[Federal Register Volume 64, Number 81 (Wednesday, April 28, 1999)]
[Notices]
[Pages 22883-22886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10624]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23807; 812-11496]
Nations Fund Trust, et al.; Notice of Application
April 22, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of an application under section 17(b) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 17(a) of
the Act.
-----------------------------------------------------------------------
SUMMARY OF THE APPLICATION: Applicants request an order to permit
certain series of Nations Fund Trust (``NFT''), Nations Fund, Inc.
(``NFT''), Nations Institutional Reserves (``NIR'') and Nations Master
Investment Trust (``NMIT'') to acquire all of the assets and
liabilities of all of the series of Pacific Horizon Funds, Inc.
(``Pacific Horizon'') and Master Investment Trust, Series (``MIT'').
[[Page 22884]]
APPLICANTS: NFT, NFI, NIR, and NMIT, NationsBanc Advisors, Inc.
(``NBAI''), Pacific Horizon, and MIT.
FILING DATES: The application was filed on February 3, 1999. Applicants
have agreed to file an amendment to the application, the substance of
which is reflected 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 12, 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 may request
notification by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549-0609. Applicants: NFT, NFI, NIR, NMIT and NBAI, One Bank of
America Plaza, 101 South Tryon Street, Charlotte, NC 28255; Pacific
Horizon and MIT, P.O. Box 8968, Wilmington, DE 19899.
FOR FURTHER INFORMATION CONTACT: Janet M. Grossnickle, Attorney-
Adviser, (202) 942-0526, or Mary Kay Frech, Branch Chief, (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 from
the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington,
D.C. 20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. Pacific Horizon, a Maryland corporation, and MIT, a Delaware
business trust, are open-end management series investment companies
registered under the Act. Pacific Horizon currently offers shares in
seventeen series (the ``Pacific Horizon Funds''), and MIT currently
consists of two master portfolios (together with the Pacific Horizon
Funds, the ``Acquired Funds'').
2. NFT and NIR, each a Massachusetts business trust, NFI, a
Maryland corporation, and NMIT, a Delaware business trust, are open-end
management investment companies registered under the Act. Each company
offers shares in certain series, some of which constitute the
``Acquiring Funds'' (together with the Acquired Funds, the ``Funds'').
NFT offers shares in thirty-nine series, three of which are Acquiring
Funds. NFI offers shares in nine series, three of which are Acquiring
Funds. NIR offers shares in five series, four of which are Acquiring
Funds. NIR is organizing six new shell series, which also will be
Acquiring Funds.\1\ NMIT has established two shell master portfolios
which are Acquiring Funds.
---------------------------------------------------------------------------
\1\ A registration statement for the six shell Acquiring Funds
was filed with the SEC on February 17, 1999 and it is anticipated
that it will be declared effective on or about May 3, 1999. These
Acquiring Funds are expected to commerce operations upon the
consummation of the Reorganization (as defined below).
---------------------------------------------------------------------------
3. Bank of America National Trust and Savings Association (``Bank
of America'') is the investment adviser to the Acquired Funds. Bank of
America, a national bank, is exempt from registration under the
Investment Advisers Act of 1940 (``Advisers Act'') pursuant to section
202(a)(11)(A) of the Advisers Act. Bank of America is a wholly-owned
subsidiary of BankAmerica Corporation.
4. NBAI is registered under the Advisers Act and is the investment
adviser for the Acquiring Funds. NBAI is a wholly-owned subsidiary of
BankAmerica Corporation. As of the date of the publication, NBAI, Bank
of America and their affiliates, all of which are part of a common
control group (the ``BankAmerica Group''), held of record, in their
name and in the names of their nominees, more than 5% (and with respect
to certain of the Funds more than 25%) of the outstanding voting
securities of certain of the Funds. All of these securities are held
for the benefit of others in trust, agency, custodial, or other
fiduciary or representatives capacity, except that certain companies of
the BankAmerica Group may, from time to time, own economic interests in
certain money market Funds for its own account.
5. On December 2, 1998, and January 14, 1999, respectively, the
boards of directors and trustees of NFT, NFI, NIR, and NMIT (the
``Acquired Funds' Boards'') and the boards of directors and trustees of
Pacific Horizon and MIT (the ``Acquired Funds' Boards''), including
their disinterested directors and trustee (``Disinterested Trustees''),
unanimously approved Agreements and Plans of Reorganization Between
each of Pacific Horizon and MIT and each of NFT, NFI, NIR, and NMIT
(each a ``Reorganization Plan'' and collectively, the ``Reorganization
Plans''). Pursuant to the Reorganization Plans, each Acquiring Fund
will acquire all of the assets and liabilities \2\ of the corresponding
Acquired Fund in exchange for shares of designated classes of the
Acquiring Fund (the ``Reorganizations'').\3\ The number of Acquiring
Fund shares to be issued to shareholders of the Acquired Fund will be
determined by dividing the aggregate net assets of each Acquired Fund
class by the net asset value per share of the corresponding Acquiring
Fund class, each computed as of the close of business on the closing
date (``Closing Date''). The Reorganization Plans provide that these
Acquiring Fund shares will be distributed pro rata to the shareholders
of record in the applicable Acquired Fund class, determined as of the
close of business on the closing date(``Closing Date''). The
Reorganization Plans provide that these Acquiring Fund shares will be
distributed pro rata to the shareholders of record in the applicable
Acquired Fund class, determined as of the close of business on the
Closing Date. This distribution will be accomplished by issuing the
Acquiring Fund shares to open accounts on the share records of the
Acquiring Funds in the names of the Acquired Fund shareholders.
Simultaneously, all issued and outstanding shares of the Acquired Funds
will be canceled on the books of the Acquired Funds. Each Acquired
Fund, Pacific Horizon, and MIT
[[Page 22885]]
thereafter will be dissolved. Applicants anticipate that the Closing
Date will be on or around May 14, 1999.
---------------------------------------------------------------------------
\2\ Prior to implementation of the Reorganization Plans, the
Acquired Funds intend to discharge substantially all of their
liabilities. Each Acquiring Fund will assume all remaining
liabilities of its corresponding Acquired Fund.
\3\ The Acquired Funds and the corresponding Acquiring Funds
are: (i) Pacific Horizon Flexible Income Fund and Nations
Diversified Income Fund; (ii) Pacific Horizon Short-Term Government
Funds and Nations Short-Intermediate Government Fund; (iii) Pacific
Horizon National Municipal Bond Fund and Nations Municipal Income
Fund; (iv) Pacific Horizon Aggressive Growth Fund and Nations Small
Company Growth Fund; (v) Pacific Horizon International Equity Fund
and Nations International Equity Fund; (vi) Pacific Horizon U.S.
Government Securities Fund and National Government Securities Fund;
(vii) Pacific Horizon Prime Fund and Nations Cash Reserves; (viii)
Pacific Horizon Government Fund and Nations Government Reserves;
(ix) Pacific Horizon Treasury Fund and Nations Treasury Reserves;
(x) Pacific Horizon Treasury Only Fund and Nations Government
Reserves; (xi) Pacific Horizon Tax-Exempt Money Fund and Nations
Municipal Reserves; (xii) Pacific Horizon California Municipal Bond
Fund and Nations California Municipal Bond Fund (shell); (xiii)
Pacific Horizon California Tax-Exempt Money Market Fund and Nations
California Tax-Exempt Reserves (shell); (xiv) Pacific Horizon Asset
Allocation Fund and Nations Asset Allocation Fund (shell); (xv)
Pacific Horizon Capital Income Fund and Nations Capital Income Fund
(shell); (xvi) Pacific Horizon Intermediate Bond Fund and Nations
Intermediate Bond Fund (shell); (xvii) Pacific Horizon Blue Chip and
Nations Blue Chip Fund (shell); (xviii) Blue Chip Master Portfolio
and Nations Blue Chip Master Portfolio (shell); and (xix) Investment
Grade Master Portfolio and Nations Intermediate Bond Master
Portfolio (shell).
---------------------------------------------------------------------------
6. The Acquiring Funds fall into two categories. First, there are
five money market Acquiring Funds that offer or, after the
Reorganizations, will offer shares in some or all of eight classes
(Adviser, Capital, Liquidity, Market, Trust, Service, Investor, and
Daily) (``Nations Money Market Funds''). Second, there are eleven non-
money market Acquiring Funds that offer or, after the Reorganizations,
will offer shares in some or all of six classes (Primary A, Primary B,
Investor A, Investor B, Investor C, and Seafirst) (``Nations Non-Money
Market Funds''). Shares in the following classes will be issued in the
reorganizations: Daily, Service, Adviser, Capital, and Investor shares
in the Nations Money Market Funds; Investor A, Investor B, Investor C,
and Seafirst shares in Nations Non-Money Market Funds. The NMIT master
portfolios will consist of an unlimited number of units of beneficial
interest representing an interest in NMIT.
7. The Daily, Service, and Investor shares in the Nations Money
Market Funds are subject to distribution and shareholder servicing fees
under rule 12b-1 plans. Adviser shares in the Nations Money Market
Funds are subject to shareholder servicing fees under a rule 12b-1
plan, but no distribution fees. No distribution or shareholder
servicing fees are paid by the Capital shares in the Nations Money
Market Funds. Investor A, Investor B, and Investor C shares in the
Nations Non-Money Market Funds are subject to distribution and
shareholder servicing fees under rule 12b-1 plans. Seafirst shares in
the Nations Non-Money Market Funds also are subject to shareholder
servicing fees, but not distribution fees. None of the Nations Money
Market Funds is subject to a front-end or contingent deferred sales
charge. Investor A shares in the Nations Non-Money Market Funds are
subject to a maximum sales load of 5.75%, and certain holders of
Investor A shares are subject to a maximum contingent deferred sales
charge of 1.00%. Investor B shares in the Nations Non-Money Market
Funds are subject to a maximum contingent deferred sales charge of
5.00%. Investor C shares in the Nations Non-Money Market Funds are
subject to a maximum contingent deferred sales charge of 1.00%.
Seafirst shares of the Nations Non-Money Market Funds are not subject
to front-end or contingent deferred sales charges.
8. The Acquired Funds also fall into two categories. First, there
are six money market Acquired Funds that offer shares in some or all of
six classes (S, X, Y, Horizon, Pacific Horizon, and Horizon Service)
(``Pacific Horizon Money Market Funds''). Second, there are eleven non-
money market Acquired Funds that offer shares in some or all of four
classes (A, B, K, and SRF) (``Pacific Horizon Non-Money Market
Funds''). The MIT master portfolios consist of an unlimited number of
units of beneficial interest representing an interest in MIT.
9. The S, X, and Y shares in the Pacific Horizon Money Market Funds
are subject to distribution and servicing fees. Horizon Service and
Pacific Horizon shares in the Pacific Horizon Money Market Funds are
subject to servicing fees, but no distribution fees. No distribution or
servicing fees are paid by the Horizon shares in the Pacific Horizon
Money Market Funds. B and K shares in the Pacific Horizon Non-Money
Market Funds are subject to distribution and shareholder servicing
fees. A and SRF shares in the Pacific Horizon Non-Money Market Funds
also are subject to servicing fees, but not distribution fees. None of
the Pacific Horizon Money Market Funds is subject to a front-end or
contingent deferred sales charge. A shares in the Pacific Horizon Non-
Money Market Funds are subject to maximum sales loads ranging from
3.25% to 5.75%, and a maximum contingent deferred sales charge of
1.00%. B shares in the Pacific Horizon Non-Money Market Funds are
subject to a maximum contingent deferred sales charge of 5.00%. K and
SRF shares of the Pacific Horizon Non-Money Market Funds are not
subject to front-end or contingent deferred sales charges.
10. As a result of the Reorganizations, holders of the S and X
shares of the Pacific Horizon Money Market Funds will become holders of
the Daily shares of the Nations Money Market Funds. Holders of the Y,
Horizon, Pacific Horizon, and Horizon Service shares of the Pacific
Horizon Money Market Funds will become holders, respectively, of
Service, Capital, Investor, and Adviser shares of the Nations Money
Market Funds. Holders of the A, B, K, and SRF shares of the Pacific
Horizon Non-Money Market Funds will become holders, respectively, of
Investor A, Investor B, Investor C, and Seafirst shares of the Nations
Non-Money Market Funds. Applicants state that the rights and
obligations of each class of shares of the Acquired Funds are
substantially similar to those of the corresponding class of shares of
the Acquiring Funds. No sales load or contingent deferred sales charge
will be imposed with respect to the shares of the Acquiring Funds to be
issued in the Reorganizations. For purposes of calculating contingent
deferred sales charges, shareholders of the A and B shares of the
Acquired Funds will be deemed to have held Investor A and Investor B
shares of the corresponding Acquiring Fund since the date the
shareholders initially purchased the shares of the Acquired Fund. No
contingent deferred sales charges will apply to Investor C shares
issued in the Reorganizations.
11. Applicants state that the investment objectives, policies, and
restrictions of each Acquired Fund and its corresponding Acquiring Fund
are substantially similar.
12. The Acquiring Funds' Boards and the Acquired Funds' Boards
(collectively, the ``Boards''), including all of their Disinterested
Trustees, found that participation in the Reorganizations is in the
best interest of each Fund and that the interests of existing
shareholders in the Funds will not be diluted as a result of the
Reorganizations. In approving the Reorganizations, the Boards
considered, among other things: (a) the terms and conditions of the
Reorganization Plans; (b) the capabilities, practices, and resources of
NBAI and other service providers to the Acquiring Funds; (c) the
expected cost savings for certain of the Acquired Funds; (d) the
relative performance of the Funds and the compatibility of their
investment objectives, policies, and limitations; (e) the anticipated
tax-free status of the Reorganizations; (f) the number of investment
portfolio options that would be available to shareholders after the
Reorganizations; (g) the shareholder services of the Acquiring Funds;
and (h) the investment advisory and other fees paid by the Acquiring
Funds, and the historical and projected expense ratios of the Acquiring
Funds as compared with those of the Acquired Funds. In addition, the
Acquired Funds' Boards considered that the Acquired Funds' shareholders
would benefit from the distribution and shareholder servicing plans of
the Acquiring Funds, as well as their shareholder services. Further,
the Acquired Funds' Boards considered that, as a result of the
Reorganizations, Acquired Fund shareholders should benefit from
improved economies of scale and will have access to a larger and more
diverse family of mutual funds. NBAI will assume all customary expenses
incurred by the Funds in connection with the Reorganizations.
13. The Reorganization Plans may be terminated by mutual written
consent of the Acquiring Fund and the respective Acquired Fund at any
time prior to the Closing Date. In addition, either party
[[Page 22886]]
may terminate the Reorganization Plan if: (a) The closing has not
occurred prior to December 31, 1999; (b) the other party materially
fails to perform its obligations; (c) the other party materially
breaches its representations, warranties, or covenants; or (d) a
condition precedent to the party's obligations cannot be met.
14. Registration statements on Form N-14 (``N-14 Registration
Statements'') were filed with the SEC on December 23, 1998 and December
31, 1998, and became effective on January 23, 1999 and January 30,
1999, respectively. Applicants mailed prospectus/proxy statements to
shareholders of the Acquired Funds on or about February 8, 1999. A
special meeting of the Acquired Fund shareholders will be held on or
about May 3, 1999.
15. The consummation of the Reorganizations is subject to the
following conditions, as set forth in the Reorganization Plans: (a) The
N-14 Registration Statements with regard to the Acquiring Funds, other
than two master portfolios, will have become effective; (b) the
Acquired Fund shareholders will have approved the Reorganization Plans;
(c) applicants will have received exemptive relief from the SEC with
respect to the issues in the application; (d) the applicants will have
received an opinion of counsel concerning the federal income tax
aspects of the Reorganizations; and (e) each Acquired Fund will have
declared a dividend or dividends to distribute substantially all of its
investment company taxable income and net capital gain, if any, to its
shareholders. Applicants agree not to make any material changes to the
Reorganization Plans that affect the applicant without prior SEC
approval.
Applicants' Legal Analysis
1. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
that person, acting as principal, from selling any security to, or
purchasing any security 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.
2. Rule 17a-8 under the Act exempts from the prohibitions of
section 17(a) 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/trustees, and/or common officers, provided
that certain conditions set forth in the rule are satisfied.
3. Applicants believe that they may not rely on rule 17a-8 because
the Funds may be affiliated for reasons other than those set forth in
the rule. First, the BankAmerica Group holds of record more than 5% of
the outstanding voting securities of certain of the Funds. Because of
this ownership, certain of the Funds may be deemed an affiliated person
of Bank America under section 2(a)(3)(B). Second, NBAI and Bank of
America are under the common ownership and control of Bank-America
Corporation. Because of this ownership, each Acquiring Fund may be
deemed an ``affiliated person of an affiliated person'' of each
Acquired Fund under sections 2(a)(3)(C) and (E) of the Act. Third,
BankAmerica Group holds of record, with power to vote, more than 25% of
certain Funds. These Funds may be deemed to be under common control,
and thus affiliated persons under section 2(a)(3)(C). Accordingly, the
Reorganizations may not meet the ``solely by reason of'' requirement of
rule 17a-8. Applicants thus are requesting an order pursuant to section
17(b) of the Act exempting them from section 17(a) to the extent
necessary to consummate the Reorganizations.
4. Section 17(b) of the Act provides that the SEC may exempt a
transaction from the provisions of section 17(a) if the 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 each registered investment
company concerned and with the general purposes of the Act.
5. Applicants submit that the terms of the Reorganizations satisfy
the standards set forth in section 17(b). Applicants note that the
Boards, including a majority of the Disinterested Trustees, found that
participation in the Reorganizations is in the best interest of each
Fund and that the interests of the existing shareholders of each Fund
will not be diluted as a result of the Reorganizations. Applicants also
note that the exchange of the Acquired Funds' assets for shares in the
Acquiring Funds will be based on the Fund's relative net asset values.
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 99-10624 Filed 4-27-99; 8:45 am]
BILLING CODE 8010-01-M
