[Federal Register Volume 67, Number 76 (Friday, April 19, 2002)]
[Notices]
[Pages 19461-19463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9626]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25525; 812-12778]


Nations Fund Trust, et al.; Notice of Application

April 15, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

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 Funds Trust (``NFST'') to acquire all of the 
assets and liabilities of certain series of Nations Fund Trust 
(``NFT''), Nations Fund, Inc. (``NFI''), and Nations Reserves (``NR'') 
(the ``Reorganization''). Because of certain affiliations, applicants 
may not rely on rule 17a-8 under the Act.
    Applicants: NFT, NFI, NR, NFST and Banc of America Advisors, LLC 
(``BA Advisors'').
    Filing Dates: The application was filed on February 5, 2002, and 
amended on April 11, 2002.
    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 8, 
2002, 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, NW., Washington, DC 20549-
0609. Applicants, One Bank of America Plaza, 101 South Tryon Street, 
Charlotte, NC 28255.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, (202) 942-0581, or Mary Kay Frech, Branch Chief, (202) 942-
0564 (Division of Investment Management, Office of Investment Company 
Regulation).

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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, NW., Washington, 
DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. NFT, a Massachusetts business trust, NFI, a Maryland 
corporation, and NR, a Massachusetts business trust, are open-end 
management investment companies registered under the Act. NFT currently 
offers 33 series, all of which will participate in the Reorganization. 
NFI offers four series, all of which will participate in the 
Reorganization. NR currently offers 13 series, all of which will 
participate in the Reorganization. The series of NFT, NFI, and NR are 
collectively referred to as the ``Acquired Funds.'' Four of the 
Acquired Funds are feeder funds (``Acquired Feeder Funds'') that invest 
all of their assets in corresponding master portfolios (``Master 
Portfolios'') of Nations Master Investment Trust (``NMIT''), a Delaware 
business trust registered under the Act as an open-end management 
investment company.
    2. NFST, a Delaware business trust, is an open-end management 
investment company registered under the Act. NFST is organizing 37 new 
series (the ``Acquiring Funds,'' and together with the Acquired Funds, 
the ``Funds'').\1\ Four of the Acquiring Funds will be feeder funds 
(``Acquiring Feeder Funds,'' together with the Acquired Feeder Funds, 
the ``Feeder Funds'') that will invest all of their assets in 
corresponding Master Portfolios of NMIT.\2\
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    \1\ A registration statement for the 37 shell Acquiring Funds 
was filed with the SEC on October 16, 2001, and became effective on 
January 1, 2002.
    \2\ The Acquired Funds and the corresponding Acquiring Funds 
are: (i) NFT Nations Georgia Intermediate Municipal Bond Fund and 
NFT Nations Georgia Municipal Bond Fund into NFST Nations Georgia 
Intermediate Municipal Bond Fund; (ii) NFT Nations Maryland 
Intermediate Municipal Bond Fund and NFT Nations Maryland Municipal 
Bond Fund into NFST Nations Maryland Intermediate Municipal Bond 
Fund; (iii) NFT Nations North Carolina Intermediate Municipal Bond 
Fund and NFT Nations North Carolina Municipal Bond Fund into NFST 
Nations North Carolina Intermediate Municipal Bond Fund; (iv) NFT 
Nations South Carolina Intermediate Municipal Bond Fund and NFT 
Nations South Carolina Municipal Bond Fund into NFST Nations South 
Carolina Intermediate Municipal Bond Fund; (v) NFT Nations Tennessee 
Intermediate Municipal Bond Fund and NFT Nations Tennessee Municipal 
Bond Fund into NFST Nations Tennessee Intermediate Municipal Bond 
Fund; (vi) NFT Nations Texas Intermediate Municipal Bond Fund and 
NFT Nations Texas Municipal Bond Fund into NFST Nations Texas 
Intermediate Municipal Bond Fund; (vii) NFT Nations Virginia 
Intermediate Municipal Bond Fund and NFT Nations Virginia Municipal 
Bond Fund into NFST Nations Virginia Intermediate Municipal Bond 
Fund; (viii) NFT Nations Capital Growth Fund and NFT Nations 
Aggressive Growth Fund into NFST Nations Capital Growth Fund; (ix) 
NFT Nations Strategic Growth Fund and NR Nations Blue Chip Fund into 
NFST Nations Strategic Growth Fund; (x) NR Nations Government 
Reserves and NFT Nations Government Money Market Fund into NFST 
Nations Government Reserves; (xi) NR Nations Cash Reserves and NFI 
Nations Prime Fund into NFST Nations Cash Reserves; (xii) NR Nations 
Treasury Reserves and NFI Nations Treasury Fund into NFST Nations 
Treasury Reserves; (xiii) NR Nations Convertible Securities Fund and 
NFI Nations Equity Income Fund into NFST Nations Convertible 
Securities Fund; (xiv) NFT Nations Tax Exempt Fund into NFST Nations 
Tax-Exempt Reserves; (xv) NFT Nations Value Fund into NFST Nations 
Value Fund; (xvi) NFT Nations MidCap Growth Fund into NFST Nations 
MidCap Growth Fund; (xvii) NFT Nations LargeCap Index Fund into NFST 
Nations LargeCap Index Fund; (xviii) NFT Nations Managed Index Fund 
into NFST Nations Managed Index Fund; (xix) NFT Nations SmallCap 
Index Fund into NFST Nations SmallCap Index Fund; (xx) NFT Nations 
Short-Intermediate Government Fund into NFST Nations Short-
Intermediate Government Fund; (xxi) NFT Nations Municipal Income 
Fund into NFST Nations Municipal Income Fund; (xxii) NFT Nations 
Short-Term Municipal Income Fund into NFST Nations Short-Term 
Municipal Income Fund; (xxiii) NFT Nations Intermediate Municipal 
Bond Fund into NFST Nations Intermediate Municipal Bond Fund; (xxiv) 
NFT Nations Short-Term Income Fund into NFST Nations Short-Term 
Income Fund; (xxv) NFT Nations Strategic Income Fund into NFST 
Nations Strategic Income Fund; (xxvi) NFT Nations Bond Fund into 
NFST Nations Bond Fund; (xxvii) NFT Nations Florida Intermediate 
Municipal Bond Fund into NFST Nations Florida Intermediate Municipal 
Bond Fund; (xxviii) NFT Nations Florida Municipal Bond Fund into 
NFST Nations Florida Municipal Bond Fund; (xxix) NFI Nations Small 
Company Fund into NFST Nations Small Company Fund; (xxx) NR Nations 
Municipal Reserves into NFST Nations Municipal Reserves; (xxxi) NR 
Nations Money Market Reserves into NFST Nations Money Market 
Reserves; (xxxii) NR Nations California Tax-Exempt Reserves into 
NFST Nations California Tax-Exempt Reserves; (xxxiii) NR Nations 
California Municipal Bond Fund into NFST Nations California 
Municipal Bond Fund; (xxxiv) NR Nations Emerging Markets Fund into 
NFST Nations Emerging Markets Fund; (xxxv) NR Nations International 
Value Fund into NFST Nations International Value Fund; (xxxvi) NR 
Nations International Equity Fund into NFST Nations International 
Equity Fund; and (xxxvii) NR Nations Intermediate Bond Fund into 
NFST Nations Intermediate Bond Fund.
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    3. BA Advisors is registered under the Investment Advisers Act of 
1940 (``Advisers Act'') and serves as investment adviser for the 
Acquired Funds that are not Feeder Funds as well as the Acquired Feeder 
Funds' corresponding Master Portfolios. The Acquired Funds that are not 
Feeder Funds and the Acquired Feeder Funds' corresponding Master 
Portfolios are currently subadvised by Gartmore Global Partners 
(``Gartmore''), Marsico Capital Management, LLC (``Marsico Capital''), 
INVESCO Global Asset Management (N.A.), Inc. (``INVESCO''), Putnam 
Investment Management LLC (``Putnam''), Brandes Investment Partners, 
L.P. (``Brandes''), or Banc of America Capital Management, LLC 
(``BACAP''), which are investment advisers registered under the 
Advisers Act. BA Advisors also will be the investment adviser, and 
Gartmore, Marsico Capital, INVESCO, Putnam, Brandes, and BACAP also 
will be the investment subadvisers, respectively, for the Acquiring 
Funds that are not Feeder Funds, and the Acquiring Feeder Funds' 
corresponding Master Portfolios. BA Advisors, BACAP and Marsico Capital 
are wholly-owned subsidiaries of Bank of America Corporation. Gartmore, 
INVESCO, Putnam, and Brandes are not affiliated persons of BA Advisors 
or any other company in the Bank of America Group (as defined below).
    4. Bank of America Corporation, Bank of America, N.A., and/or 
certain of their affiliates that are under common control with BA 
Advisors (the ``Bank of America Group'') hold of record, in their name 
and in the names of their nominees, more than 5% (and in some cases, 
more than 25%) of the outstanding voting securities of each of the 
Acquired Funds. Except for a limited number of securities of certain 
Acquired Funds that are held by companies of the Bank of America Group 
in their own accounts, such securities are held for the benefit of 
others in a trust, agency, custodial, or other fiduciary or 
representative capacity.
    5. On October 10, 2001, the board of trustees of NFST (the 
``Acquiring Funds'' Board'') and the boards of directors or trustees of 
NFT, NFI, and NR (the ``Acquired Funds' Boards,'' together with the 
Acquiring Funds' Board, the ``Boards''), including all of the directors 
or trustees who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act (``Independent Members''), of the respective Funds, 
approved an agreement and plan of reorganization (each a ``Plan'' and 
collectively, the ``Plans'') on behalf of each Acquiring Fund and 
Acquired Fund. Under the Plans, on the date following the closing date 
(``Closing Date''), which is currently anticipated to be on or about 
May 10, 2002 (or May 17, 2002, for Nations Small Company Fund, Nations 
California Municipal Bond Fund and Nations Value Fund), each class of 
each Acquiring Fund will acquire all of the assets and liabilities of 
the corresponding class of the Acquired Fund in exchange for shares of 
designated classes of the Acquiring Fund that have an aggregate net 
asset value equal to the value of the class of the Acquired Fund's net 
assets, determined as of the Closing Date unless mutually agreed 
otherwise (``Valuation

[[Page 19463]]

Time''). The value of the assets will be determined in accordance with 
NFT's, NFI's, NR's, and NFST's then current valuation procedures stated 
in their prospectuses. On the date following each Closing Date, the 
Acquired Funds will make a pro rata distribution of shares of the 
Acquiring Fund to its shareholders and liquidate.
    6. Applicants state that the Acquiring Funds will pursue investment 
objectives and follow principal investment strategies that are either 
identical or similar to those of the Acquired Funds. Each of the 
Acquired Funds has multiple classes of shares, and the respective 
Acquiring Fund will have the same classes of shares.\3\ Applicants 
state that the distribution and shareholder servicing arrangements for 
the respective classes of the Acquired Fund are identical or similar to 
the arrangements of the corresponding classes of the Acquiring Fund. 
For purposes of calculating any deferred sales charge, each Acquired 
Fund's shareholders will be deemed to have held shares of the 
respective Acquiring Fund since the date the shareholder initially 
purchased shares of the Acquired Fund. No sales charge will be imposed 
in connection with the Reorganization. Each Plan provides that its 
respective Acquired Fund will be responsible for the expenses 
associated with the Reorganization. To the extent that such expenses 
exceed contractual total operating expense ratio caps in place for any 
such Acquired Fund, BA Advisors or any of its affiliates will bear such 
excess expenses.
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    \3\ In addition to the same classes of shares, some of the 
Acquiring Funds also will offer additional classes of shares.
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    7. The Boards, including all of the Independent Members, found that 
participation in the Reorganization is in the best interest of each of 
their respective Funds and that the interests of each Fund's existing 
shareholders will not be diluted as a result of the Reorganization. In 
approving the Reorganization, the Boards considered, among other 
things: (a) The potential effect of the Reorganization; (b) the 
respective expense ratios of the Funds; (c) the compatibility of the 
investment objectives and investment strategies of the Funds; (d) the 
terms and conditions of the Reorganization; and (e) the tax-free nature 
of the Reorganization. The Boards also noted that the Acquired Funds 
will be responsible for the expenses associated with the 
Reorganization, and considered potential benefits of the Reorganization 
to BA Advisors and its affiliates.
    8. Each Plan may be terminated by mutual written consent of the 
Acquiring Fund and the Acquired Fund at any time through the Closing 
Date. In addition, either Board may terminate the Plan under certain 
circumstances specified in the Plan. The consummation of the 
Reorganization is subject to the following conditions: (a) A 
registration statement under the Securities Act of 1933 for the 
Acquiring Funds will have become effective; (b) the Acquired Funds' 
shareholders will have approved their respective Plan; (c) applicants 
will have received exemptive relief from the SEC with respect to the 
issues in the application; (d) the Funds will have received an opinion 
of counsel concerning the tax-free nature of the Reorganization; and 
(e) the Acquired Fund will have declared a dividend 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 changes to the Plan that materially affect the application without 
prior SEC staff approval.
    9. Definitive proxy solicitation materials have been filed with the 
SEC and were mailed to the Acquired Funds' shareholders on or about 
January 14, 2002. A special meeting of the Acquired Funds' shareholders 
was held on March 27, 2002, at which time the Acquired Funds' 
shareholders approved their respective Plan.

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 or other 
property to, or purchasing any security or other property 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 state that the Bank of America Group holds of record 
more than 5% (and in some cases, more than 25%) of the outstanding 
voting securities of each of the Acquired Funds. Because of this 
ownership, applicants state that the Funds may be deemed affiliated 
persons for reasons other than those set forth in rule 17a-8 and 
therefore unable to rely on the rule. Applicants request an order 
pursuant to section 17(b) of the Act exempting them from section 17(a) 
to the extent necessary to consummate the Reorganization.
    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 Reorganization satisfy 
the standards set forth in section 17(b). Applicants note that the 
Boards, including all of the Independent Members, found that 
participation in the Reorganization is in the best interests of each 
Fund and that the interests of the existing shareholders of each Fund 
will not be diluted as a result of the Reorganization. Applicants also 
note that the Reorganization will be based on the Funds' relative net 
asset values.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-9626 Filed 4-18-02; 8:45 am]
BILLING CODE 8010-01-P