39452 Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices

1Under the Reorganization Agreement, the

Acquired Funds will merge into the Acquiring

Funds as follows: Govett Global Income Fund will

merge into ARK Income Portfolio, Govett Smaller

Companies Fund into ARK Small-Cap Portfolio,

Govett Emerging Market Equity Fund into ARK

Emerging Markets Equity Portfolio and Govett

International Equity Fund into ARK International

Selection Portfolio. The Govett International Equity

Fund merger into the ARK International Selection

Portfolio is contingent upon proposed changes

being approved by shareholders of the ARK

International Selection Portfolio at a meeting on

July 10, 2000. The proposals include increasing the

investment advisory fees payable by the ARK

International Selection Portfolio from 0.65% to

1.00% and revising its principal investment strategy

so that it is substantially identical to that of the

Govett International Equity Fund. In the event these

proposals are not approved. Govett International

Equity Fund would be reorganized into the ARK

International Equity Portfolio, which has

investment objectives, policies and restrictions

substantially identical to those of the Govett

International Equity Fund.

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

24503; 812–11978]

Ark Funds, et al.; Notice of Application

June 19, 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.

SUMMARY OF THE APPLICATION:

Applicants request an order to permit

the proposed reorganizations of four

series (the ‘‘Acquired Funds’’) of The

Govett Funds, Inc. (‘‘Govett Funds’’)

with and into four series of ARK Funds

(the ‘‘Acquiring Funds,’’ and together

with the Acquired Funds, the ‘‘Funds’’).

Because of certain affiliations,

applicants may not rely on rule 17a–8

under the Act.

APPLICANTS: ARK Funds, Govett Funds,

Allied Investment Advisers, Inc.

(‘‘AIA’’), and AIB Govett, Inc. (‘‘AIB

Govett’’).

FILING DATES: The application was filed

on February 14, 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 July 10, 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, D.C.

20549–0609. Applicants, c/o Allfirst

Trust Company, N.A., 25 S. Charles

Street, Baltimore, Maryland 21201.

FOR FURTHER INFORMATION CONTACT:

Emerson S. Davis, Sr., Senior Counsel,

at (202) 942–0714, or Janet M.

Grossnickle, 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

Commission’s Public Reference Branch,

450 Fifth Street, N.W., Washington, D.C.

20549–0102 (telephone (202) 942–8090).

Applicants’ Representations

1. Ark Funds, a Massachusetts

business trust, is registered under the

Act as an open-end management

investment company and currently

offers twenty-four series (the ‘‘Ark

Portfolios’’). Three of the ARK

Portfolios, the ARK Income Portfolio,

ARK Small-Cap Equity Portfolio (‘‘Ark

Small-Cap Portfolio’’), and ARK

International Equity Selection Portfolio

(‘‘ARK International Selection

Portfolio’’), are Acquiring Funds. ARK

Funds is organizing two new ARK

Portfolios, the ARK International Equity

Portfolio and ARK Emerging Markets

Equity Portfolio, which also will be

Acquiring Funds. AIA, a Maryland

corporation, is an investment adviser

registered under the Investment

Advisers Act of 1940 (‘‘Advisers Act’’)

and serves as investment adviser to each

Ark Portfolio. AIA is a wholly owned

subsidiary of Allfirst Bank, which is a

wholly-owned subsidiary of Allfirst

Financial Inc. (‘‘Allfirst Financial’’), a

bank holding company, which is a

wholly-owned subsidiary of Allied Irish

Banks, p.l.c. (‘‘Allied Irish’’). The

Allfirst Financial Inc. Pension Plan (the

‘‘Allfirst Plan’’), which is a defined

benefit plan maintained for the benefit

of the employees of Allfirst Financial

and its subsidiaries, is the beneficial

owner of more than 5% of the

outstanding voting securities of two

Acquiring Funds. Moreover, Allfirst

Trust Company, N.A. (‘‘Allfirst Trust’’),

an indirect wholly-owned subsidiary of

Allfirst Financial, owns, in a fiduciary

capacity, more than 25% of the

outstanding voting shares of each

Acquiring Fund.

2. Govett Funds, a Maryland

corporation, is registered under the Act

as an open-end management investment

company and currently offers five series

(each a ‘‘Govett Fund’’), four of which

are Acquired Funds: the Govett Global

Income Fund, Govett Smaller

Companies Fund, Govett International

Equity Fund, and Govett Emerging

Markets Equity Fund. AIB Govett, a

Maryland corporation, is an investment

adviser registered under the Advisers

Act and serves as investment adviser to

each of the Govett Funds. AIB Govett

Asset Management Limited (‘‘AIB

Govett London’’), is an investment

adviser registered under the Advisers

Act and serves as sub-adviser to each of

the Govett Funds. AIB Govett is a

wholly-owned subsidiary of, and AIB

Govett London is a majority-owned

subsidiary of AIB Asset Management

Holding Limited, which is an indirect

majority-owned subsidiary of Allied

Irish.

3. On December 10, 1999 and January

5, 2000, the board of trustees of the

Acquiring Funds and the board of

directors of the Acquired Funds

(together, the ‘‘Boards’’), respectively,

including all the trustees and 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 between the Funds (the

‘‘Reorganization Agreement’’). Under

the Reorganization Agreement, each

Acquiring Fund will acquire all the

assets and stated liabilities of the

corresponding Acquired Fund in

exchange for shares of the Acquiring

Fund (the ‘‘Reorganizations’’).1 The

shares of each Acquiring Fund

exchanged will have an aggregate net

asset value equal to the aggregate net

asset value of the Acquired Fund’s

shares determined as of the close of

business on the business day

immediately preceding the day of the

closing of each Reorganization (‘‘Closing

Date’’). The value of the assets of the

Funds will be determined according to

the Funds’ then-current prospectuses

and statements of additional

information. As soon as reasonably

practical after the Closing Date, each

Acquired Fund will be liquidated by the

distribution of the Acquiring Fund

shares pro rata to the shareholders of

the Acquired Fund.

4. Applicants state that the

investment objectives, policies and

restrictions of each Acquired Fund are

generally similar (and in the case of the

Govett International Equity Fund and

Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices 39453

Govett Emerging Markets Funds,

substantially identical) to those of the

corresponding Acquiring Fund. Each

Fund offer Institutional Class Shares

which are not subject to any sales

charge or a distribution fee adopted

under rule 12b–1 under the Act. The

Acquired Fund’s Institutional Class

Shares are subject to redemption and

exchange fees (as permitted by rule 11a–

3 under the Act). The Acquired Funds

offer Class A Retail Class Shares, which

are not subject to a front-end sales load

but are subject to rule 12b–1

distribution, redemption and exchange

fees (as permitted by rule 11a–3 under

the Act). The Acquiring Funds offer

Retail Class A Shares, which are subject

to a front-end sales load and rule 12b–

1 distribution fee, but not a redemption

or exchange fee. Shareholders of

Institutional Class and Retail Shares of

the Acquired Funds will receive

Institutional and Retail Shares,

respectively, of the corresponding

Acquiring Fund. No sales charges will

be imposed in connection with the

Reorganizations. AIB Govett will bear

the costs associated with the

Reorganizations.

5. The Boards, including all of the

Independent Directors, determined that

the participation of each Acquiring and

Acquired Fund in a Reorganization was

in the best interests of the shareholders

of each Fund, and that the interests of

the shareholders of each Fund would

not be diluted as a result of the

Reorganization. In assessing the

Reorganizations, the Boards considered

various factors, including: (a) The

investment objectives, policies and

limitations of each of the Acquired

Funds and their compatibility with

those of the corresponding Acquiring

Funds; (b) the investment advisory and

other fees paid by each of the Acquiring

Funds and the historical and projected

expenses of each of the Acquiring

Funds; (c) the terms and conditions of

the Reorganization Agreement; and (d)

the anticipated tax consequences of the

Reorganizations for the Funds and their

shareholders. In addition, the board of

directors of the Govett Funds

considered: (a) The historical

investment performance records of the

Funds; (b) the capabilities, practices and

resources of AIA and ARK Funds’ other

service providers; and (c) the

shareholders services offered by ARK

Funds.

6. The Reorganizations are subject to

a number of conditions precedent,

including that: (a) The shareholders of

each Acquired Fund will have approved

the Reorganization; (b) the Funds will

have received opinions of counsel that

the Reorganizations will be tax-free for

the Funds and their shareholders; and

(c) applicants will have received from

the Commission an exemption from

section 17(a) of the Act for the

Reorganizations. The Reorganization

Agreement may be terminated and the

Reorganizations abandoned at any time

prior to the Closing Date by the Boards.

Applicants agree not to make any

material changes to the Reorganization

Agreement without prior Commission

approval.

7. A registration statement on Form

N–14 with respect to the

Reorganizations, containing a proxy

statement/prospectus, was filed with the

Commission on May 18, 2000 and will

be mailed to shareholders of the

Acquired Funds during the week of June

19, 2000. A shareholders meeting of the

Acquired Funds is scheduled for July

10, 2000.

Applicants’ Legal Analysis

1. Section 17(a) of the Act, in relevant

part, 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

certain mergers, consolidations, and

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 are satisfied. Applicants

believe that rule 17a–8 may not be

available to exempt the Reorganizations

because the Funds may be deemed to be

affiliated by reasons other than having

a common investment adviser, common

directors, and/or common officers.

Applicants state that because Allfirst

Plan owns in the aggregate 5% of certain

Acquiring Funds and Allfirst Financial

has an indirect pecuniary interest in the

performance of the assets held by the

Allfirst Plan. Allfirst Financial may be

deemed to be an affiliated person of

these Acquiring Funds. In addition,

applicants state that because Allfirst

Trust owns in the aggregate, as a

fiduciary, more than 25% of the

outstanding voting securities of the

Acquiring Funds, it may be deemed to

be an affiliated person of the Acquiring

Funds. Because of the common

ownership of Allfirst Financial and AIB

Govett, each Acquiring Fund might be

deemed to be an affiliated person of an

affiliated person of the corresponding

Acquired Fund.

3. 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.

4. Applicants request an order under

section 17(b) of the Act exempting them

from section 17(a) to the extent

necessary to complete the

Reorganizations. Applicants submit that

the Reorganizations satisfy the

standards of section 17(b) of the Act.

Applicants state that the terms of the

Reorganizations are reasonable and fair

and do not involve overreaching.

Applicants state that the investment

objectives and policies of each Acquired

Fund are generally similar (and in the

case of the Govett International Equity

Fund and Govett Emerging Markets

Funds, substantially identical) to those

of its corresponding Acquiring Fund.

Applicants also state that the Boards,

including all of the Independent

Directors, have made the requisite

determinations that the participation of

the Acquired and Acquiring Funds in

the Reorganizations is in the best

interests of each Fund and that such

participation will not dilute the

interests of the existing shareholders of

each Fund. In addition, applicants state

that the Reorganizations will be on the

basis of relative net asset value.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–16025 Filed 6–23–00; 8:45 am]

BILLING CODE 8010–01–M