[Federal Register Volume 63, Number 76 (Tuesday, April 21, 1998)]
[Notices]
[Pages 19769-19770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10503]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23116; 812-10228]
New England Funds, L.P. et al.; Notice of Application
April 15, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order pursuant to section 17(d)
and rule 17d-1 under the Investment Company Act of 1940 (the ``Act'').
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Summary of Application: Applicants request an order that would permit
funds relying on section 12(d)(1) (E) or (G) of the Act to enter into a
special servicing agreement.
Applicants: New England Funds, L.P. (``NEF''); New England Funds
Management, L.P. (``NEFM''); New England Funds Trust I, on behalf of
its series, New England Balanced Fund, New England Growth Fund, New
England Value Fund, New England International Equity Fund, New England
Capital Growth Fund, New England Bond Income Fund, New England Tax
Exempt Income Fund, New England Government Securities Fund, New England
Star Advisers Fund, New England Strategic Income Fund, and New England
Star Worldwide Fund; New England Funds Trust II, on behalf of its
series, New England Massachusetts Tax Free Income Fund, New England
High Income Fund, New England Growth Opportunities Fund, New England
Limited Term U.S. Government Fund, New England Adjustable Rate U.S.
Government Fund, New England Intermediate Term Tax Free Fund of
California, and New England Intermediate Term Tax Free Fund of New
York; New England Funds Trust III, on behalf of its series, New England
Equity Income Fund (collectively with New England Funds Trusts I, II,
and III, the ``New England Funds''); and each existing or future open-
end management investment company or series thereof, including TopFund
Series Trust, that is part of the same group of investment companies as
the New England Funds under section 12(d)(1)(G)(ii) of the Act and
which is, or will be, advised by NEFM or any entity controlling,
controlled by, or under common control with NEFM, or for which NEF or
any entity controlling, controlled by, or under common control with
NEF, serves as principal underwriter.
Filing Dates: The application was filed on July 1, 1996, and amended on
December 5, 1996, May 1, 1997, and September 11, 1997. Applicants have
agreed to file an additional amendment, the substance of which is
incorporated in this notice, during the notice period.
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 11, 1998,
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 Fifth Street, N.W., Washington, D.C.
20549. Applicants: New England Funds, L.P., 399 Boylston Street,
Boston, Massachusetts 02116, c/o Robert E. O'Hare, Esq.
FOR FURTHER INFORMATION CONTACT:
Mary T. Geffroy, Senior Counsel, at (202) 942-0553, or Nadya B.
Roytblat, Assistant Director, 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. (202) 942-8090).
Applicants' Representatives
1. Each New England Fund is an open-end management investment
company registered under the Act. New England Funds are referred to as
``Underlying Funds.''
2. NEFM is an investment adviser registered under the Investment
Advisers Act of 1940 (the ``Advisers Act''). NEFM serves as adviser to
the New England Funds, except for the New England Growth Fund, which is
advised by Capital Growth Management, L.P., an investment adviser
registered under the Advisers Act. NEF is registered as a broker-dealer
under the Securities Exchange Act of 1934. NEF serves as the principal
underwriter of the New England Funds, including the New England Growth
Fund.
3. TopFund Series Trust will be organized as a Massachusetts
business trust and registered under the Act as an open-end management
investment company. The term ``TopFund Series Trust'' refers to each
existing and future open-end management investment company or any
series of that company (the ``TopFunds'') that (1) is part of the same
group of investment companies as the Underlying Funds under section
12(d)(1)(G)(ii) of the Act and (a) is, or will be, advised by NEFM or
any entity controlling, controlled by, or under common control with
NEFM, or (b) for which NEF or any entity controlling, controlled by, or
under common control with NEF, serves as principal underwriter and (2)
intends to invest substantially all of its assets in the Underlying
Funds.\1\ Certain TopFunds will invest in multiple Underlying Funds in
accordance with section 12(d)(1)(G) of the Act and other TopFunds will
invest all of their assets in a single Underlying Fund in accordance
with section 12(d)(1)(E) of the Act. Each TopFund and each Underlying
Fund will be a multiple class fund in reliance on rule 18f-3 under the
Act.
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\1\ The TopFunds may not be Underlying Funds and no TopFund will
invest in another TopFund.
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4. Applicants propose to enter into a Special Servicing Agreement
(the ``Agreement''), which will be among NEFM, TopFund Series Trust,
NEF, New England Funds Trust I, New England Funds Trust II, and New
England Funds Trust III. Under the Agreement, the Underlying Fund will
bear the expenses of a TopFund (other than advisory fees and rule 12b-1
fees) in proportion to the average daily value
[[Page 19770]]
of the Underlying Fund's shares owned by the TopFund. Payments by an
Underlying Fund to a TopFund under the Agreement will be a fund-wide
expense of the Underlying Fund.
5. Applicants submit that a TopFund, by investing its assets in an
Underlying Fund, enables the Underlying Fund to spread the Underlying
Fund's expenses over a larger asset base. Applicants further submit
that the Underlying Fund may experience savings because it would be
servicing only one account (i.e., the TopFund), instead of multiple
accounts of the shareholders of the TopFund. No Underlying Fund will
bear any expenses of a TopFund that exceed Net Benefits as defined in
the condition below, to the Underlying Fund from the arrangement.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1(a) under the Act provide
that an affiliated person of, or a principal underwriter for, a
registered investment company, or an affiliate of such person or
principal underwriter, acting as principal, shall not participate in,
or effect any transaction in connection with, any joint enterprise or
other joint arrangement in which the registered investment company is a
participant unless the SEC has issued an order approving the
arrangement.
2. Rule 17d-1(b) provides that, in passing upon exemptive requests
under the rule, the SEC will consider whether participation of the
investment company in the joint enterprise, joint arrangement, or
profit-sharing plan on the basis proposed is consistent with the
provisions, policies, and purposes of the Act and the extent to which
the participation is on a basis different from or less advantageous
than that of other participants.
3. Applicants request relief under section 17(d) and rule 17d-1 to
permit them to enter into the Agreement in which the Underlying Funds
may pay certain expenses of the TopFunds. Applicants contend that each
Underlying Fund will pay a TopFund's expenses only in direct proportion
to the average daily value of the Underlying Fund's shares owned by the
TopFund to ensure that expenses of the TopFund are borne
proportionately and fairly. Applicants also state that prior to an
Underlying Fund's entering into the Agreement, and at least annually
thereafter, the board of trustees of the Underlying Funds, including a
majority of trustees who are not interested persons of the Underlying
Fund (the ``Board'') will determine that the Agreement will result in
Net Benefits, as defined in the condition below, to the Underlying
Fund. In making the annual determination, one of the factors the Board
will consider is the amount of Net Benefits actually experienced by
each class of shareholders of the Underlying Fund and the Underlying
Fund as a whole during the preceding year. For these reasons,
applicants believe that the requested relief meets the standards of
section 17(d) and rule 17d-1.
Applicants' Condition
Applicants agree that the order will be subject to the following
condition:
Prior to an Underlying Fund's entering into the Special Servicing
Agreement and at least annually thereafter, the Board must determine
that the Special Servicing Agreement will result in quantifiable
benefits to each class of shareholders of the Underlying Fund and to
the Underlying Fund as a whole that will exceed the costs of the
Special Servicing Agreement borne by each class of shareholders of the
Underlying Fund and by the Underlying Fund as a whole (``Net
Benefits''). In making the annual determination, one of the factors the
Board must consider is the amount of Net Benefits actually experienced
by each class of shareholders of the Underlying Fund and the Underlying
Fund as a whole during the preceding year. The Underlying Fund will
preserve for a period of not less than six years from the date of a
Board determination, the first two years in an easily accessible place,
a record of the determination and the basis and information upon which
the determination was made. This record will be subject to examination
by the SEC and its staff.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-10503 Filed 4-20-98; 8:45 am]
BILLING CODE 8010-01-M
