[Federal Register Volume 63, Number 135 (Wednesday, July 15, 1998)]
[Notices]
[Pages 38219-38221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18762]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23307; 812-11122]
EuroPacific Growth Fund, et al.; Notice of Application
July 9, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for relief from section
2(a)(19) of the Act.
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SUMMARY OF APPLICATION: Applicants request an order under section 6(c)
of the Act declaring that a director on the boards of certain
registered investment companies who also is an outside director for the
parent company of a registered broker-dealer, will not be deemed an
``interested person'' of the registered investment companies.
APPLICANTS: EuroPacific Growth Fund (``EUPAC''), the New Economy Fund
(``NEF''), New Perspective Fund, Inc. (``NPF''), SMALLCAP World Fund,
Inc. (``SCWF''), The Investment Company of America (``ICA'')
(collectively, the ``Fund''); Capital Research and Management Company
(``Capital Research''); and American Funds Distributors, Inc.
(``AFD'').
FILING DATES: The application was filed on April 29, 1998.
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 August 3, 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
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants: 333 South Hope Street, Los Angeles, CA 90071-1447.
FOR FURTHER INFORMATION CONTACT:
Mary T. Geffroy, Senior Counsel, at (202) 942-0553, 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 from
the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington,
D.C. 20549 (tel. (202) 942-8090).
Applicant's Representations
1. Each of the Funds is an open-end management investment company
registered under the Act. EUPAC and NEF are Massachusetts business
trusts. NPF and SCWF are Maryland corporations. ICA is a Delaware
corporation.
2. Capital Research, an investment adviser registered under the
Investment Advisers Act of 1940, serves as investment adviser to the
Funds and certain other registered investment companies. The Funds and
these investment companies, together with any future registered
investment company advised by Capital Research, are referred to as the
``American Funds.'' AFD, a wholly-owned
[[Page 38220]]
subsidiary of Capital Research, is the principal underwriter of the
Funds.
3. Each Fund has a board of directors (``Board''), a majority of
whom are not ``interested persons'' within the meaning of section
2(a)(19) of the Act. ICA and NPF also have advisory boards, as defined
in section 2(a)(1) of the Act, whose members consult with Capital
Research and the Funds' Boards.
4. William H. Kling serves as a director of NEF, SCWF, NPF and
EUPAC, and as an advisory board member of ICA. Mr. Kling's principal
occupation is as President of Minnesota Public Radio. Mr. Kling also is
a non-employee director of Irwin Financial Corporation (``Irwin
Financial'').\1\ Irwin Financial is a bank holding company that is
primarily engaged in the mortgage banking business. One of Irwin
Financial's indirect wholly-owned subsidiaries is Irwin Securities, a
broker-dealer registered under the Securities Exchange Act of 1934 (the
``1934 Act''). Approximately 0.4% of Irwin Financial's net revenues
comes from Irwin Securities.\2\
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\1\ In 1996, Mr. Kling's aggregate compensation from Irwin
Financial was approximately $16,000. As a non-employee director, Mr.
Kling also participates in Irwin Financial's mandatory and non-
mandatory stock options plans. In April 1997, Mr. Kling was granted
400 stock options, 100 of which are currently vested. The exercise
price of the options is $23.375 per share. The market value of Irwin
Financial's common stock as of the close of trading on February 26,
1998 was $47.25 per share. In addition, as of March 11, 1997, Mr.
Kling beneficially owned 3,404 shares, or approximately 0.03%, of
Irwin Financial's common stock, with market value on February 26,
1998 of approximately $160,839. The applicants represent that Mr.
Kling's ownership of Irwin Financial's common stock is not material
to Mr. Kling since it does not represent a material portion of his
financial holdings generally.
\2\ This figure is based on Irwin Financial's net revenues in
1996.
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5. Irwin Securities is a small firm. It does not execute any
portfolio transactions for the Funds. Irwin Securities provides de
minimis distribution services to the Funds. The gross sales by Irwin
Securities of Fund shares during the period 1991 through 1996 was
approximately $3.55 million, or 0.003% of the total gross sales of Fund
shares by all broker-dealers for the same period. The fees received by
Irwin Securities from the sale of Fund shares for the past five years
represented approximately 0.017% of Irwin Financial's total net
revenues. The Funds have adopted plans pursuant to rule 12b-1 under the
Act and make payments to their distributors, including Irwin
Securities, pursuant to those plans.
Applicants' Legal Analysis
1. Section 2(a)(19)(A)(v) of the Act defines an ``interested
person'' of a registered investment company to include any broker-
dealer registered under the 1934 Act or any affiliated person of the
broker-dealer. Applicants state that Mr. Kling may be deemed an
affiliated person of Irwin Securities by virtue of his position as a
director of Irwin Financial, an entity that controls Irwin Securities
within the meaning of section 2(a)(9) of the Act. Because Mr. Kling may
be deemed an affiliated person of Irwin Securities, Mr. Kling currently
is considered an interested person of the Funds.
2. Rule 2a19-1 under the Act provides, in relevant part, that a
director of a registered investment company will not be considered an
interested person solely because the director is an affiliated person
of a registered broker-dealer, provided that: (1) the broker-dealer
does not execute any portfolio transactions for the ``company
complex,'' as that term is defined in the rule, engaged in any
principal transactions with the company complex, or distribute shares
of the company complex, for at least six months prior to the time the
director is to be considered independent and for the period during
which the director continues to be considered independent; (2) the
company's board of directors finds that the company and its
shareholders will not be adversely affected if the broker-dealer does
not engage in transactions for or with the company complex; and (3) no
more than a minority of the company's independent directors are
affiliated with broker-dealers. Applicants state that they may not rely
on rule 2a-19 in determining Mr. Kling's status because Irwin
Securities provides de minimis services to the Funds.
3. Applicants believes that, because Mr. Kling's affiliation with
Irwin Securities is solely the result of his position as a non-employee
director of Irwin Financial, and because Irwin Securities provides only
de minimis distribution services to the Funds, it would be more
appropriate to treat Mr. Kling as an independent director. Applicants
thus request an order under section 6(c) of the Act declaring that Mr.
Kling will not be deemed an interested person under section 2(a)(19) of
the Act.\3\
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\3\Applicants are not requesting relief from the provisions of
rule 12b-1(b)(2) that require a rule 12b-1 plan to be approved by
the directors of an investment company ``who are not interested
persons of the company and have no direct or indirect financial
interest in the operation of the plan or in any agreements related
to the plan.'' Applicants state that they intend to treat Mr. Kling
as a director who meets these requirements, based on Mr. Kling's
lack of material business or professional relationship with Irwin
Financial and applicants' belief that Mr. Kling's ownership of Irwin
Financial's common stock is not a material portion of Mr. Kling's
financial holding generally. Applicants represent that, should Mr.
Kling develop a direct or indirect financial interest in the
operation of the American Funds' rule 12b-1 plans, he will no longer
be treated as meeting the above requirements of rule 12b-1.
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4. Section 6(c) of the Act provides, in part, that the Commission
may exempt any person from any provision of the Act or any rule under
the Act if and to the extent 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. Applicants contend that their request for relief from interested
person status for Mr. Kling meets this standard because Mr. Kling's
relationship with Irwin Securities is attenuated and poses no real or
potential conflict of interest and because Irwin Securities' only
business relationship with the Funds involves a de minimis amount of
distribution services for the Funds.
5. Applicants state that, in his position as a non-employee
director of Irwin Financial, Mr. Kling has no authority or
responsibility for the operations of Irwin Securities and does not
control or influence the day-to-day management of Irwin Securities.
Applicants also represent that Mr. Kling has no material business or
professional relationship with Irwin Financial, Irwin Securities,
American Funds, Capital Research, AFD or any affiliated person of these
entities.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. All of the requirements of rule 2a19-1 will be met, except that
Irwin Securities will be permitted to provide limited distribution
services to the American Funds;
2. No more than 1% of Irwin Financial's gross revenues will come
from the distribution of any one American Fund's shares; and no more
than 5% of Irwin Financial's gross revenues will come from the
distribution of all of the American Funds' shares;
3. No more than 1% of any one of the American Fund's shares, and no
more than 5% of all of the American Funds' shares, will be distributed
by Irwin Securities; and
4. Irwin Securities will not serve as a ``regular broker or
dealer,'' as that term
[[Page 38221]]
is defined in rule 10b-1 under the Act, for any American Fund.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-18762 Filed 7-14-98; 8:45 am]
BILLING CODE 8010-01-M
