[Federal Register Volume 62, Number 56 (Monday, March 24, 1997)]
[Notices]
[Pages 13915-13918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7282]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22569; 812-10524]
Nations Fund Trust et al.; Notice of Application
March 17, 1997.
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: Nations Funds Trust (``NFT''), Nations Fund, Inc.
(``NFI''), NationsBanc Advisors, Inc. (``NBAI''), The Pilot Funds
(``Pilot''), and Boatmen's Trust Company (``Boatmen's'').
RELEVANT ACT SECTIONS: Order requested under section 17(b) for an
exemption from section 17(a).
SUMMARY OF APPLICATION: Applicants request an order under section 17(b)
for an exemption from section 17(a) to permit certain series of NFT and
NFI to acquire all of the assets and assume all of the stated
liabilities of certain series of Pilot. Because of certain
affiliations, applicants may not rely on rule 17a-8 under the Act.
FILING DATE: The application was filed on February 13, 1997. Applicants
have agreed to file an amendment during the notice period, the
substance of which is included 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 April 11, 1997,
and should be accompanied by proof of service on the 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, N.W., Washington, D.C.
20549. Applicants: NFT, NFI, NBAI, and Boatmen's One NationsBank Plaza,
Charlotte, North Carolina 28255; Pilot, 3435 Stelzer Road, Columbus,
Ohio, 43219.
FOR FURTHER INFORMATION CONTACT:
John K. Forst, Staff Attorney, at (202) 942-0569, 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.
Applicants' Representations
1. NFT, a Massachusetts business trust, is registered under the Act
as an open-end management investment company. NFT currently consists of
thirty-two series, seven of which are the subject of this application:
Nations Strategic Fixed Income Fund, Nations Disciplined Equity Fund,
Nations Value Fund, Nations Intermediate Municipal Bond Fund, Nation
Short-Intermediate Government Fund, Nations Tax Exempt Fund, and
Nations Municipal Income Fund. NFI, A Maryland corporation, is
registered under the Act as an open-end management investment company.
Three of NFI's existing five series and three shell funds are the
subject of this application: Nations Equity Income Fund, Nations Prime
Fund, Nations Treasury Fund, Nations Small Company Growth Fund (shell),
Nations U.S. Government Bond Fund (shell), and Nations International
Growth Fund (shell) (collectively, these thirteen funds are referred to
as the ``Acquiring Funds'').
2. Pilot, a Massachusetts business trust, is registered under the
Act as an open-end management investment company. Pilot currently
offers fourteen series: Pilot Diversified Bond Income Fund, Pilot
Equity Income Fund, Pilot Growth Fund, Pilot Growth and Income Fund,
Pilot Intermediate Municipal Bond Fund, Pilot Intermediate U.S.
Government Securities Fund, Pilot International Equity Fund, Pilot
Missouri Short-Term Tax-Exempt Fund, Pilot Municipal Bond Fund, Pilot
Municipal Bond Fund, Pilot Short-Term U.S. Treasury Fund, Pilot Small
Capitalization Equity Fund, Pilot U.S. Government Securities Fund,
Pilot Short-Term Diversified Assets Fund, and Pilot Short-Term Tax-
Exempt Diversified Fund (collectively, the ``Acquired Funds'').
3. The investment objectives of each Acquired Fund are
substantially similar to those of the corresponding Acquiring Fund.
4. NBAI is the investment adviser to the operating Acquiring Funds.
NBAI is
[[Page 13916]]
a wholly-owned subsidiary of NationsBank, N.A., which is a wholly-owned
subsidiary of NationsBank Corporation (``NationsBank''). Boatmen's is
the investment adviser to the Acquired Funds.
5. On August 29, 1996, Boatmen's Bancshares, Inc. (``Bancshares''),
the former parent of Boatmen's, entered into an Agreement and Plan of
Merger (the ``Merger Agreement'') with NationsBank. The Merger
Agreement provided that Bancshares will merge with and into a wholly-
owned subsidiary of NationsBank (the ``Holding Company Merger''). The
Holding Company Merger was consummated on January 7, 1997.
6. Currently, Boatmen's and its affiliates, which are under common
control with NBAI, hold of record in their name and in the names of
their nominees more than 25% of the outstanding voting Securities of
the Pilot class of shares of a minority of the Acquired Funds. Except
as noted below, all such securities are held for the benefit of others
in a trust, agency, custodial, or other fiduciary or representative
capacity. Except for Boatmen's ownership for its own account as of
December 31, 1996, of more than 5%, but less than 10% of the Pilot
class of the Pilot Municipal Bond Fund, neither Boatmen's, NBAI, or any
affiliate of NBAI owns an economic interest in these securities.
7. Shares of Nations Prime Fund, Nations Tax Exempt Fund, and
Nations Treasury Fund (the ``Nations Money Market Funds'') are divided
into six classes of shares: Primary A Shares, Primary B Shares,
Investor A Shares, Investor B Shares, Investor C Shares, and Daily
Shares. Shares of all other Acquiring Funds (the ``Nations Non-Money
Market Funds'') are divided into five classes of shares: Primary A
Shares, Primary B Shares. Investor A Shares, Investor C Shares, and
Investor N Shares. Primary A Shares, Daily Shares, and Investor B
Shares are the only share classes of Nations Money Market Funds
involved in the proposed reorganization. Primary A Shares, Investor A
Shares, and Investor N Shares are the only share classes of Nations
Non-Money Market Funds involved in the proposed reorganization.
8. Shares of the Acquiring Funds are distributed by Stephens Inc.
(``Stephens''), a registered broker-dealer. Stephens receives no
compensation in connection with the distribution of Primary A Shares of
the Acquiring Funds. Each Acquiring Fund's Investor A Share class has
adopted a distribution plan pursuant to rule 12b-1 under the Act. This
distribution plan provides for a payment of up to 0.25% (on an
annualized basis) of the average daily net asset value of the Investor
A Shares of the Non-Money Market Funds. The Acquiring Funds have
approved shareholder servicing plans and distribution plans with
respect to Investor B and Daily Shares of the Nations Money Market
Funds and Investor N Shares of the Nations Non-Money Market Funds.
Payments under the shareholder servicing plans may not exceed 0.25% (on
an annualized basis) of the average daily net asset value of these
shares. Payments under the distribution plans may not exceed 0.75% of
the average daily net asset value of each Nations Non-Money Market
Fund's Investor N Shares, or 0.10% of the Investor B Shares and 0.45%
of the Daily Shares of the Nations Money Market Funds.
9. Shares of Pilot Missouri Short-Term Tax-Exempt Fund, Pilot
Short-Term Diversified Assets Fund, Pilot Short-Term Tax-Exempt Fund,
and Pilot Short-Term U.S. Treasury Fund (the ``Pilot Money Market
Funds'') are divided into three classes of shares: Pilot Shares,
Investor Shares, and Administration Shares. The other Acquired Funds
(the ``Pilot Non-Money Market Funds'') are divided into three classes
of shares: Pilot Shares, Class A Shares, and Class B Shares.
10. Shares of the Acquired Funds are distributed by Pilot Fund
Distributors, Inc. (``PFD''), a registered broker-dealer. Certain
classes of the Acquired Funds have adopted distribution plans pursuant
to rule 12b-1 under the Act. Under these plans, PFD receives payments
for distribution and support services. Payments under the distribution
plan for Class A Shares may not exceed 0.25% (on an annual basis) of
the average daily net assets. Payments under the distribution plan for
Class B Shares may not exceed 1.00% (on an annual basis) of the average
daily net assets.\1\ Pilot Administration Shares have an account
administration fee of 0.25% and Pilot Investor Shares have a rule 12b-1
fee of 0.50% to be paid to PFD in connection with distribution and
administration of such shares. Pilot Shares are not subject to any rule
12b-1 fees.
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\1\ Not more than 0.25% of such assets will be used to
compensate service organizations for personal services provided to
Class B shareholders and/or the maintenance of shareholder accounts.
Not more than 0.75% of such assets will be paid to PFD as
reimbursement for distribution activities.
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11. Pilot Shares, Administrative Shares, and Investor Shares of the
Acquired Funds are offered at net assets value. Class A Shares of the
Acquired Funds are offered at a public offering price that includes a
maximum front-end sales load between 4.00% and 4.50%. Class B Shares of
the Acquired Funds are offered at net asset value with a sliding-scale
deferred sales load. The Acquired Funds' shareholders will pay no
front-end or contingent deferred sales charges after the
reorganization. Shares of all classes of the Acquiring Funds are
offered at net asset value.
12. Pilot has entered into a separate agreement and plan of
reorganization (each a ``Plan'' and, collectively, the ``Plans'') with
each of NFT and NFI, providing for the transfer of all of the assets
(and subject to the assumption of the stated liabilities) of each of
Pilot Diversified Bond Income Fund, Pilot Equity Income Fund, Pilot
Growth Fund, Pilot Growth and Income Fund, Pilot Intermediate Municipal
Bond Fund, Pilot Intermediate U.S. Government Securities Fund, Pilot
International Equity Fund, Pilot Municipal Bond Fund, Pilot Short-Term
U.S. Treasury Fund, Pilot Small Capitalization Equity Fund, Pilot U.S.
Government Securities Fund, and Pilot Short-Term Diversified Assets
Fund to Nations Strategic Fixed Income Fund, Nations Equity Income
Fund, Nations Disciplined Equity Fund, Nations Value Fund, Nations
Intermediate Municipal Bond Fund, Nations Short-Intermediate Government
Fund, Nations International Growth Fund (shell), Nations Municipal
Income Fund, Nations Treasury Fund, Nations Small Company Growth Fund
(shell), Nations U.S. Government Bond Fund (shell), and Nations Prime
Fund, respectively, in exchange for shares of designated classes of
each corresponding Acquiring Fund. Pursuant to these Plans, both Pilot
Missouri Short-Term Tax-Exempt Fund and Pilot Short-Term Tax-Exempt
Diversified Fund will be reorganized into the Nations Tax Exempt Fund.
Pilot Money Market Fund shareholders of Pilot Shares, Investor Shares,
and Administration Shares will receive Primary A, Daily, and Investor B
Shares, respectively, of Nations Money Market Funds. Shareholders of
Pilot Non-Money Market Fund Pilot Shares, Class A Shares, and Class B
Shares will receive Primary A, Investor A, and Investor N Shares,
respectively, of Nations Non-Money Market Funds. The aggregate net
asset value of Acquiring Fund shares to be issued to shareholders of an
Acquired Fund will equal the value of the aggregate net assets of the
Acquired Fund as of the close of business on the business day
immediately prior to the closing. Shares of the Acquiring Funds will be
[[Page 13917]]
distributed pro rata to shareholders of each Acquired Fund in
liquidation of the Acquired Fund. Thereafter, each of the Acquired
Funds and Pilot will be dissolved.
13. The board of trustees of NFT and the board of directors of NFI,
including the disinterested trustees/directors, considered and
unanimously approved the respective Plan on February 6, 1997. The board
of trustees of Pilot, including the disinterested trustees, considered
and unanimously approved the Plans at meetings held on January 31, 1997
and February 5, 1997. Each of the boards has determined, with respect
to their funds, that participation in the reorganizations is in the
best interests of each of the Acquired Funds and the Acquiring Funds,
and that the interests of shareholders will not be diluted as a result
of the reorganizations.
14. Each board based its decision to approve the Plans on a number
of factors, including: (a) The compatibility of each Acquired Fund's
investment objective, policies and restrictions with those of its
corresponding Acquiring Fund; (b) the terms and conditions of the
reorganizations and whether they would result in a dilution of the
existing shareholders' interests; (c) the conditioning of the
reorganizations on receipt of a legal opinion confirming the absence of
any adverse federal tax consequences to the Acquired Funds or their
shareholders resulting from the reorganizations; (d) the similarities
between the Acquired Funds' and the Acquiring Funds' respective
distribution, administrative, transfer agency, shareholder service and
custody arrangements, and the relative performance of each of the
Acquired and Acquiring Funds; (e) the potential expense savings,
economies of scale, reduced per-share expenses, and benefits to the
portfolio management process that could result from combining the
assets and operations of the Acquired Funds and the Acquiring Funds;
and (f) information regarding expense ratios of the Acquired Funds and
the Acquiring Funds.
15. Combined prospectus/proxy statements describing the relevant
reorganizations were filed with the SEC on February 20, 1997, and will
be mailed to shareholders of each Acquired Fund on or about March 20,
1997. Applicants anticipate that special meetings of shareholders of
the Acquired Funds will be held on or about April 21, 1997 and, subject
to shareholder approval, the reorganizations will be completed on or
about May 2, 1997.
16. Approximately $450,000 of the expenses incurred in connection
with the reorganizations will be allocated to the Acquiring Funds
following consummation of the reorganizations (the ``Allocated
Amount''). NBAI will absorb all expenses of the reorganizations other
than the Allocated Amount. In addition, NBAI has committed to maintain
current (after waiver) expense ratios for all Acquiring Fund classes
for a period of at least two years after the closing, absent
extraordinary circumstances or a reduction in fund assets that impacts
fee levels (the Expense Commitment). This Expense Commitment will cause
NBAI, in effect, to absorb approximately $320,000 of the Allocated
Amount through additional fee waivers. NBAI also will absorb the
portion of the remaining Allocated Amount that otherwise would be borne
by current Pilot Fund shareholders by making a capital contribution of
$31,000 to the Pilot Funds prior to the closing. After NBAI absorbs
this $351,000, approximately $99,000 of expenses will be borne by
current Nations Fund shareholders.
17. Applicants agree not to make any material changes to the Plans
that affect representations in the application without the prior
approval of the SEC staff.
Applicants' Legal Analysis
1. Section 17(a) of the Act provides, in pertinent part, that it is
unlawful for any affiliated person of a registered investment company,
or any affiliated person of such person, acting as principal, knowingly
(a) to sell any security or other property to such registered company,
or (b) to purchase from such registered company any security or other
property. Section 17(b) provides that the SEC may exempt a transaction
from section 17(a) if 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 the registered investment company concerned and with the
general purposes of the Act.
2. Section 2(a)(3) of the Act, in pertinent part, defines the term
``affiliated person'' of another person to include (a) any person
owning, controlling, or holding with power to vote, 5% or more of the
outstanding voting securities of such other person; (b) any person 5%
or more of whose outstanding voting securities are owned, controlled,
or held with the power to vote by such other person; (c) any person
controlling, controlled by, or under common control with, such other
person; and (d) if such other person is an investment company, any
investment adviser thereof.
3. Rule 17a-8 under the Act exempts from section 17(a) mergers,
consolidations, or purchases or sales of substantially all of the
assets of registered investment companies that may be affiliated
persons solely by reason of having a common investment adviser, common
directors/trustees, and/or common officers provided that certain
conditions are satisfied.
4. The reorganizations may not be exempt from the prohibitions of
section 17(a) pursuant to rule 17a-8 because the Acquiring Funds and
the Acquired Funds may be affiliated for reasons other than those set
forth in the rule. As a result of the Holding Company Merger, Boatmen's
and NBAI are both under common control of NationsBank. Currently,
Boatmen's and its affiliates hold of record in their name and in the
names of their nominees more than 25% of the outstanding voting
securities of the Pilot class of a minority of the Acquired Funds.
Because of this record ownership and the beneficial ownership of more
than 5% of the Pilot Class of the Pilot Municipal Bond Fund, each
Acquiring Fund may be deemed an affiliated person of an affiliated
person of the corresponding Acquired Fund, and vice versa, for reasons
not based solely on their common adviser, common directors/trustees,
and/or common officers.
5. Applicants believe that the terms of the proposed
reorganizations satisfy the standards of section 17(b). The boards of
trustees and directors of NFT, NFI, and Pilot have determined that
participation in the reorganizations is in the best interests of the
Acquiring Funds, the Acquired Funds and their shareholders, and that
the interests of the shareholders will not be diluted as a result of
the reorganizations. Applicants further submit that the terms of the
transaction, including the consideration to be paid or received, are
reasonable and fair and do not involve overreaching on the part of any
party; the investment objectives, policies, and restrictions of each
Acquired Fund are compatible with and substantially similar to each
respective Acquiring Fund's investment objectives, policies, and
restrictions; and, the reorganization and the granting of the requested
order is appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the
policies and provisions of the Act.
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For the Commission, by the Division of Investment Management,
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 97-7282 Filed 3-21-97; 8:45 am]
BILLING CODE 8010-01-M
