[Federal Register Volume 61, Number 189 (Friday, September 27, 1996)]
[Notices]
[Pages 50887-50889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24861]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 22243; 812-10270]
The Pilot Funds, et al.; Notice of Application
September 23, 1996.
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: The Pilot Funds (``Trust''), on behalf of Pilot Growth
Fund, Pilot Growth and Income Fund, Pilot Short-Term Diversified Assets
Fund, and Pilot Diversified Bond Income Fund (``Acquiring Funds''),
FUNDS IV Trust (``Funds IV''), on behalf of Aggressive Stock
Appreciation Fund, Stock Appreciation Fund, Value Stock Appreciation
Fund, Bond Income Fund, Intermediate Bond Income Fund, and Cash Reserve
Money Market Fund (``Reorganizing Funds''), Boatmen's Trust Company
(``BTC''), and BANK IV, N.A.
RELEVANT ACT SECTIONS: Order requested under section 17(b) granting an
exemption from section 17(a).
SUMMARY OF APPLICATION: Applicants request an order under section 17(b)
granting an exemption from section 17(a) to permit each Acquiring Fund
to acquire all of the assets and assume all of the stated liabilities
of its corresponding Reorganizing Fund or Funds.
FILING DATES: The application was filed on July 25, 1996. 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 October 15,
1996, 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 such notification by writing to
the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants: Trust, 3435 Stelzer Road, Columbus, Ohio 43219;
Funds IV, 237 Park Avenue, New York, New York 10019; BTC, 100 North
Broadway, St. Louis, Missouri 63178; Bank IV, N.A., 100 North Broadway,
Wichita, Kansas 67202.
FOR FURTHER INFORMATION CONTACT:
Harry Eisenstein, Staff Attorney, at (202) 942-0552, or Mercer E.
Bullard, 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.
Applicants' Representations
1. The Trust, organized as a Massachusetts business trust, and
Funds IV, organized as a Delaware business trust, are registered under
the Act as open-end management investment companies. BTC acts as
investment adviser to each Acquiring Fund. Bank IV, N.A. acts as
investment adviser to each Reorganizing Fund, except the Cash Reserve
Money Market Fund, which is advised by AMR Investment Services, Inc.
(``AMR''). Bank IV, N.A. and BTC are wholly-owned subsidiaries of
Boatmen's Bancshares, Inc.
2. BTC, Bank IV, N.A. and their respective affiliates hold of
record 99% of the total outstanding shares of each Reorganizing Fund,
96% of Pilot Growth and Income Fund, and 79% of Pilot Short-Term
Diversified Assets Fund.\1\ Except with respect to certain defined
benefit plans sponsored by BTC, Bank IV, N.A. and their affiliates, (a)
none of BTC, Bank IV, N.A. or any of their affiliates has any economic
interest in any of such shares, and (b) all such shares being held of
record by BTC, Bank IV, N.A. and their affiliates are held for the
benefit of others in a trust, agency or other fiduciary or
representative capacity. In some instances, any of BTC, Bank IV, N.A.
and their affiliates may hold or share voting discretion, investment
discretion
[[Page 50888]]
or both with respect to the shares held of record thereby.
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\1\ Pilot Growth Fund and Pilot Diversified Bond Income Fund
have not commenced operations as of the date of this Application and
do not presently intend to commence operations prior to the
effectiveness of the proposed transactions.
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3. Each Acquiring Fund and its corresponding Reorganizing Fund have
substantially similar investment objectives and policies. Each
Reorganizing Fund offers two classes of shares, Service Class and
Premium Class. The Premium Class shares outstanding of each
Reorganizing Fund represent less than 1% of the outstanding shares of
each such Fund. All outstanding shares of the Premium Class of each of
the Reorganizing Funds are held by Furman Selz LLC, which provides
certain management and administrative services necessary for the
operation of the Reorganizing Funds. Those Premium Class shares will be
redeemed prior to the effectiveness of the proposed transactions.
Service Class shares are offered primarily to persons purchasing
through a trust investment manager or an account managed or
administered by Bank IV, N.A.
4. Each of the Acquiring Funds, except Pilot Short-Term Diversified
Assets Fund, offers three classes of shares, Class A, Class B and Pilot
Shares. Pilot Short-Term Diversified Assets Fund offers three classes
of shares, Administration Shares, Investor Shares, and Pilot Shares.
Pilot Shares of each Acquiring Fund only are sold to persons or
entities with trust, fiduciary, custodial or investment management
accounts with BTC or its affiliates.
5. Each Acquiring Fund will acquire all of the assets and assume
all of the stated liabilities of its corresponding Reorganizing Fund or
Funds in exchange for Pilot Shares of the Acquiring Fund (a
``Reorganization''). Service Class shares are not subject to an initial
or contingent deferred sales charge or any redemption or exchange fee.
The Service Class Shares are subject to a 12b-1 plan which provides for
a payment of up to .25% of average daily net assets, but these fees
have been waived. No initial or contingent deferred sales charge, 12b-1
fee, or account administration fee is imposed on any Pilot Shares.
6. Immediately after a Reorganization, Pilot Shares of the
Acquiring Fund will be distributed to shareholders of the corresponding
Reorganizing Fund. Specifically, shares of Pilot Growth Fund will be
distributed to shareholders of Aggressive Stock Appreciation Fund,
shares of Pilot Growth and Income Fund to shareholders of Stock
Appreciation Fund and Value Stock Appreciation Fund, shares of Pilot
Short-Term Diversified Assets Fund to shareholders of Cash Reserve
Money Market Fund, and shares of Pilot Diversified Bond Income Fund to
shareholders of Bond Income fund and Intermediate Bond Income Fund. The
number of shares in an Acquiring Fund to be issued in exchange for each
share of the corresponding Reorganizing Fund will be determined on the
basis of the relative net asset values per share and the aggregate net
assets of the Acquiring Fund computed as of the date that
Reorganization is consummated (``Closing Date'').
7. The Board of Trustees of each of the Trust and Funds IV approved
a reorganization agreement on May 21, 1996, and May 10, 1996,
respectively (``Reorganization Agreement''). Each Board of Trustees,
including a majority of trustees who are not ``interested persons'' as
defined in section 2(a)(19) of the Act, found that participation in the
Reorganizations was in the best interest of each Acquiring Fund and
Reorganizing Fund, respectively, and that the interests of existing
shareholders of the Funds would not be diluted as a result of the
Reorganizations. Each Board of Trustees considered the following
factors: (a) The Reorganizations will be effected at net asset value;
(b) unamortized expenses of each Reorganizing Fund as of the Closing
Date and all other costs of the Reorganizing and Acquiring Fund
associated with the Reorganizations will be paid by BTC; (c) each
Reorganizing Fund will distribute all of its taxable income for the
taxable year ending on or prior to the Closing Date and net capital
gains realized in such year; (d) shareholders of each Reorganizing Fund
must approve the Reorganization Agreement; (e) each Reorganization is
expected to be tax-free to the parties thereto and their shareholders;
(f) BTC and Bank IV, N.A. have shared investment research and reported
within a common line of supervision (except to the extent portfolio
management is performed by AMR) since the merger of their respective
parent companies; and (g) the investment objectives and policies of
each Reorganizing Fund and its corresponding Acquiring Fund are
substantially similar.
8. BTC has voluntarily agreed to limit through January 31, 1998 the
actual total operating expense ratio of each Acquiring Fund to the
actual total operating expense ratio (``Expense Ratio'') of the
corresponding Reorganizing Fund, as of January 31, 1996. If more than
one Reorganizing Funds is merging into an Acquiring Fund, the
Reorganizing Fund having the lower Expense Ratio as of January 31, 1996
will be the ``corresponding'' Reorganizing Fund for purposes of the
foregoing sentence.
9. Either the Trust or Funds IV may terminate the Reorganization
Agreement (a) on or prior to December 31, 1996, with the consent of the
other or (b) after that date by either party on written notice at any
time prior to the consummation of the Reorganizations, if the
conditions to that party's obligation to perform have not been
satisfied. The Trust and Funds IV agree not to make any changes to the
Reorganization Agreement that would have a material adverse effect on
the application without prior SEC approval.
Applicants' Legal Analysis
1. Section 17(a) of the Act, in relevant part, prohibits an
affiliated person of a registered investment company, or any affiliated
person of such a person, acting as principal, from selling to or
purchasing from such registered company, or any company controlled by
such registered company, any security or other property.
2. Section 2(a)(3) of the Act defines the term ``affiliated
person'' of another person to include any person directly or indirectly
owning, controlling, or holding with power to vote, five percent or
more of the outstanding voting securities of such other person.
3. 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, and/or common officers, provided that
certain conditions set forth in the rule are satisfied.
4. Applicants may not rely on rule 17a-8 in connection with the
Reorganizations because the Acquiring Funs and the Reorganizing Funds
may be deemed to be affiliated for reasons other than those set forth
in the rule. As noted above, BTC, Bank IV, N.A. and their affiliates
hold of record more than 5% of the outstanding shares of each of the
Reorganizing Funds, Pilot Growth and Income Fund, and Pilot Short-Term
Diversified Assets Fund.
5. Section 17(b) of the Act provides that the SEC may exempt a
transaction from the provisions of section 17(a) if evidence
establishes that the terms of the proposed transactions, 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.
[[Page 50889]]
6. Applicants submit that each Reorganization meets the standard
for relief under section 17(b), in that the terms of each
Reorganization are reasonable and fair and do not involve overreaching
on the part of any person concerned; and each Reorganization is
consistent with the general purposes of the Act and with the policies
of the respective Acquiring Fund and the corresponding Reorganizing
Fund.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-24861 Filed 9-26-96; 8:45 am]
BILLING CODE 8010-01-M
