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[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
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