[Federal Register Volume 65, Number 27 (Wednesday, February 9, 2000)]
[Notices]
[Pages 6423-6425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2879]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24275; 812-11680]


Ark Funds, et al.; Notice of Application

February 2, 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 a 
pension plan to transfer its assets to certain registered open-end 
management investment companies in exchange for shares of the 
companies.

APPLICANTS: ARK Funds, Allfirst Financial Inc. Pension Plan (``Allfirst 
Plan''), Allied Investment Advisers, Inc. (``AIA''), Allfirst Trust 
Company, N.A. (``Allfirst Trust'') and Allfirst Financial Inc.

FILING DATES: The application was filed on July 1, 1999. 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 February 24, 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, NW, Washington, DC 
20549-0609. Applicants, c/o Alan C. Porter, Esq., Piper Marbury Rudnick 
& Wolfe LLP, 1200 Nineteenth Street, NW, Washington, DC 20036-2412.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel, 
at (202) 942-0714, 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

[[Page 6424]]

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).

Applicants' Representations

    1. ARK Funds, a Massachusetts business trust, is registered under 
the Act as an open-end management investment company and offers twenty 
series (the ``ARK Portfolios''). AIA is an investment adviser 
registered under the Investment Advisers Act of 1940 and serves as 
investment adviser to each ARK Portfolio. Allfirst Trust acts as 
custodian and sub-administrator for the ARK Portfolios. AIA and 
Allfirst Trust are wholly-owned subsidiaries of Allfirst Bank, which is 
a wholly-owned subsidiary of Allfirst Financial Inc., a bank holding 
company (Allfirst Financial Inc. and its direct and indirect 
subsidiaries, collectively ``Allfirst'').
    2. The Allfirst Plan is a defined benefit pension plan qualified 
under section 401 of the Internal Revenue Code of 1986, as amended. The 
Allfirst Plan is maintained for the benefit of employees of Allfirst 
and is exempt from the definition of ``investment company'' under 
section 3(c)(11) of the Act. Allfirst Trust is trustee of and AIA is 
investment adviser to the Allfirst Plan.
    3. Currently, the Allfirst Plan has approximately 36.8% of its 
assets invested in the ARK Portfolios, with the remainder invested 
directly in individual securities. The Allfirst Plan holds more than 5% 
of the outstanding voting securities of four of the ARK Portfolios. 
Applicants propose to transfer in-kind of the assets of the Allfirst 
Plan, other than shares of the ARK Portfolios, to various ARK 
Portfolios for which the securities are appropriate investments, in 
exchange for Institutional Class shares of the respective ARK 
Portfolios having an aggregate net asset value equal to that of the 
securities transferred (the ``Proposed Exchange''). Pursuant to 
procedures adopted by each ARK Portfolio's board of directors 
(``Board''), AIA has determined that the individual securities held by 
the Allfirst Plan are appropriate investments for the participating ARK 
Portfolios. The securities of the Allfirst Plan to be transferred will 
be valued in accordance with the provisions of rule 17a-7(b) under the 
Act. Institutional Class shares of the ARK Portfolios do not have a 
front-end or deferred sales charge, redemption fee, or distribution 
fee. Allfirst will pay any expenses incurred in connection with the 
Proposed Exchange. Applicants request relief to effect the Proposed 
Exchange.

Applicants' Legal Analysis

    1. Section 17(a) of the Act, in relevant part, prohibits an 
affiliated persons 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 investment company. Section 
2(a)(3) of the Act, in relevant part, 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 
directly or indirectly controlling, controlled by, or under common 
control with, the other person; and (c) if the other person is an 
investment company, any investment adviser of that company. Applicants 
state that, because the Allfirst Plan may be viewed as acting as 
principal in the Proposed Exchange and because the Allfirst Plan and 
the ARK Portfolios may be viewed as being under the common control of 
Allfirst, within the meaning of section 2(a)(3)(C) of the Act, the 
Proposed Exchange may be subject to the prohibitions of section 17(a) 
of the Act.
    2. Rule 17a-7 under the Act exempts from the prohibitions of 
section 17(a) certain purchase and sale transactions if an affiliation 
exists solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided, among other requirements, 
that the transaction involves a cash payment against prompt delivery of 
the securities. Applicants state that rule 17a-7 may not be available 
for the Proposed Exchange because the Allfirst Plan owns 5% or more of 
the outstanding voting shares of certain ARK Portfolios and Allfirst 
has an indirect pecuniary interest in the performance of the assets 
held by the Allfirst Plan. As a result, the affiliation between the 
Allfirst Plan and the ARK Portfolios is not solely by reason of having 
a common investment adviser, common directors, and/or common officers. 
In addition, applicants state that the Proposed Exchange is to be 
effected as an in-kind transfer, rather than in cash.
    3. Rule 17a-8 under the Act exempts certain mergers, 
consolidations, and sales of assets of registered investment companies 
from the provisions of section 17(a) of the Act if an affiliation 
exists solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided, among other requirements, 
that the board of directors of each investment company makes certain 
determinations. Applicants state that rule 17a-8 is not available for 
the Proposed Exchange because Allfirst is not transferring 
``substantially all'' of its assets to the ARK Portfolios, because the 
Allfirst Plan is not a registered investment company and because the 
Allfirst Plan and the ARK Portfolios are affiliated other than solely 
by reason of having a common investment adviser, common director and/or 
common officers.
    4. Section 17(b) of the Act provides that the Commission may exempt 
a proposed transaction from the provisions of section 17(a) if evidence 
establishes that: (a) The terms of the proposed transaction, including 
the consideration to be paid, are reasonable and fair and do not 
involve overreaching on the part of any person concerned; (b) the 
proposed transaction is consistent with the policy of each registered 
investment company concerned; and (c) the proposed transaction is 
consistent with the general purposes of the Act.
    5. Applicants request an order under section 17(b) of the Act to 
permit the Proposed Exchange. Applicants submit that the Proposed 
Exchange satisfies the standards for relief under section 17(b) of the 
Act. Applicants state that the securities to be acquired from the 
Allfirst Plan are consistent with the investment objectives, policies 
and restrictions of the participating ARK Portfolios. Applicants also 
state that the Proposed Exchange will meet all of the conditions of 
rules 17a-8 (with respect to the ARK Funds) and that the Proposed 
Exchange will occur in accordance with procedures respectively adopted 
by the Board, pursuant to rule 17a-7(e), and that the provisions of 
rule 17a-7(b), (c), (d) and (f) will be satisfied. Applicants state 
that the Proposed Exchange will take place as an in-kind transfer from 
the Allfirst Plan to the ARK Portfolios, rather than on the basis of 
cash as required by rule 17a-7(a). The Proposed Exchange will not occur 
unless and until the Board (including a majority of the Independent 
Trustees) finds that participation by the ARK Portfolios in the 
Proposed Exchange is in the best interests of each ARK Portfolio and 
that the interests of existing shareholders of the ARK Portfolio will 
not be diluted as a result of the transaction.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:

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    1. The Proposed Exchange will comply with the terms of rule 17a-
7(b) through (f).
    2. The Proposed Exchange will not occur unless and until the Board 
(including a majority of the Independent Trustees) finds that 
participation by the ARK Portfolios in the Proposed Exchange is in the 
best interests of each ARK Portfolio and that the interests of existing 
shareholders of the ARK Portfolio will not be diluted as a result of 
the transaction. These findings, and the basis upon which they are 
made, will be recorded fully in the minute books of ARK Funds.
    3. The Proposed Exchange will not occur unless and until AIA, as 
investment manager and fiduciary of the Allfirst Plan, has determined 
in accordance with its fiduciary duties that the Proposed Exchange is 
in the best interests of the Allfirst Plan.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-2879 Filed 2-8-00; 8:45 am]
BILLING CODE 8010-01-M