[Federal Register Volume 65, Number 72 (Thursday, April 13, 2000)]
[Notices]
[Pages 19941-19944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9180]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-24379, 812-11968]


Boston 1784 Funds et al., Notice of Application

April 6, 2000.
Agency: Securities and Exchange Commission (``SEC'').

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

-----------------------------------------------------------------------

Summary of Application: Applicants request an order to permit certain 
series of The Galaxy Fund (``Galaxy'') to acquire all of the assets and 
liabilities of all of the series of Boston 1784 Funds 
(``1784'')(the``Reorganization''). Because of certain affiliations, 
applicants may not rely on rule 17a-8 under the Act.

Applicants: 1784, Galaxy, Fleet National Bank and Fleet Investment 
Advisors Inc.

Filing Dates: The application was filed on February 9, 2000. Applicants 
agree 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 May 1, 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. 1784, 2 Oliver Street, Boston, MA 02109; Fleet National Bank, 100 
Federal Street, Boston, MA 02110; Galaxy, 4400

[[Page 19942]]

Computer Drive, Westborough, MA 01581-5108; and Fleet Investment 
Advisors Inc., 75 State Street, Boston MA 02109.

For Further Information Contact: Paula L. Kashtan, Senior Counsel, at 
(202) 942-0615, or Mary Kay Frech, 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 
SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 
20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. 1784, a Massachusetts business trust, is registered under the 
Act as an open-end management investment company and is comprised of 
seventeen series (the ``Acquired Fund'').
    2. Galaxy, a Massachusetts business trust, is registered under the 
Act as an open-end management investment company. Galaxy currently 
offers 29 series, ten of which will participate in the Reorganization 
(the ``Operating Acquiring Funds''). Galaxy also is organizing seven 
new shell series, each of which will participate in the Reorganization 
(the ``Shell Acquiring Funds,'' and together with the Operating 
Acquiring Funds, the ``Acquiring Funds'').\1\ The Acquiring Funds and 
the Acquired Funds are collectively referred to as the ``Fund.'' 
Applicants state that the investment objectives, policies and 
restrictions of each Acquired Fund and its corresponding Acquiring Fund 
are substantially similar.
---------------------------------------------------------------------------

    \1\ A registration statement for the Shell Acquiring Funds was 
filed with the SEC on February 23, 2000, and it is anticipated that 
it will be declared effective on or about May 8, 2000.
---------------------------------------------------------------------------

    3. Fleet National Bank, formerly BankBoston, N.A (``Fleet 
National''), serves as investment adviser to the Acquired Funds and is 
exempt from registration pursuant to section 202(a)(11)(A) of the 
Investment Advisers Act of 1940 (``Advisers Act''). Fleet Investment 
Advisers Inc. (``Fleet'') is registered under the Advisers Act, and is 
the investment adviser for the Operating Acquiring Funds and will be 
the investment adviser for the Shell Acquiring Funds. Fleet National 
and Fleet and wholly owned subsidiaries of Fleet Boston Corporation.
    4. Currently, Fleet National, Fleet and certain of their affiliates 
that are under common control (the ``Fleet Boston Group'') hold of 
record, in their names or in the names of their nominees, in excess of 
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 a trust, agency, 
custodial, or other fiduciary or representative capacity, except that 
certain companies of the Fleet Boston Group may, at times, own economic 
interests in certain money market Funds for their own account.
    5. On January 25, 2000 and February 4, 2000, respectively, the 
boards of trustees of Glaxy (the ``Board of Galaxy'') and 1784 (``Board 
of 1784''), including all of their disinterested trustees 
(``Disinterested Trustees''), unanimously approved a plan of 
Reorganization pursuant to which substantially all of the assets and 
liabilities of each of the Acquired Funds will be transferred to the 
corresponding Acquiring Fund in exchange for shares of designated 
classes of the corresponding Acquiring Fund (the ``Plan of 
Reorganization'').\2\ 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 by the net asset value per 
share of the corresponding Acquiring Fund class, each computed 
immediately prior to the effective time of the Reorganization 
(``Effective Time''). The Acquiring Fund shares will be distributed pro 
rata to the shareholders of record in the applicable Acquired Fund, 
determined as of the Effective Time. 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 of record. Simultaneously, all issued and outstanding 
shares of the Acquired Funds will be canceled on the books of the 
Acquired funds. Each of the acquired Funds thereafter will be 
dissolved. The Reorganization is expected to occur on or around May 12, 
2000. The Plan of Reorganization may be terminated by mutual written 
consent of the Board of Glaxy and the Board of 1784 any time prior to 
the Effective Time.
---------------------------------------------------------------------------

    \2\ The Acquired Funds and their corresponding Acquiring Funds 
are: (1) 1784 Tax-Free Money Market Fund and Galaxy Tax-Exempt Fund; 
(2) 1784 U.S. Treasury Money Market Fund and Galaxy U.S. Treasury 
Fund; (3) 1784 Institutional U.S. Treasury Money Market Fund and 
Galaxy Institutional Treasury Money Market Fund (shell); (4) 1784 
Prime Money Market Fund and Galaxy Money Market Fund; (5) 1784 
Institutional Prime Money Market Fund and Galaxy Institutional Money 
Market Fund (shell); (6) 1784 Short-Term Income Fund and Galaxy 
Short-Term Bond Fund; (7) 1784 Income Fund and Galaxy High Quality 
Bond Fund; (8) 1784 U.S. Government Medium-Term Income Fund and 
Galaxy Intermediate Government Income Fund; (9) 1784 Tax-Exempt 
Medium-Term Income Fund and Galaxy Intermediate Tax-Exempt Bond Fund 
(shell); (10) 1784 Connecticut Tax-Exempt Income Fund and Galaxy 
Connecticut Intermediate Municipal Bond Fund (shell); (11) 1784 
Florida Tax-Exempt Income Fund and Galaxy Florida Municipal Bond 
Fund (shell); (12) 1784 Massachusetts Tax-Exempt Income Fund and 
Galaxy Massachusetts Intermediate Municipal Bond Fund (shell); (13) 
1784 Rhode Island Tax-Exempt Income Fund and Galaxy Rhode Island 
Municipal Bond Fund; (14) 1784 Asset Allocation Fund and Galaxy 
Asset Association Fund; (15) 1784 Growth and Income Fund and Galaxy 
Growth and Income Fund; (16) 1784 Growth Fund and Galaxy Growth Fund 
II (shell); and (17) 1784 International Equity Fund and Galaxy 
International Equity Fund.
---------------------------------------------------------------------------

    6. The Acquiring Funds and the Acquired Funds consist of: (a) Five 
money market Funds (the ``Money Market Funds''); and (b) twelve non-
money market Funds (the ``Non-Money Market Funds). Each Acquired Fund 
offers one class of shares. Three classes of shares of the Acquiring 
Funds (BKB, Trust and shares) will be issued in the Reorganization.\3\
---------------------------------------------------------------------------

    \3\ Certain of the Acquiring Funds are authorized to issue four 
additional classes of shares (Retail A, Retail B, Prime A, and Prime 
B) not involved in the Reorganization.
---------------------------------------------------------------------------

    7. As a result of the Reorganization, shareholders of the 1784 
Florida Tax-Exempt Income Fund, 1784 Tax-Free Money Market Fund, and 
1784 Institutional U.S. Treasury Money Market Fund will receive shares 
of the corresponding Acquiring Fund, each of which offers a single 
class of shares (``Shares''). Shareholders of the remaining Acquired 
Funds will receive either BKB shares or Trust shares of the 
corresponding Acquiring Fund. Shareholders who purchased shares of the 
remaining Acquired Funds through an investment management, trust, 
custody, or other agency relationship with Fleet National 
(``Institutional Shareholders'') will receive Trust shares of the 
corresponding Acquiring Fund. All other shareholders of the remaining 
Acquired Funds (``Retail Shareholders'') will receive BKB shares of the 
corresponding Acquiring Fund. BKB shares will convert to Retail A 
shares of the respective Acquiring Fund on the first anniversary of the 
Reorganization, provided that the Board of Galaxy determines that such 
conversion is in the best interests of the BKB shareholders. Applicants 
state that the rights and obligations of the shares of the Acquired 
Funds are substantially similar to those of the corresponding classes 
of shares of the Acquiring Funds issued in the Reorganization.
    8. Shares of the Acquired Funds are offered at net asset value with 
no front-end sales load or contingent deferred

[[Page 19943]]

sales charge (``CDSC''). Trust shares, BKB shares and Shares of the 
Acquiring Funds are offered at net asset value with no front-end sales 
load or CDSC. The Non-Money Market Funds of the Acquired Funds are 
subject to a .25% rule 12b-1 fee. Since 1784's inception, however, no 
fees have been paid under the rule 12b-1 plan. Two of the Money Market 
Funds of the Acquired Funds (the 1784 U.S. Treasury Money Market Fund 
and the 1784 Prime Money Market Fund) are subject to an annual service 
fee of .10% of average daily net assets. Trust shares, BKB shares and 
Shares of the Acquiring Funds are not subject to distribution fees 
under a rule 12b-1 plan. BKB shares and Retail A shares are subject to 
a maximum .50% shareholder servicing fee.\4\ The BKB service fee will 
be waived, fully or partially, so that no Acquired Fund shareholder 
will realize an increase in expenses as a result of such fees for as 
long as they hold BKB shares. No sales load or CDSC will be imposed 
with respect to the shares of the Acquiring Funds to be issued in the 
Reorganization. In addition, no sales load will be imposed on 
conversion of BKB shares to Retail A shares, and no CDSC will be 
imposed on redemptions of Retail A shares by former Acquired Fund 
shareholders.
---------------------------------------------------------------------------

    \4\ The Acquiring Funds approved a shareholder services plan 
with respect to Trust shares, although no agreement has been entered 
into under the plan
---------------------------------------------------------------------------

    9. The Boards of 1784 and Galaxy, including all of their 
Disinterested Trustees, found that participation in the Reorganization 
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 
Reorganization. In approving the Reorganization, the Board of 1784 and 
the Board of Galaxy considered, among other things: (a) The 
capabilities, practices, and resources of Fleet and other service 
providers to the Acquiring Funds; (b) the investment advisory and other 
fees projected to be paid by the Acquiring Funds, and the projected 
expense ratios of the Acquiring Funds as compared with those of the 
Acquiring Funds; (c) the investment objectives, strategies, and 
limitations of the Acquiring Funds and their compatibility with those 
of the Acquiring Funds; (d) the shareholder services offered by the 
Acquiring Funds; (e) the terms and conditions of the Plan of 
Reorganization; (f) the expected cost savings for certain of the 
Acquiring Funds; (g) the anticipated tax-Free status of the 
Reorganization; and (h) the number of investment portfolio options that 
would be available to shareholders after the Reorganization. In 
addition, the Board of 1784 considered that the Acquiring Funds' 
shareholders would benefit from the distribution and shareholder 
servicing plans of the Acquiring Funds. Further, the Board of 1784 
considered that, as a result of the Reorganization, Acquired Fund 
shareholders should benefit from improved economies of scale and will 
have access to a larger and more diverse family of mutual funds. Fleet 
will assume all expenses incurred by the Funds in connection with the 
Reorganization.
    10. The Reorganization is subject to a number of conditions 
precedent, as set forth in the Plan of Reorganization, including that: 
(a) a registration statement under the Securities Act of 1933 for the 
Acquiring Funds will have become effective; (b) the shareholders of the 
Acquiring Funds, including a majority of the Institutional Shareholders 
and a majority of the Retail Shareholders, will have approved the Plan 
of Reorganization independently;\5\ (c) each Acquiring 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; (d) applicants will have received exemptive relief from 
the SEC with respect to the issues in the application; and (e) the 
applicants will have received an opinion of counsel concerning the 
federal income tax aspects of the Reorganization. Applicants agree not 
to make any material changes to the Reorganization Plan without prior 
SEC approval.
---------------------------------------------------------------------------

    \5\ An Acquired Fund will not be reorganized unless both the 
Institutional Shareholders and Retail Shareholders separately as a 
class approve the Reorganization.
---------------------------------------------------------------------------

    11. A registration statement on Form N-14 was filed with the SEC on 
February 7, 2000, and became effective on March 8, 2000. Applicants 
mailed prospectus/proxy statements to shareholders of the Acquiring 
Funds on or about March 15, 2000. A special meeting of the Acquired 
Fund shareholders will be held on or about April 28, 2000.

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 
such a 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 directly or indirectly owning, controlling, or holding with 
power to vote 5% or more of the outstanding voting securities of the 
other person; (b) any person 5% or more of whose 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 Funds may be deemed affiliated 
persons and thus the Reorganization may be prohibited by section 17(a).
    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, or affiliated persons of an affiliated person, 
solely by reason of having a common investment adviser, common 
directors, 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 in 
connection with the Reorganization because the Funds may be deemed to 
be affiliated for reasons other than those set forth in the rule. By 
virtue of the direct or indirect ownership by the Fleet Boston Group of 
more than 5% (and in some cases, more than 25%) of the outstanding 
voting securities of certain of the Funds, each Acquired Fund may be 
deemed an affiliated person of an affiliated person of the 
corresponding Acquiring Fund. In addition, because of this ownership, 
certain of the Funds may be deemed to be under common control, and thus 
affiliated persons under section 2(a)(3)(C) of the Act.
    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 each registered investment company 
concerned and with the general purposes of the Act.
    5. Applicants request an order under section 17(b) of the Act 
exempting them from section 17(a) of the Act to the extent necessary to 
permit applicants to consummate the Reorganization. Applicants submit 
that the Reorganization satisfies the standards of section 17(b) of the 
Act. Applicants state that the Boards of Galaxy and 1784, including all 
of their Disinterested Trustees, found that participation in the 
Reorganization is in the best interests of each of the Funds, and that 
the interests of the existing shareholders will not be diluted as a 
result of the Reorganization.

[[Page 19944]]

Applicants also note that the exchange of the Acquired Funds' assets 
for shares in the Acquiring Funds will be based on the Funds' relative 
net asset values.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-9180 Filed 4-12-00; 8:45 am]
BILLING CODE 8010-01-M