[Federal Register Volume 65, Number 115 (Wednesday, June 14, 2000)]
[Notices]
[Pages 37441-37442]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14929]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24492; 812-12082]


Sit Large Cap Growth Fund, Inc., et al.; Notice of Application

June 7, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 17(b) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 17(a) 
of the Act.

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SUMMARY OF THE APPLICATION:  Applicants request an order to permit an 
open-end management investment company to acquire all of the assets 
stated liabilities of a series of another registered open-end 
management investment company. Because of certain affiliations, 
applicants may not rely on rule 17a-8 under the Act.

APPLICANTS: Sit Large Cap Growth Fund, Inc. (``Large Cap Fund''), Sit 
Mutual Funds, Inc. (Sit Funds) and Sit Investment Associates, Inc. 
(``Adviser'').

FILING DATES: The application was filed on April 27, 2000. Applicants 
have agreed to file an amendment to the application 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 29, 2000, 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, Commission, 450 Fifth Street, N.W., Washington, 
DC 20549-0609. Applicants, c/o Kathleen L. Prudhomme, Esq., Dorsey & 
Whitney LLP, Pillsbury Center South, 220 South Sixth Street, 
Minneapolis, Minnesota 55402.

FOR FURTHER INFORMATION CONTACT: Susan K. Pascocello, Senior Counsel, 
at (202) 942-0674, or Michael W. Mundt, Branch Chief, at (202) 942-0578 
(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 Commission's Public Reference Branch, 450 Fifth Street, NW, 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicant's Representations

    1. Large Cap Fund and Sit Funds, both Minnesota corporations, are 
registered under the Act as open-end management investment companies. 
Large Cap Fund offers its shares in a single series, and Sit Funds 
offers six series, including Sit Regional Growth

[[Page 37442]]

Fund (``Regional Fund,'' and together with Large Cap Fund, the 
``Funds''). The Adviser, a Minnesota corporation, serves as investment 
adviser to the Funds and is registered as an investment adviser under 
the Investment Advisers Act of 1940. The Adviser is record holder of 
more than 5% of the outstanding shares of Regional Fund.
    2. On February 20, 2000, the boards of directors of each Funds 
(together, the ``Boards''), including the directors who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Directors''), unanimously approved an agreement and plan 
of reorganization (the ``Reorganization Agreement'') under which Large 
Cap Fund will acquire the assets and liabilities of Regional Fund in 
exchange for Large Cap Fund shares (the ``Reorganization''). The Large 
Cap Fund shares exchanged will have an aggregate net asset value equal 
to the aggregate net asset value of the Regional Fund's shares 
determined at the effective time of the Reorganization (the ``Effective 
Time''), currently anticipated to occur on June 30, 2000. The net asset 
value per share of each Fund's shares will be determined in the manner 
set forth in the respective Fund's current prospectus and statement of 
additional information. At the Effective Time, Regional Fund will 
liquidate and distribute pro rata to its shareholders the Large Cap 
Fund shares.
    3. Applicants state that the investment objectives of Large Cap 
Fund are identical to those of Regional Fund. Neither Largo Cap Fund 
nor Regional Fund imposes any sales charges or distribution related 
fees. No sales charges will be imposed upon Regional Fund shareholders 
in connection with the Reorganization. The Adviser will pay the 
expenses of the Reorganization.
    4. The Boards, including all of the Independent Directors, 
determined that the Reorganizations is in the best interests of each 
Fund, and that the interests of the existing shareholders of each Fund 
would not be diluted as a result of the Reorganization. In assessing 
the Reorganization, the Boards considered various factors, including: 
(a) The compatibility of each Fund's investment objectives and 
principal investment strategies; (b) the terms and conditions of the 
Reorganization; (c) the expense ratio of each Fund; and (d) the tax-
free nature of the Reorganization.
    5. The Reorganization is subject to a number of conditions, 
including that: (a) The Reorganization Agreement is approved by the 
Regional Fund shareholders; (b) the Funds receive an opinion of counsel 
that the Reorganization will be tax-free; and (c) applicants receive 
exemptive relief from the Commission as requested in the application. 
The Reorganization Agreement may be terminated and the Reorganization 
abandoned at any time prior to the Effective Time if either Board 
determines that circumstances have changed to make the Reorganization 
inadvisable. Applicants agree not to make any material changes to the 
Reorganization Agreement without prior Commission approval.
    6. A registration statement on Form N-14 containing a combined 
prospectus/proxy statement was filed with the Commission on April 10, 
2000, and became effective on May 10, 2000. Proxy solicitation 
materials were mailed to Regional Fund's shareholders on May 23, 2000. 
A special meeting of Regional Fund shareholders is scheduled for June 
15, 2000.

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 
such a 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 directly or indirectly owning, controlling, or holding with 
power to vote 5% or more of the outstanding voting securities of the 
other person; (b) any person 5% or more of whose 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, or affiliated persons of an affiliated person, 
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.
    3. Applicants believe that because the Funds may be deemed to be 
affiliated by reasons other than having a common investment adviser, 
common directors, and/common officers, they may not be able to rely on 
rule 17a-8 in connection with the Reorganization. Applicants state that 
the Adviser holds of record more than 5% of the outstanding securities 
of Regional Fund, and holds or shares voting power and/or investment 
discretion with respect to a portion of these shares.
    4. Section 17(b) of the Act provides, in relevant part, that the 
Commission may exempt a transaction from the provisions of section 
17(a) if evidence establishes that 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, 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 request an order under section 17(b) of the Act 
exempting them from section 17(a) to the extent necessary to complete 
the Reorganization. Applicants submit that the Reorganization satisfies 
the standards of section 17(b) of the Act. Applicants state that the 
terms of the Reorganization are reasonable and fair and do not involve 
overreaching. Applicants state that the investment objectives of 
Regional Fund and Large Cap Fund are identical. Applicants also state 
that the Boards, including all of the Independent Directors, have 
determined that the participation of each Fund in the Reorganization is 
in the best interests of each Fund and that such participation will not 
dilute the interests of shareholders of each Fund. In addition, 
Applicants state that the Reorganization will be based on the Funds' 
relative net asset values.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-14929 Filed 6-13-00; 8:45 am]
BILLING CODE 8010-01-M