names of their nominees, more than 5% (and with respect 
to certain of the Funds more than 25%) of the outstanding voting 
securities of certain of the Funds. All of these securities are held 
for the benefit of others in trust, agency, custodial, or other 
fiduciary or representatives capacity, except that certain companies of 
the BankAmerica Group may, from time to time, own economic interests in 
certain money market Funds for its own account.
    5. On December 2, 1998, and January 14, 1999, respectively, the 
boards of directors and trustees of NFT, NFI, NIR, and NMIT (the 
``Acquired Funds' Boards'') and the boards of directors and trustees of 
Pacific Horizon and MIT (the ``Acquired Funds' Boards''), including 
their disinterested directors and trustee (``Disinterested Trustees''), 
unanimously approved Agreements and Plans of Reorganization Between 
each of Pacific Horizon and MIT and each of NFT, NFI, NIR, and NMIT 
(each a ``Reorganization Plan'' and collectively, the ``Reorganization 
Plans''). Pursuant to the Reorganization Plans, each Acquiring Fund 
will acquire all of the assets and liabilities \2\ of the corresponding 
Acquired Fund in exchange for shares of designated classes of the 
Acquiring Fund (the ``Reorganizations'').\3\ The number of Acquiring 
Fund shares to be issued to shareholders of the Acquired Fund will be 
determined by dividing the aggregate net assets of each Acquired Fund 
class by the net asset value per share of the corresponding Acquiring 
Fund class, each computed as of the close of business on the closing 
date (``Closing Date''). The Reorganization Plans provide that these 
Acquiring Fund shares will be distributed pro rata to the shareholders 
of record in the applicable Acquired Fund class, determined as of the 
close of business on the closing date(``Closing Date''). The 
Reorganization Plans provide that these Acquiring Fund shares will be 
distributed pro rata to the shareholders of record in the applicable 
Acquired Fund class, determined as of the close of business on the 
Closing Date. This distribution will be accomplished by issuing the 
Acquiring Fund shares to open accounts on the share records of the 
Acquiring Funds in the names of the Acquired Fund shareholders. 
Simultaneously, all issued and outstanding shares of the Acquired Funds 
will be canceled on the books of the Acquired Funds. Each Acquired 
Fund, Pacific Horizon, and MIT

[[Page 22885]]

thereafter will be dissolved. Applicants anticipate that the Closing 
Date will be on or around May 14, 1999.
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    \2\ Prior to implementation of the Reorganization Plans, the 
Acquired Funds intend to discharge substantially all of their 
liabilities. Each Acquiring Fund will assume all remaining 
liabilities of its corresponding Acquired Fund.
    \3\ The Acquired Funds and the corresponding Acquiring Funds 
are: (i) Pacific Horizon Flexible Income Fund and Nations 
Diversified Income Fund; (ii) Pacific Horizon Short-Term Government 
Funds and Nations Short-Intermediate Government Fund; (iii) Pacific 
Horizon National Municipal Bond Fund and Nations Municipal Income 
Fund; (iv) Pacific Horizon Aggressive Growth Fund and Nations Small 
Company Growth Fund; (v) Pacific Horizon International Equity Fund 
and Nations International Equity Fund; (vi) Pacific Horizon U.S. 
Government Securities Fund and National Government Securities Fund; 
(vii) Pacific Horizon Prime Fund and Nations Cash Reserves; (viii) 
Pacific Horizon Government Fund and Nations Government Reserves; 
(ix) Pacific Horizon Treasury Fund and Nations Treasury Reserves; 
(x) Pacific Horizon Treasury Only Fund and Nations Government 
Reserves; (xi) Pacific Horizon Tax-Exempt Money Fund and Nations 
Municipal Reserves; (xii) Pacific Horizon California Municipal Bond 
Fund and Nations California Municipal Bond Fund (shell); (xiii) 
Pacific Horizon California Tax-Exempt Money Market Fund and Nations 
California Tax-Exempt Reserves (shell); (xiv) Pacific Horizon Asset 
Allocation Fund and Nations Asset Allocation Fund (shell); (xv) 
Pacific Horizon Capital Income Fund and Nations Capital Income Fund 
(shell); (xvi) Pacific Horizon Intermediate Bond Fund and Nations 
Intermediate Bond Fund (shell); (xvii) Pacific Horizon Blue Chip and 
Nations Blue Chip Fund (shell); (xviii) Blue Chip Master Portfolio 
and Nations Blue Chip Master Portfolio (shell); and (xix) Investment 
Grade Master Portfolio and Nations Intermediate Bond Master 
Portfolio (shell).
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    6. The Acquiring Funds fall into two categories. First, there are 
five money market Acquiring Funds that offer or, after the 
Reorganizations, will offer shares in some or all of eight classes 
(Adviser, Capital, Liquidity, Market, Trust, Service, Investor, and 
Daily) (``Nations Money Market Funds''). Second, there are eleven non-
money market Acquiring Funds that offer or, after the Reorganizations, 
will offer shares in some or all of six classes (Primary A, Primary B, 
Investor A, Investor B, Investor C, and Seafirst) (``Nations Non-Money 
Market Funds''). Shares in the following classes will be issued in the 
reorganizations: Daily, Service, Adviser, Capital, and Investor shares 
in the Nations Money Market Funds; Investor A, Investor B, Investor C, 
and Seafirst shares in Nations Non-Money Market Funds. The NMIT master 
portfolios will consist of an unlimited number of units of beneficial 
interest representing an interest in NMIT.
    7. The Daily, Service, and Investor shares in the Nations Money 
Market Funds are subject to distribution and shareholder servicing fees 
under rule 12b-1 plans. Adviser shares in the Nations Money Market 
Funds are subject to shareholder servicing fees under a rule 12b-1 
plan, but no distribution fees. No distribution or shareholder 
servicing fees are paid by the Capital shares in the Nations Money 
Market Funds. Investor A, Investor B, and Investor C shares in the 
Nations Non-Money Market Funds are subject to distribution and 
shareholder servicing fees under rule 12b-1 plans. Seafirst shares in 
the Nations Non-Money Market Funds also are subject to shareholder 
servicing fees, but not distribution fees. None of the Nations Money 
Market Funds is subject to a front-end or contingent deferred sales 
charge. Investor A shares in the Nations Non-Money Market Funds are 
subject to a maximum sales load of 5.75%, and certain holders of 
Investor A shares are subject to a maximum contingent deferred sales 
charge of 1.00%. Investor B shares in the Nations Non-Money Market 
Funds are subject to a maximum contingent deferred sales charge of 
5.00%. Investor C shares in the Nations Non-Money Market Funds are 
subject to a maximum contingent deferred sales charge of 1.00%. 
Seafirst shares of the Nations Non-Money Market Funds are not subject 
to front-end or contingent deferred sales charges.
    8. The Acquired Funds also fall into two categories. First, there 
are six money market Acquired Funds that offer shares in some or all of 
six classes (S, X, Y, Horizon, Pacific Horizon, and Horizon Service) 
(``Pacific Horizon Money Market Funds''). Second, there are eleven non-
money market Acquired Funds that offer shares in some or all of four 
classes (A, B, K, and SRF) (``Pacific Horizon Non-Money Market 
Funds''). The MIT master portfolios consist of an unlimited number of 
units of beneficial interest representing an interest in MIT.
    9. The S, X, and Y shares in the Pacific Horizon Money Market Funds 
are subject to distribution and servicing fees. Horizon Service and 
Pacific Horizon shares in the Pacific Horizon Money Market Funds are 
subject to servicing fees, but no distribution fees. No distribution or 
servicing fees are paid by the Horizon shares in the Pacific Horizon 
Money Market Funds. B and K shares in the Pacific Horizon Non-Money 
Market Funds are subject to distribution and shareholder servicing 
fees. A and SRF shares in the Pacific Horizon Non-Money Market Funds 
also are subject to servicing fees, but not distribution fees. None of 
the Pacific Horizon Money Market Funds is subject to a front-end or 
contingent deferred sales charge. A shares in the Pacific Horizon Non-
Money Market Funds are subject to maximum sales loads ranging from 
3.25% to 5.75%, and a maximum contingent deferred sales charge of 
1.00%. B shares in the Pacific Horizon Non-Money Market Funds are 
subject to a maximum contingent deferred sales charge of 5.00%. K and 
SRF shares of the Pacific Horizon Non-Money Market Funds are not 
subject to front-end or contingent deferred sales charges.
    10. As a result of the Reorganizations, holders of the S and X 
shares of the Pacific Horizon Money Market Funds will become holders of 
the Daily shares of the Nations Money Market Funds. Holders of the Y, 
Horizon, Pacific Horizon, and Horizon Service shares of the Pacific 
Horizon Money Market Funds will become holders, respectively, of 
Service, Capital, Investor, and Adviser shares of the Nations Money 
Market Funds. Holders of the A, B, K, and SRF shares of the Pacific 
Horizon Non-Money Market Funds will become holders, respectively, of 
Investor A, Investor B, Investor C, and Seafirst shares of the Nations 
Non-Money Market Funds. Applicants state that the rights and 
obligations of each class of shares of the Acquired Funds are 
substantially similar to those of the corresponding class of shares of 
the Acquiring Funds. No sales load or contingent deferred sales charge 
will be imposed with respect to the shares of the Acquiring Funds to be 
issued in the Reorganizations. For purposes of calculating contingent 
deferred sales charges, shareholders of the A and B shares of the 
Acquired Funds will be deemed to have held Investor A and Investor B 
shares of the corresponding Acquiring Fund since the date the 
shareholders initially purchased the shares of the Acquired Fund. No 
contingent deferred sales charges will apply to Investor C shares 
issued in the Reorganizations.
    11. Applicants state that the investment objectives, policies, and 
restrictions of each Acquired Fund and its corresponding Acquiring Fund 
are substantially similar.
    12. The Acquiring Funds' Boards and the Acquired Funds' Boards 
(collectively, the ``Boards''), including all of their Disinterested 
Trustees, found that participation in the Reorganizations is in the 
best interest of each Fund and that the interests of existing 
shareholders in the Funds will not be diluted as a result of the 
Reorganizations. In approving the Reorganizations, the Boards 
considered, among other things: (a) the terms and conditions of the 
Reorganization Plans; (b) the capabilities, practices, and resources of 
NBAI and other service providers to the Acquiring Funds; (c) the 
expected cost savings for certain of the Acquired Funds; (d) the 
relative performance of the Funds and the compatibility of their 
investment objectives, policies, and limitations; (e) the anticipated 
tax-free status of the Reorganizations; (f) the number of investment 
portfolio options that would be available to shareholders after the 
Reorganizations; (g) the shareholder services of the Acquiring Funds; 
and (h) the investment advisory and other fees paid by the Acquiring 
Funds, and the historical and projected expense ratios of the Acquiring 
Funds as compared with those of the Acquired Funds. In addition, the 
Acquired Funds' Boards considered that the Acquired Funds' shareholders 
would benefit from the distribution and shareholder servicing plans of 
the Acquiring Funds, as well as their shareholder services. Further, 
the Acquired Funds' Boards considered that, as a result of the 
Reorganizations, Acquired Fund shareholders should benefit from 
improved economies of scale and will have access to a larger and more 
diverse family of mutual funds. NBAI will assume all customary expenses 
incurred by the Funds in connection with the Reorganizations.
    13. The Reorganization Plans may be terminated by mutual written 
consent of the Acquiring Fund and the respective Acquired Fund at any 
time prior to the Closing Date. In addition, either party

[[Page 22886]]

may terminate the Reorganization Plan if: (a) The closing has not 
occurred prior to December 31, 1999; (b) the other party materially 
fails to perform its obligations; (c) the other party materially 
breaches its representations, warranties, or covenants; or (d) a 
condition precedent to the party's obligations cannot be met.
    14. Registration statements on Form N-14 (``N-14 Registration 
Statements'') were filed with the SEC on December 23, 1998 and December 
31, 1998, and became effective on January 23, 1999 and January 30, 
1999, respectively. Applicants mailed prospectus/proxy statements to 
shareholders of the Acquired Funds on or about February 8, 1999. A 
special meeting of the Acquired Fund shareholders will be held on or 
about May 3, 1999.
    15. The consummation of the Reorganizations is subject to the 
following conditions, as set forth in the Reorganization Plans: (a) The 
N-14 Registration Statements with regard to the Acquiring Funds, other 
than two master portfolios, will have become effective; (b) the 
Acquired Fund shareholders will have approved the Reorganization Plans; 
(c) applicants will have received exemptive relief from the SEC with 
respect to the issues in the application; (d) the applicants will have 
received an opinion of counsel concerning the federal income tax 
aspects of the Reorganizations; and (e) each Acquired Fund will have 
declared a dividend or dividends to distribute substantially all of its 
investment company taxable income and net capital gain, if any, to its 
shareholders. Applicants agree not to make any material changes to the 
Reorganization Plans that affect the applicant without prior SEC 
approval.

Applicants' Legal Analysis

    1. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
that person, acting as principal, from selling any security to, or 
purchasing any security 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; and (d) if the other person is an investment company, any 
investment adviser of that company.
    2. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) mergers, consolidations, or purchases or sales of 
substantially all of the assets of registered investment companies that 
are affiliated persons solely by reason of having a common investment 
adviser, common directors/trustees, and/or common officers, provided 
that certain conditions set forth in the rule are satisfied.
    3. Applicants believe that they may not rely on rule 17a-8 because 
the Funds may be affiliated for reasons other than those set forth in 
the rule. First, the BankAmerica Group holds of record more than 5% of 
the outstanding voting securities of certain of the Funds. Because of 
this ownership, certain of the Funds may be deemed an affiliated person 
of Bank America under section 2(a)(3)(B). Second, NBAI and Bank of 
America are under the common ownership and control of Bank-America 
Corporation. Because of this ownership, each Acquiring Fund may be 
deemed an ``affiliated person of an affiliated person'' of each 
Acquired Fund under sections 2(a)(3)(C) and (E) of the Act. Third, 
BankAmerica Group holds of record, with power to vote, more than 25% of 
certain Funds. These Funds may be deemed to be under common control, 
and thus affiliated persons under section 2(a)(3)(C). Accordingly, the 
Reorganizations may not meet the ``solely by reason of'' requirement of 
rule 17a-8. Applicants thus are requesting an order pursuant to section 
17(b) of the Act exempting them from section 17(a) to the extent 
necessary to consummate the Reorganizations.
    4. Section 17(b) of the Act provides that the SEC may exempt a 
transaction from the provisions of section 17(a) if the 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 each registered investment 
company concerned and with the general purposes of the Act.
    5. Applicants submit that the terms of the Reorganizations satisfy 
the standards set forth in section 17(b). Applicants note that the 
Boards, including a majority of the Disinterested Trustees, found that 
participation in the Reorganizations is in the best interest of each 
Fund and that the interests of the existing shareholders of each Fund 
will not be diluted as a result of the Reorganizations. Applicants also 
note that the exchange of the Acquired Funds' assets for shares in the 
Acquiring Funds will be based on the Fund's relative net asset values.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 99-10624 Filed 4-27-99; 8:45 am]
BILLING CODE 8010-01-M