[Federal Register Volume 65, Number 51 (Wednesday, March 15, 2000)]
[Notices]
[Pages 14000-14001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6366]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24335; 812-11442]


Nations Fund Trust, et al.; Notice of Application

March 9, 2000.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of an application under sections 6(c) and 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 common trust funds and a collective investment fund to transfer 
their assets to certain series of registered open-end management 
investment companies in exchange for shares of the series.

Applicants: Nations Fund Trust, Nations Fund, Inc., Nations Reserves, 
Bank of America, N.A. (``Bank of America``) and Banc of America 
Advisors, Inc. (''BAAI'').

Filing Dates: The application was filed on December 23, 1998, and 
amended on December 23, 1999. 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 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 March 30, 2000, 
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 SEC's 
Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549-
0609. Applicants, One Bank of America Plaza, 101 South Tryon Street, 
Charlotte, NC 28255.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Staff Attorney at 
(202) 942-0634, or George J. Zornada, Branch Chief 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 
SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 
20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. Nations Fund Trust, Nations Fund, Inc., and Nations Reserves 
(the ``Nations Funds``) are registered under the Act as open-end 
management investment companies. BAAI is an investment adviser 
registered under the Investment Advisers Act of 1940, and serves as the 
investment adviser to each series of the Nations Funds. BAAI is a 
wholly-owned subsidiary of Bank of America, which is in turn a wholly-
owned subsidiary of Bank of America Corporation (``BAC``), a publicly-
held bank holding company. Certain employee benefit plans maintained 
for the benefit of employees of BAC and entities controlling, 
controlled by, or under common control with BAC (collectively, ``Bank 
of America Group``) (the ``Benefit Plans``) hold five percent or more 
of the outstanding voting shares of certain series of the Nations 
Funds.
    2. Bank of America acts as trustee for a number of common trust 
funds, as defined in section 584(a) of the Internal Revenue Code of 
1986, as amended (``Code'') (the ``CTFs''). Bank of America also acts 
as trustee for a collective investment fund sponsored by Bank of 
America as an investment vehicle for employment benefit retirement 
plans qualified under section 401 of the Code (the ``CIF,'' and 
together with the CTFs, the ``Common/Collective Funds''). The CTFs and 
the CIF are excluded from the definition of ``investment company'' 
under section 3(c)(3) and section 3(c)(11), respectively, of the 
Act.\1\
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    \1\ Applicants also request that the relief apply to future 
transactions in which a terminating Common/Collective Fund for which 
Bank of America Group, acting as trustee or in another fiduciary 
capacity, transfers it assets to a registered open-end management 
investment company advised by BAAI, or Bank of America Group, which 
investment company has 5% or more ot its outstanding voting 
securities owned by a defined benefit pension plan or other employee 
benefit plans (qualified or non-qualified) sponsored by Bank of 
America Group, or which employee benefit plan sponsored by Bank of 
America Group has a 5% or more participation in the terminating 
Common/Collective Fund (``Future Relief''). Applicants state that 
they will rely on the Future Relief only in accordance with the 
terms and conditions in the application.
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    3. Applicants propose that substantially all of the assets of each 
Common/Collective Fund be transferred in-kind to a designated series of 
the Nations Funds in exchange for Primary A Shares of that series, 
which will have at the time of the transfer an aggregate net asset 
value equal to the value of the assets transferred by the corresponding 
Common/Collective Fund (the ``CF Conversion'').\2\ The investment 
objectives and policies of each of the Common/Collective Funds and its 
corresponding series of the Nations Funds are generally similar. The 
Common/Collective Fund assets to be transferred will be valued in 
accordance with the provisions of rule 17a-7(b) and the shares of the 
Nations Funds exchanged in the CF conversion will be credited to the 
account of each participant in the Common/Collective Funds 
(``Participant''), pro rata, according to the Participant's interest in 
the relevant Common/Collective Fund immediately prior to the CF 
Conversion. Following the CF Conversion, the CTFs will be terminated. 
The CIF may be terminated following the conversion. Applicants state 
that the CF Conversion is expected to commence on or about March 31, 
2000. BAAI will pay all expenses incurred in connection with the CF 
Conversion.
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    \2\ In the CF Conversion, the assets of the following Common/
Collective Funds will be transferred to designated series of the 
Nations Funds: BCA Retail Fund, Equity Value Fund, Kansas Stock 
Fund, Equity Index Fund, Managed Small Cap Fund, International 
Equity Fund, and LargeCap Index Fund.
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Applicants' Legal Analysis

    1. Section 17(a) of the Act, in relevant part, prohibits an 
affiliated person of a registered investment company, or any

[[Page 14001]]

affiliated person of such person, acting as principal, from selling to 
or purchasing from such investment company any security or other 
property, Section 2(a)(3) of the Act, in relevant part, defines 
``affiliated person'' to include: (a) Any person directly or indirectly 
owning, controlling, or holding with the power to vote, 5% or more of 
the outstanding voting securities of such other person; (b) any person 
directly or indirectly controlling, controlled by, or under common 
control with, such other person; and (c) if such other person is an 
investment company, any investment adviser of the investment company. 
Applicants state that, because the Common/Collective Funds may viewed 
as acting as principals in the CF Conversion and because the Common/
Collective Funds and the Nations Funds may be viewed as being under the 
common control of Bank of America within the meaning of section 
2(a)(3)(C) of the Act, the CF Conversion may be subject to the 
prohibitions contained in section 17(a).
    2. Rule 17a-7 under the Act exempts certain purchase and sale 
transactions otherwise prohibited by section 17(a) if an affiliation 
exists solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided, among other requirements, 
that the transaction involves a cash payment against prompt delivery of 
the security. Applicants may not rely on rule 17a-7 for the CF 
Conversion because the ownership of more than five percent of the 
outstanding voting shares of the Nations Funds by the Benefit Plans may 
be deemed to create an affiliation ``not solely by reason of'' having a 
common investment adviser, directors, and/or common officers.
    3. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) certain 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 are satisfied. Although applicants state that 
the CF Conversion will be a sale of substantially all of the assets of 
the Common/Collective funds, applicants may not rely on rule 17a-8 for 
the CF Conversion because the Common/Collective Funds are not 
registered investment companies, and because the Common/Collective 
Funds and the Nations Funds have affiliations other than those covered 
by the rule.
    4. Section 17(b) of the Act provides that the SEC shall exempt a 
proposed transaction from section 17(a) if evidence establishes that: 
(a) the terms of the proposed transaction are reasonable and fair and 
do not involve overreaching; (b) the proposed transaction is consistent 
with the policy of the registered investment company involved; and (c) 
the proposed transaction is consistent with the general purposes of the 
Act. Section 6(c) provides that the SEC may exempt any person or 
transaction from any provision of the Act or any rule under the Act to 
the extent that 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.
    5. Applicants seek an order under section 17(b) of the Act to 
permit the CF Conversion and under sections 6(c) and 17(b) to permit 
the Future Relief. Applicants submit that the proposed transactions 
satisfy the standards for relief under sections 17(b) and 6(c) of the 
Act. Applicants state that the securities to be acquired by the Nations 
Funds are consistent with the investment policies of the participating 
Nations Funds. With respect to the Nations Funds, the CF Conversions 
will be executed in accordance with procedures previously adopted by 
the Nations Funds' respective boards of directors/trustees (the 
``Boards'') in accordance with 17a-7(e) of the Act, and the provisions 
of rule 17a-7(b), (c), and (d), and (f) also will be satisfied with 
respect to the Nations Funds. The Boards, including a majority of the 
directors/trustees who are not interested persons are defined in 
section 2(a)(19) of the Act (``Disinterested Members''), have 
determined that participation by each series of the Nations Funds in 
the CF Conversion is in the best interests of each series and that the 
interests of existing shareholders of each series will not be diluted 
as a result of the CF Conversion. These findings, and the basis upon 
which they were made, will be recorded in the books of the Nations 
Funds. With respect to the Common/Collective Funds, Bank of America 
will have determined in accordance with its fiduciary duty as trustee 
and fiduciary for the Common/Collective Funds and the Participants that 
the CF Conversion is in the best interest of the Participants in each 
of the Common/Collective Funds.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The CF Conversion will comply with the terms of rule 17a-7(b) 
through (f).
    2. The CF Conversion will not occur unless and until each relevant 
Board, including a majority of such Board's Disinterested Members, 
finds that participation by each individual series of the Nations Funds 
in the CF Conversion is in the best interests of each such series of 
the Nations Funds and that the interests of existing shareholders of 
such series of the Nations Funds will not be diluted as a result of the 
CF Conversion. These findings, and the bases upon which they are made, 
will be recorded in the minute books of the Nations Funds.
    3. The CF Conversion will not occur unless and until Bank of 
America, as trustee and fiduciary in accordance with its fiduciary 
duties as trustee and fiduciary for each of the Common/Collective Funds 
and the Participants thereof, has determined that the CF Conversion is 
in the best interests of Participants in each of the Common/Collective 
Funds.

    For the SEC, by the Division of Investment Management, pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-6366 Filed 3-14-00; 8:45 am]
BILLING CODE 8010-01-M