[Federal Register Volume 64, Number 203 (Thursday, October 21, 1999)]
[Notices]
[Pages 56825-56827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27498]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-24085; 812-11776]


GW Capital Management, LLC, et al.; Notice of Application

October 15, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J) 
of the Investment Company Act of 1940 (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.

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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 other funds that are part of the same group of 
investment companies and in funds that are not part of the same group 
of investment companies in reliance on section 12(d)(1)(F) of the Act.

APPLICANTS: GW Capital Management, LLC (``Adviser''), Maxim Series 
Fund, Inc. (``Fund''), Orchard Series Fund (``Trust''), and One Orchard 
Equities, Inc. (``Distributor'').

FILING DATES: The application was filed on September 16, 1999. 
Applicant 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 November 9, 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, N.W., Washington, 
D.C. 20549-0609; Applicants, c/o Beverly A. Byrne, Esq., Maxim Series 
Fund, Inc., 8505 East Orchard Road, Englewood, CO 80111.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 942-0574 or Michael W. Mundt, 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 
Commission's Public Reference Branch, 450 Fifth Street, N.W., 
Washington, D.C. 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Fund is organized as a Maryland corporation and the Trust is 
organized as a Delaware business trust. The Fund and the Trust are 
registered under the Act as open-end management investment companies 
and are part of the same ``group of investment companies'' (as defined 
in section 12(d)(1)(G)(ii) of the Act). The Adviser is registered under 
the Investment Advisers Act of 1940 and serves as investment adviser to 
the Fund and the Trust.
    2. Applicants request relief to permit the series of the Fund and 
any other registered open-end management investment company that is 
part of the same ``group of investment companies'' as the Fund 
(collectively, the ``Profile Portfolios'') to purchase shares of series 
of the Fund, series of the Trust, and other registered open-end 
management investment companies or series that are part of the same 
``group of investment companies'' as the Profile Portfolios 
(collectively, the ``Underlying Portfolios).\1\ The Profile Portfolios 
also would invest in other registered open-end management investment 
companies that are not part of the same ``group of investment 
companies'' as the Profile Portfolios (the ``Other Portfolios'') in 
reliance on section 12(d)(1)(F) of the Act.
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    \1\ Applicants request relief for each existing or future 
registered open-end management investment company or series of such 
company that is part of the same ``group of investment companies'' 
as the Fund, and (1) is, or will be, advised by the Adviser or by 
any entity controlling, controlled by, or under common control with 
the Adviser; or (2) for which the Distributor or any entity 
controlling, controlled by, or under common control with the 
Distributor serves as principal underwriter. Each existing 
registered open-end management investment company that currently 
intends to rely on the order is named as an applicant. 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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    3. Shares of the Profile Portfolios are offered to separate 
accounts of Great-West Life & Annuity Insurance Company and its 
affiliates and separate accounts of unaffiliated insurers for the 
purpose of funding variable contracts issued by those insurance 
companies. Shares may also be offered directly to qualified pension and 
retirement plans. The Profile Portfolios do not impose any front-end 
sales charges, contingent deferred sales charges, or rule 12b-1 fees. 
Applicants state that the Profile Portfolios are intended as an 
efficient and cost-effective method of allowing investors who are 
pursuing long-term investment goals, namely, owners of variable 
insurance contracts and qualified plan participants, to structure a 
comprehensive asset allocation program with investments in the 
Underlying Portfolios and Other Portfolios consistent with the 
investors' investment time horizon.

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 companies, represent more than 10% of the acquiring 
companys 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; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not 
excessive under rules adopted

[[Page 56826]]

pursuant to section 22(b) or section 22(c) of the Act 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 
Profile Portfolios will invest in shares of the Other Portfolios, they 
cannot rely on the exemption from sections 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 securities purchased by 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, section 12(d)(1)(F) 
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.
    4. Section 12(d)(1)(J) of the Act 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 
Profile Portfolios to invest in the Underlying Portfolios. Applicants 
are not requesting relief from section 12(d)(1)(F) and will rely on 
that section for investments in Other Portfolios.
    6. Applicants state that the Profile Portfolios' investments in the 
Underlying Portfolios do not raise the concerns that sections 
12(d)(1)(A) and (B) were designed to address, which include undue 
influence, duplicative fees, and overly complex fund arrangements. 
Because the Profile Portfolios and Underlying Portfolios are part of 
the same group of investment companies, applicants submit that there is 
little potential for the Adviser to exercise inappropriate control over 
the Underlying Portfolios. Applicants further state that the proposed 
conditions would appropriately address any concerns about the layering 
of advisory fees, sales charges, and other fees. Applicants state that 
the arrangements would not become overly complex because Underlying 
Portfolios and Other Portfolios generally will not invest in other 
investment companies in excess of the limits of section 12(d)(1)(A).

Section 17(a) of the Act

    1. 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; and (d) if the other person is an investment company, any 
investment adviser of that company. Applicants state that the Profile 
Portfolios and the Underlying Portfolios will be advised by the 
Adviser. As a result, applicants submit that a Profile Portfolio and 
Underlying Portfolio may be deemed to be affiliated persons by virtue 
of being under the common control of the Adviser, or to the extent that 
a Profile Portfolio owns 5% or more of the shares of an Underlying 
Portfolio. Applicants state that purchases and redemptions of shares of 
the Underlying Portfolios by the Profile Portfolios could be deemed to 
be principal transactions between affiliated persons under section 
17(a).
    2. 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.
    3. 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) of the Act to permit the Profile Portfolios to 
purchase and redeem shares of the Underlying Portfolios.
    4. Applicants state that the terms of the proposed transactions 
will be fair and reasonable 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 Profile 
Portfolios in the Underlying Portfolios will be effected in accordance 
with the investment restrictions of the Profile Portfolios and will be 
consistent with the policies as set forth in the registration statement 
of the Profile Portfolios.

Applicant's Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. All Underlying Portfolios will be part of the same ``group of 
investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, as the Profile Portfolios.
    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 Profile Portfolios, when aggregated with 
any sales charges, distribution-related fees and service fees paid by 
the Profile Portfolios relating to the 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 
Conduct Rules of the National Association of Securities Dealers.

[[Page 56827]]

    4. Before approving any advisory contract under section 15 of the 
Act, the board of directors of the Profile Portfolios, including a 
majority of the directors 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 Profile Portfolios.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 99-27498 Filed 10-20-99; 8:45 am]
BILLING CODE 8010-01-M