[Federal Register Volume 63, Number 225 (Monday, November 23, 1998)]
[Notices]
[Pages 64741-64743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31229]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23538; File No. 812-11310]
DG Investor Series, et al.; Notice of Application
November 16, 1998.
AGENCY: Securities and Exchange Commission (the ``SEC'').
ACTION: Notice of application for an order under Section 17(b) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
Section 17(a) of the Act.
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SUMMARY OF APPLICATION: Applicants, DG Investor Series (``DG Series'')
and The Infinity Mutual Funds, Inc. (``Infinity Funds''), request an
order to permit certain series of Infinity Funds to acquire all of the
assets and liabilities of certain series of DG Series. Because of
certain affiliations, applicants may not rely on Rule 17a-8 under the
Act.
FILING DATES: The application was filed on September 18, 1998.
Applicants have agreed to file an amendment during the
[[Page 64742]]
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 December 10,
1998, and should be accompanied by proof of service on Applicants, in
the form of an affidavit or, for lawyers, a certification 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, N.W., Washington, D.C.
20549. Applicants: DG Series, 5800 Corporate Drive, Pittsburgh, PA
15237-7071; Infinity Funds, 3435 Stelzer Road, Columbus, OH 43219-3035.
FOR FURTHER INFORMATION CONTACT: Deepak Pai, Senior Counsel, at (202)
942-0574, or Edward Macdonald, 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, N.W., Washington, D.C.
20549 (tel. no. 202-942-9080).
Applicants' Representations
1. DG Series is a Massachusetts business trust registered under the
Act as an open-end management investment company and composed of nine
separate series, two of which are seeking the requested relief: the DG
Limited Term Government Income Fund and the DG Treasury Money Market
Fund (the ``Acquired Funds'').
2. Infinity Funds is a Maryland corporation registered under the
Act as an open-end management investment company and composed of twenty
separate series, two of which are seeking the requested relief: the ISG
Limited Duration U.S. Government Portfolio and the ISG U.S. Treasury
Money Market Portfolio (the ``Acquiring Funds''). The Acquired Funds
and Acquiring Funds are collectively referred to as ``Funds''.
3. First American National Bank (``FANB''), a national banking
association and a subsidiary of First American Corporation, serves as
the investment adviser to the Acquiring Funds. FANB is not required to
register under the Investment Advisers Act of 1940 (the ``Advisers
Act''). ParkSouth Corporation (``ParkSouth''), an indirect subsidiary
of First American Corporation, serves as the investment adviser to the
Acquired Funds. ParkSouth is registered under the Advisers Act. FANB,
as a fiduciary for its customers, owns of record more than 25% of the
outstanding voting securities of each of the Funds.
4. On May 14, 1998, and September 18, 1998, the boards of directors
or trustees of the Funds (the ``Boards''), including a majority of the
directors or trustees who are not ``interested persons'' under section
2(a)(19) of the Act (``Independent Board Members''), approved for each
Fund a plan of reorganization (the ``Plans''). Under the Plans, ISG
Limited Duration U.S. Government Portfolio and ISG U.S. Treasury Money
Market Portfolio will acquire the assets, and assume the liabilities,
of DG Limited Term Government Income Fund and DG Treasury Money Market
Fund, respectively, in exchange for shares of the Acquiring Funds (the
``Reorganization''). As a result of the Reorganization, each Acquired
Fund will receive Acquiring Fund shares having an aggregate net asset
value (``NAV'') equal to the aggregate NAV of the corresponding
Acquired Fund's shares held by that shareholder calculated as of the
close of business immediately prior to the date on which the
Reorganization will occur. Applicants expect that the Reorganization
will occur on or about December 11, 1998 (the ``Closing Date'').
5. Each Acquired Fund has one class of shares. ISG Limited Duration
U.S. Government Portfolio has three classes of shares: Classes A, B,
and Trust Shares. ISG U.S. Treasury Money Market Portfolio has two
classes of shares: Classes A and Trust Shares. Acquired Funds'
shareholders generally will receive Class A shares of the Acquiring
Funds. Trust Shares will be issued to Acquired Funds' shareholders who
are eligible to purchase Trust Shares. Class B shares will not be
exchanged in the Reorganization.
6. Class A shares of ISG Limited Duration U.S. Government Portolio
are subject to a front-end sales charge, a contingent deferred sales
charge (``CDSC''), and an asset-based distribution fee. Shares of DG
Limited Term Government Income Fund are subject to a front-end sales
load. Trust Shares are not subject to any front-end sales charge or
CDSC. Each Acquired Fund has adopted an asset-based distribution plan.
Class A shares of the ISG U.S. Treasury Money Market Portfolio and
Trust Shares of the Acquiring Funds are not subject to an asset-based
distribution fee. Shares of the Acquired Funds and Class A shares and
Trust Shares of the Acquiring Funds are subject to a service fee.
7. The Board of each Fund, including a majority of the Independent
Board Members, approved the Reorganization as in the best interests of
the shareholders and determined that the interests of existing
shareholders will not be diluted as a result of the Reorganization. The
Boards considered, among other things, (1) the compatibility of the
Funds' investment objectives and policies; (2) the shareholder services
offered by the Funds; (3) the terms and conditions of the
Reorganization; (4) expense ratios, fees and expenses of the Funds; and
(5) the tax-free nature of the Reorganization. No sales charge will be
imposed in connection with the Reorganization. FANB will pay the
expenses of the Reorganization.
8. The Plans may be terminated by the Board of DG Series or
Infinity Funds if circumstances should develop that in the opinion of
the Board makes proceeding with the Reorganization inadvisable or if
any condition precedent to the terminating party's obligations has not
been met and it appears that such condition precedent will not or
cannot be met.
9. A registration statement on Form N-14 containing the preliminary
combined prospectus/proxy statement for the Reorganization was filed
with the SEC on September 18, 1998. A final prospectus/proxy was mailed
to shareholders of the Acquired Funds on October 28, 1998. A special
meeting of the Acquired Funds' shareholders will be held on or about
December 11, 1998, to approve the Reorganization.
10. The consummation of the Reorganization under the Plans is
subject to a number of conditions precedent, including: (1) The Plans
have been approved by the Acquired Funds' shareholders in the manner
required by applicable law; (2) on the Closing Date, no action, suit or
other proceeding is pending before any court or governmental agency in
connection with the Reorganization; (3) the Funds have received an
opinion of counsel stating, among other thing, that the Reorganization
will not result in federal income taxes for the Funds or their
shareholders; (4) the Funds have received from the SEC an order
exempting the Reorganization from the provisions of section 17(a) of
the Act; and (5) the registration statement on Form N-14 has been
declared effective.
[[Page 64743]]
Applicants agree not to make any material changes to the Plans that
affect the application without prior SEC approval.
Applicants' Legal Analysis
1. Section 17(a) of the Act provides that it is unlawful for any
affiliated person of a registered investment company, or any affiliated
person of such a person, acting as principal, knowingly to sell any
security to, or purchase any security from the company. Section 2(a)(3)
of the Act defines the term ``affiliated person'' of another 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 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 the person.
2. Rule 17a-8 under the Act exempts from the prohibitions of
section 17(a) of the Act 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, and/or common officers, provided
that certain conditions are satisfied.
3. Applicants state that they cannot rely on rule 17a-8 under the
Act because the Funds may be affiliated for reasons other than those
set forth in the rule. The Funds may be affiliated persons of each
other because FANB, as fiduciary for its customers, owns of record 25%
or more of the outstanding securities of each Fund.
4. Section 17(b) of the Act provides that the SEC may exempt a
transaction from section 17(a) of the Act if evidence establishes that
(a) 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; (b) the proposed transactions is
consistent with the policy of each registered investment company
concerned, and (c) the proposed transaction is consistent with the
general purposes of 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
consummate the Reorganization. Applicants submit that the
Reorganization satisfies the provisions in section 17(b) of the Act.
Applicants state that the Boards have determined that the
Reorganization is in the best interests of each Fund's shareholders and
that the interests of the existing shareholders will not be diluted as
a result of the Reorganization. In addition, applicants state that the
exchange of the Acquired Funds' shares for the Acquiring Funds' shares
will be based on the relative NAVs.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-31229 Filed 11-20-98; 8:45 am]
BILLING CODE 8010-01-M
