[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
