[Federal Register Volume 60, Number 23 (Friday, February 3, 1995)]
[Notices]
[Pages 6744-6747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2656]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20867; File No. 812-9320]
G.T. Global Growth Series; Notice of Application
January 27, 1995.
agency: Securities and Exchange Commission (``SEC'').
action: Notice of Application for Exemption under the Investment
Company Act of 1940 (``the Act'').
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applicants: G.T. Global Growth Series (``Growth Series''), G.T.
Investment Funds, Inc. (``Investment Funds''), G.T. Investment
Portfolios, Inc. (``Investment Portfolios''), G.T. Capital Management,
Inc. (the ``Adviser''), and G.T. Global Financial Services, Inc.
(``Distributor'').
relevant act sections: Order requested under section 6(c) of the Act
exempting applicants from sections 2(a)(32), 2(a)(35), 18(f)(1), 18(g),
18(i), 22(c), and 22(d) of the Act and rule 22c-1 thereunder.
summary of application: Applicants request an order that would permit
certain investment companies to issue multiple classes of shares
representing interests in the same portfolios of securities and assess,
and under certain circumstances waive, a contingent deferred sales
charge (``CDSC'') on redemptions of shares.
filing dates: The application was filed on November 4, 1994, and
amended on January 5, 1995.
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 February 21,
1995, 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 of a hearing by writing to the SEC's Secretary.
addresses: Secretary, SEC, 450 5th Street NW., Washington, DC 20549.
[[Page 6745]] Applicants, 50 California Street, San Francisco,
California 94111.
for further information contact: Bradley W. Paulson, Staff Attorney, at
(202) 942-0147 or Robert A. Robertson, 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 is available for a fee from the
SEC's Public Reference Branch.
Applicants' Representations
A. Multi-Class Distribution System
1. Growth Series, Investment Funds, and Investment Portfolios are
open-end management investment companies registered under the Act.
Applicants request relief on behalf of themselves and any future open-
end management investment company for which G.T. Capital (or any person
controlling, controlled by, or under common control with G.T. Capital)
serves as investment adviser or G.T. Global (or any person controlling,
controlled by, or under common control with G.T. Global) serves as
principal underwriter. These future companies, together with Growth
Series, Investment Funds, and Investment Portfolios, are referred to as
the ``Companies.'' Existing and future series of each Company are
referred to as the ``Portfolios.'' The Adviser is the investment
adviser and administrator for each existing Portfolio, and the
Distributor serves as principal underwriter for each existing
Portfolio.
2. The existing Portfolios currently offer multiple classes of
shares in accordance with existing exemptive orders.\1\ Under those
orders, shares are offered subject to either a front-end sales charge
in accordance with the applicable provisions of rule 22d-1 under the
Act and a distribution plan adopted in accordance with rule 12b-1 under
the Act or a CDSC and a rule 12b-1 plan. Applicants request an order
amending and superseding their prior orders to permit them to offer
unlimited classes of shares in accordance with a ``Multiple Class
System.''
\1\G.T. Global Growth Series, Investment Company Act Release No.
19022 (Feb. 4, 1994) (notice) and 20101 (Mar. 1, 1994) (order); and
G.T. Global Growth Series, Investment Company Act Release No. 18961
(Sept. 17, 1992) (notice) and 19022 (Oct. 14, 1992) (order).
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3. Under this system, each class of shares of a Portfolio would be
identical in all respects to any other class of shares of that
Portfolio except: (1) Each class would have different class
designations; (2) each class may have a different sales charge; (3)
each class would bear the expense of any payments made under a rule
12b-1 plan and/or shareholder services plan (collectively, the
``Plans''), if any, entered into with respect to such class; (4) each
class could bear certain other expenses directly attributable only to
that class described in condition one, below (``Class Expenses''); (5)
only the holders of a class of shares would be entitled to vote on
matters pertaining to a Plan, related agreements, or other matters
relating to such class; and (6) exchange privileges could vary among
the classes.
4. With respect to each class, a Company (on behalf of a Portfolio)
could enter into one or more rule 12b-1 plan agreements and/or
shareholder services plan agreements (``Plan Agreements'') concerning
the provision of certain services to shareholders of a particular class
by the Adviser, the Distributor, other groups, organizations or
institutions.
5. The gross income of each Portfolio will be allocated to each
class based upon the relative daily net assets of the class. Expenses
of a company that cannot be attributed directly to any one Portfolio
(``Company Expenses'') will be allocated to each Portfolio based on the
relative daily net assets of those Portfolios. Expenses attributable to
a particular Portfolio, but not a particular class of shares
(``Portfolio Expenses''), will be allocated to each class based upon
the relative daily net assets of the class. Class Expenses will be
charged directly to the net assets of the particular class and will be
borne on a pro rata basis by the outstanding shares of such class.
Accordingly, the net income and net asset value per share of (and
dividends and other distributions payable to) each class may differ
from other classes in the same Portfolio.
6. The shares of different classes of a Portfolio will have
different exchange privileges. Applicants anticipate that shares of
each class of a Portfolio will be exchangeable for shares of the
corresponding class of one or more other Portfolios. Such exchanges
will be based on the respective net asset values of the shares being
exchanged. All exchange privileges will comply with rule 11a-3 under
the Act.
B. The CDSC
1. Applicants also request an exemption to allow the Portfolios to
impose a CDSC on redemptions of certain classes of shares (``CDSC
Shares'') and to waive or reduce the CDSC on redemptions under certain
circumstances. The sum of any initial sales charge, asset-based sales
charge, and CDSC imposed on shares of a class will not exceed the
maximum sales charge provided for in Article III, Section 26(d) of the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc.
2. A Portfolio's CDSC may be imposed at a constant or declining
rate over a specified period of years (``CDSC Period''). No CDSC would
be imposed on any redemption of CDSC Shares representing reinvestment
of dividends or other distributions. As presently contemplated, no CDSC
would be imposed on any redemption of CDSC Shares that were purchased
more than six years prior to the redemption.
3. The amount of the CDSC would be the lesser of the amount
representing a specified percentage of the net asset value of the CDSC
Shares at the time of purchase or the amount representing such
percentage of the net asset value at the time of redemption. As a
result, no CDSC would be imposed on amounts representing an increase in
the value of the shareholder's account resulting from capital
appreciation above the amount paid for CDSC Shares purchased in the
CDSC Period. In determining the applicability and rate of any CDSC, it
would be assumed that a redemption is made first of shares representing
reinvestment of dividends and capital gain distributions, next of
shares held by the shareholder for a period equal to or greater than
the CDSC Period, and finally of other shares held by the shareholder
for the longest period of time. This would result in a charge, if any,
imposed at the lowest possible rate.
4. Applicants request relief to permit each Portfolio to waive or
reduce the CDSC under certain circumstances. Any waiver or reduction
will comply with the conditions contained in paragraphs (a) through (d)
of rule 22d-1.
5. Applicants also request the ability to provide a credit for any
CDSC paid in connection with a redemption of Shares followed by a
reinvestment effected within a specified period not exceeding 365 days
of the redemption. If an investor redeems CDSC Shares and pays a CDSC,
then subsequently reinvests all of his redemption proceeds in CDSC
Shares of the same or a different Fund within 365 days, the investor
will be credited for the full amount of the CDSC paid. If the investor
chooses instead to invest less than the full amount of the redemption
proceeds, the investor will be credited a pro rata amount of the CDSC.
The credit will be paid by the principal underwriter.
Applicants' Legal Analysis
1. Applicants request an exemption under section 6(c) of the Act
from [[Page 6746]] sections 18(f)(1), 18(g), and 18(i) of the Act to
the extent that the proposed issuance and sale of multiple classes of
shares representing interests in a Fund's Portfolios could be deemed:
(A) to result in a ``senior security'' within the meaning of section
18(g) and to be prohibited by section 18(f)(1), and (B) to violate the
equal voting provisions of section 18(i). Applicants believe that the
proposed allocation of expenses and voting rights in the manner
described above is equitable and would not discriminate against any
group of shareholders. The proposed arrangement does not involve
borrowings, and does not affect the Funds' existing assets or reserves.
The proposed arrangement also will not increase the speculative
character of the shares of a Fund.
2. Applicants also request an exemption under section 6(c) from
sections 2(a)(32), 2(a)(35), 22(c), and 22(d) of the Act and rule 22c-1
thereunder to permit the Funds to assess, and under certain
circumstances waive, a CDSC in connection with the redemption of
shares.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the conditions set forth below.
1. Each class of shares of a Portfolio will represent interests in
the same portfolio of investments, and be identical in all respects,
except as set forth below. The only differences between the classes of
shares of a Portfolio will relate solely to one or more of the
following: (a) Expenses assessed to a class pursuant to a Plan, if any,
with respect to such class; (b) sales charges applicable to a class of
shares, if any (c) the impact of Class Expenses, which are limited to
any or all of the following: (i) Transfer agent fees identified as
being attributable to a specific class of shares, (ii) stationery,
printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and
proxy statements to current shareholders of a specific class of shares,
(iii) Blue Sky registration fees incurred by a specific class of
shares, (iv) SEC registration fees incurred by a specific class of
shares, (v) expenses of administrative personnel and services as
required to support the shareholders of a specific class of shares,
(vi) directors' fees or expenses incurred as a result of issues
relating to a specific class of shares, (vii) accounting expenses
relating solely to a specific class of shares, (viii) auditors' fees,
litigation expenses, and legal fees and expenses relating to a specific
class of shares, (ix) expenses incurred in connection with shareholders
meetings as a result of issues relating to a specific class of shares,
(x) organizational expenses related to a specific class of shares and
(xi) any other incremental expenses subsequently identified which
should be properly allocated to a specific class of shares and which,
as such, are approved by the SEC pursuant to an amended order or by
rule or regulation; (d) the fact that the classes will vote separately
with respect to matters relating to the applicable distribution plan
and related agreements, if any, or any other matters appropriately
limited to such class(es); (e) the different exchange privileges of the
classes of shares, if any; and (f) the designation of each class of
shares of a Portfolio.
2. The board of directors of each Company, including a majority of
the directors who are not interested persons of the Company
(``Independent Directors''), will have approved the Multiple Class
System with respect to a particular Portfolio of the Company prior to
the implementation of the system by that Portfolio. The minutes of the
meetings of the board of the Company regarding the deliberations of the
directors with respect to the approvals necessary to implement the
Multiple Class System will reflect in detail the reasons for the
determination by the board that the proposed Multiple Class System is
in the best interests of each Portfolio and its shareholders.
3. The initial determination of the Class Expenses that will be
allocated to a particular class and any subsequent changes thereto will
be reviewed and approved by a vote of the appropriate board of
directors, including a majority of the Independent Directors. Any
person authorized to direct the allocation and disposition of monies
paid or payable by a Portfolio to meet Class Expense shall provide to
the applicable board and the directors shall review, at least
quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
4. If any class will be subject to a shareholder services plan, the
plan(s) will be adopted and operated in accordance with the procedures
set forth in rule 12b-1 (b) through (f) as if the expenditures made
thereunder were subject to rule 12b-1, except that shareholders need
not enjoy the voting rights specified in rule 12b-1.
5. On an ongoing basis, the board of each Company, pursuant to its
fiduciary responsibilities under the Act and otherwise, will monitor
each Portfolio, as applicable, for the existence of any material
conflicts among the interests of the classes of its shares, if there is
more than one class. The board, including a majority of the Independent
Directors, shall take such action as is reasonably necessary to
eliminate any such conflicts that may develop. Each Portfolio's
principal underwriter and investment adviser will be responsible for
reporting any potential or existing conflicts to the appropriate board.
If such a conflict arises, the Portfolio's principal underwriter and
investment adviser, at their own expense, will take such actions as are
necessary to remedy such conflict, including establishing a new
registered management investment company, if necessary.
6. The principal underwriter of each Portfolio implementing a
Multiple Class System will adopt compliance standards with respect to
when each class of shares may be appropriately sold to particular
investors. Applicants will require all persons selling shares of the
Portfolios to agree to conform to such standards.
7. The board of directors of each Company will receive quarterly
and annual statements concerning the amounts expended under the
Company's Plans in compliance with paragraph (b)(3)(ii) of rule 12b-1,
as it may be amended from time to time. In the statements, only
expenditures properly attributable to the sale or servicing of a
particular class of shares will be used to justify and fee for services
charged to that class. Expenditures not related to the sale or
servicing of a particular class will not be presented to the board to
justify any fee attributable to that class. The statements, including
the allocations upon which they are based, will be subject to the
review and approval of the Independent Directors in the exercise of
their fiduciary duties.
8. Dividends and other distributions paid by a Portfolio with
respect to each class of its shares, to the extend any dividends and
other distributions are paid, will be declared and paid on the same day
and at the same time, and will be determined in the same manner and
will be in the same amount, except that the amount of the dividends and
other distributions declared and paid by a particular class may be
different from that of another class because payments made under a Plan
or Plan Agreement by a class and Class Expenses will be borne
exclusively by that class.
9. The methodology and procedures for calculating the net asset
value and dividends and other distributions of the classes and the
proper allocation of expenses among the classes have been reviewed by
an expert (``Expert'') who has rendered a report to applicants,
[[Page 6747]] which has been provided to the staff of the SEC, stating
that such methodology and procedures are adequate to ensure that such
calculations and allocations will be made in an appropriate manner. On
an ongoing basis, the Expert, or an appropriate substitute Expert, will
monitor the manner in which the calculations and allocations are being
made and, based upon such review, will render at least annually a
report to the Portfolios that the calculations and allocations are
being made properly. The reports of the Expert will be filed as part of
the periodic reports filed with the SEC pursuant to sections 30(a) and
30(b)(1) of the Act. The work papers of the Expert with respect to such
reports, following request by the Portfolios (which the Portfolios
agree to provide), will be available for inspection by the SEC staff
upon written request to the Portfolios for such work papers by a senior
member of the Division of Investment Management, limited to the
Director, an Associate Director, the Chief Accountant, the Chief
Financial Analyst, an Assistant Director, and any Regional
Administrators or Associate and Assistant Administrators. The initial
report of the Expert is a ``Special Purpose'' report on ``policies and
procedures placed in operation'' in accordance with Statement on
Auditing Standards (``SAS'') No. 70, ``Reports on the Processing of
Transactions by Service Organizations,'' of the American Institute of
Certified Public Accountants (``AICPA''). Ongoing reports will he on
``policies and procedures placed in operation and tests of operating
effectiveness'' prepared in accordance with SAS No. 70 of AICPA, as it
may be amended from time to time, or similar auditing standards as may
be adopted by the AICPA from time to time and any such other then
applicable auditing standards as may be adopted by the AICPA.
10. Applicants have adequate facilities in place to ensure
implementation of the methodology and procedures for calculating the
net asset value and dividends and other distributions of the classes of
shares and the proper allocation of expenses among the classes of
shares and this representation has been concurred with by the Expert in
the initial report referred to in the preceding condition and will be
concurred with by the Expert, or an appropriate substitute Expert, on
an ongoing basis at least annually in the ongoing reports referred to
in the preceding condition. Applicants will take immediate corrective
action if the Expert, or appropriate substitute Expert, does not so
concur in the ongoing reports.
11. The prospectuses of each class of shares will contain a
statement to the effect that a salesperson and any other person
entitled to receive compensation for selling or servicing shares may
receive different compensation with respect to one particular class of
shares over another in the Portfolios.
12. The conditions pursuant to which the exemptive order is granted
and the duties and responsibilities of the board of each Portfolio with
respect to the Multiple Class System will be set forth in guidelines
which will be furnished to the directors.
13. Each Portfolio implementing a Multiple Class System will
disclose the respective expenses, performance data, distribution
arrangements, services, fees, sales charges (if any), and exchange
privileges applicable to each class of its shares in every prospectus,
regardless of whether all classes of its shares are offered pursuant to
each prospectus. Each Portfolio will disclose the respective expenses
and performance data applicable to all classes of its shares in every
shareholder report. The shareholder reports will contain, in the
statement of assets and liabilities and statements of operations,
information related to the Portfolio as a whole generally and not on a
per class basis. Each Portfolio's per share data, however, will be
prepared on a per class basis with respect to all classes of shares of
such Portfolio. To the extent that any advertisement or sales
literature describes the expenses or performance data applicable to any
class of its shares, each Portfolio will also disclose the respective
expenses and/or performance data applicable to all classes of that
Portfolio's shares. The information provided by an applicant or other
Portfolio for publication in any newspaper or similar listing of a
Portfolio's net asset value or public offering price will present each
class of that Portfolio's shares separately.
14. Applicants acknowledge that the grant of the exemptive order
requested by this application will not imply SEC approval of,
authorization of, or acquiescence in any particular level of payments
that any Portfolio may make pursuant to a Plan in reliance on the
exemptive order.
15. Applicants will comply with the provisions of proposed rule 6c-
10 under the Act, Investment Company Act Release No. 16619 (November 2,
1988), as such rule is currently proposed and as it may be reproposed,
adopted or amended.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-2656 Filed 2-2-95; 8:45 am]
BILLING CODE 8010-01-M
