[Federal Register Volume 63, Number 93 (Thursday, May 14, 1998)]
[Notices]
[Pages 26832-26833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12810]
[[Page 26832]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23175; 812-11096]
Pax World Fund, Incorporated, et al.; Notice of Application
May 7, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 12(d)(1)(J)
of the Investment Company Act of 1940 (the ``Act'') for an exemption
from section 12(d)(1) (A) and (B) of the Act, under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act, and
under section 17(d) of the Act and rule 17d-1 under the Act.
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SUMMARY OF APPLICATION: The requested order would permit certain
registered open-end management investment companies to invest excess
cash in an affiliated money market fund.
APPLICANTS: Pax World Fund, Incorporated (``PWF''), Pax World Growth
Fund, Inc. (``PWGF''), Pax World Money Market Fund, Inc. (``PWMMF''),
and Pax World Management Corp. (``PWMC'').
FILING DATES: The application was filed on April 2, 1998. Applicants
have agreed to file an amendment during the 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 Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on June 1, 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
who wish to be notified of a hearing may request notification by
writing to the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Applicants, 222 State Street,
Portsmouth, NH 03801-3853.
FOR FURTHER INFORMATION CONTACT:
Kathleen L. Knisely, Staff Attorney, at (202) 942-0517, or George J.
Zornada, 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
Commission's Public Reference Branch, 450 Fifth Street, N.W.,
Washington, D.C. 20459 (tel. 202-942-8090).
Applicants' Representations
1. PWF and PWGF are open-end management investment companies
registered under the Act and organized as Delaware corporations. PWMC,
a Delaware corporation, serves as the investment adviser to PWF and
PWGF. H.G. Wellington Capital Management (``HGW'') serves as investment
sub-adviser to PGWF. HGW and PWMC are registered under the Investment
Advisers Act of 1940 (``Advisers Act'').
2. PWMMF is an open-end management investment company registered
under the Act and organized as a Maryland corporation. PWMMF seeks to
maintain a stable net asset value and is subject to rule 2a-7 under the
Act. PWMC serves as investment adviser to PWMMF. Reich & Tang Asset
Management, L.P. (``R&T'') serves as investment sub-adviser to PWMMF.
R&T is registered under the Advisers Act. (PWMC, HGW, and R&T,
collectively, the ``Investment Advisers'').
3. PWF and PWGF have, or may be expected to have, uninvested cash
(``Uninvested Cash'') held by their custodian. Uninvested Cash may
result from a variety of sources, including dividends or interest
received on portfolio securities, unsettled securities transactions,
reserves held for investment strategy purposes, scheduled maturity of
investments, liquidation of investment securities to meet anticipated
redemptions, dividend payments, or new monies received from investors.
Currently, PWF and PWGF may invest Uninvested Cash directly in
individual short-term money market instruments.
4. PWF and PWGF (the ``Investing Funds'') wish to have the
flexibility to invest their Uninvested Cash in PWMMF.\1\ Any investment
of Uninvested Cash in shares of PWMMF will be in accordance with each
Investing Fund's investment restrictions and will be consistent with
each Investing Fund's policies as set forth in its prospectuses and
statements of additional information. Applicants believe that the
proposed transactions may reduce transaction costs, create more
liquidity, increase returns, and diversify holdings.
Applicants' Legal Analysis
1. Section 12(d)(1)(A) of the Act provides that no registered
investment company may acquire securities of another investment company
if such securities represent more than 3% of the acquired company's
outstanding voting stock, more than 5% of the acquiring company's total
assets, or if such securities, together with the securities of other
acquired investment companies, represent more than 10% of the acquiring
company's outstanding total assets. Section 12(d)(1)(B) of the Act
provides that no registered open-end investment company may sell its
securities to another investment company if the sale will cause the
acquiring company to own more than 3% of the acquired company's voting
stock, or if the sale will cause more than 10% of the acquired
company's voting stock to be owned by the investment company.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction (or classes thereof) from
any provision of section 12(d)(1) if and to the extent that such
exemption is consistent with the public interest and the protection of
investors.
3. Applicants request relief under section 12(d)(1)(J) to permit
the Investing Funds to use Uninvested Cash to acquire shares of PWMMF
in excess of the percentage limitations in section 12(d)(1)(A),
provided however, that in all cases the Investing Fund's aggregate
investment of Uninvested Cash in shares of PWMMF will not exceed 25% of
the Investing Fund's total assets at any time. Applicants also request
relief to permit PWMMF to sell its securities to an Investing Fund in
excess of the percentage limitations in section 12(d)(1)(B). Applicants
represent that PWMMF will not acquire securities of any other
investment company in excess of the limitation contained in section
12(d)(1)(A) of the Act.
4. Applicants believe that the proposed arrangement does not result
in the abuses that sections 12(d)(1)(A) and (B) were intended to
prevent. Applicants represent that the proposed arrangement will not
result in an inappropriate layering of fees because shares of PWMMF
sold to the Investing Funds will not be subject to a sales load,
redemption fee, asset-based distribution fee or service fee. In
addition, the Investment Advisers will waive their investment advisory
fees for each Investing Fund in an amount that offsets the amount of
the advisory fees of PWMMF incurred by the Investing Fund.
[[Page 26833]]
5. Section 17(a) of the Act makes it unlawful for any affiliated
person of a registered investment company, acting as principal, to sell
or purchase any security to or from the company. Section 2(a)(3) of the
Act defines an affiliated person of an investment company to include
any investment adviser to the investment company and any person
directly or indirectly controlling, controlled by, or under common
control with the investment adviser. The Investing Funds and PWMMF
share a common investment adviser and thus may be deemed to be under
common control. As a result, section 17(a) would prohibit the sale of
the shares of PWMMF to the Investing Funds, and the redemption of the
shares by PWMMF.
6. Section 17(b) of the Act authorizes the Commission to exempt a
transaction from section 17(a) of the Act if the terms of the proposed
transaction, including the consideration to be paid or received, are
reasonable and fair and do not involve overreaching on the part of any
person concerned, the proposed transaction is consistent with the
policy of each investment company concerned, and with the general
purposes of the Act.
7. Section 6(c) of the Act permits the Commission to exempt persons
or transactions from any provision of the Act, if the exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
8. Applicants submit that their request for relief satisfies the
standards in sections 17(b) and 6(c). Applicants state that the
Investing Funds will retain their ability to invest Uninvested Cash
directly in money market instruments as authorized by their respective
investment objectives and policies, if they believe they can obtain a
higher rate of return, or for any other reason. Similarly, PWMMF has
the right to discontinue selling shares to any of the Investing Funds
if PWMMF's board of directors determines that such sale would adversely
affect its portfolio management and operations. In addition, applicants
note that shares of PWMMF will be purchased and redeemed at their net
asset value, the same consideration paid and received for these shares
by any other shareholder.
9. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of an investment company, acting as principal,
from participating or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates. Applicants believe that each Investing Fund, by
participating in the proposed transactions, and each Investment Adviser
of an Investing Fund, by managing the assets of the Investing Funds and
PWMMF, could be deemed to be participating in a joint arrangement
within the meaning of section 17(d) and rule 17d-1 under the Act.
10. In considering whether to grant an exemption under rule 17d-1,
the Commission considers whether the investment company's participation
in such joint enterprise is consistent with the provisions, policies,
and purposes of the Act, and the extent to which such participation is
on a basis different from or less advantageous than that of other
participants. Applicants submit that the Funds will participate in the
proposed transactions on a basis not different from or less
advantageous than that of any other participant and that the
transactions will be consistent with the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. Shares of PWMMF sold to and redeemed by the Investing Funds will
not be subject to a sales load, redemption fee, distribution fee under
a plan adopted in accordance with rule 12b-1 under the Act, or service
fee (as defined in rule 2830(b)(9) of the NASD's Conduct Rules).
2. The Investment Advisers will waive their advisory fee for each
Investing Fund in an amount that offsets the amount of the advisory
fees of PWMMF incurred by the Investing Fund.
3. Each Investing Fund will invest Uninvested Cash in, and hold
shares of, PWMMF only to the extent that the Investing Fund's aggregate
investment in PWMMF does not exceed 25% of the Investing Fund's total
assets. For purposes of this limitation, each Investing Fund or series
thereof will be treated as a separate investment company.
4. Investment in shares of PWMMF will be in accordance with each
Investing Fund's respective socially responsible criteria and
investment restrictions, if any, and will be consistent with each
Investing Fund's policies as set forth in its prospectuses and
statements of additional information.
5. Each Investing Fund and any future fund that may rely on the
order requested hereunder will be advised by PWMC or an entity
controlling, controlled by, or under common control with PWMC.
6. PWMMF shall not acquire securities of any other investment
company in excess of the limits contained in section 12(d)(1)(A) of the
Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-12810 Filed 5-13-98; 8:45 am]
BILLING CODE 8010-01-M
