[Federal Register Volume 63, Number 148 (Monday, August 3, 1998)]
[Notices]
[Pages 41304-41306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20560]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23332; 812-10754]


Great Plains Funds, et al.; Notice of Application

July 27, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``Act'').

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RELEVANT ACT SECTIONS: Order requested under section 12(d)(1)(J) of the 
Act for an exemption from section 12(d)(1) of the Act, and under 
sections 6(c) and 17(b) of the Act for an exemption from section 17(a) 
of the Act.

SUMMARY OF APPLICATION: Applicants request an order that would permit 
them to implement a ``fund of funds'' arrangement. The fund of funds 
would invest in funds in the same group of investment companies and in 
other funds within the limits of section 12(d)(1)(F) of the Act. 
Applicants also seek an exemption from the sales load limitation in 
section 12(d)(1)(F) of the Act.

APPLICANTS: Great Plains Fund (the ``Trust'') and First Commerce 
Investors, Inc. (the ``Adviser''). 

FILING DATES: The application was filed on August 13, 1997, and amended 
on May 15, 1998 and July 14, 1998. Applicants have agreed to file an 
amendment 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 August 21, 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 Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549. Great Plains Funds, 5800 Corporate 
Drive, Pittsburgh, PA 15237-7010. First Commerce Investors, Inc., 610 
NBC Center, Lincoln, NB 68508.

FOR FURTHER INFORMATION CONTACT: Kathleen L. Knisely, Staff Attorney, 
at (202) 942-0517, or Nadya B. Roytblat, Assistant Director, at (202) 
942-0564 (Office of Investment Company Regulation, Division of 
Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch (tel. 202-942-8090).

Applicants' Representations

    1. The Trust is registered as an open-end management investment 
company under the Act and currently consists of five portfolios: Great 
Plains Equity Fund, Great Plains Premier Fund, Great Plains 
International Equity Fund, Great Plains Intermediate Bond Fund, and 
Great Plains Tax-Free Bond Fund. The portfolios are advised by the 
Adviser, which is registered under the Investment Advisers Act of 1940.
    2. Applicants request relief to permit certain portfolios of the 
Trust (the ``Portfolios'') to invest in certain other portfolios of the 
Trust (the ``Underlying Portfolios'') that are in the same group of 
investment companies as the Portfolios.\1\ Applicants also request 
relief to permit the Portfolios to invest in other registered open-end 
management investment companies that are not part of the same group of 
investment companies as the Portfolios (the ``Other portfolios'') in 
accordance with section 12(d)(1)(F) of the Act discussed below.\2\ The 
Portfolios also

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will invest a portion of their assets directly in securities (``Direct 
Investments''). With respect to Portfolio's investment in Other 
Portfolios, applicants also seek an exemption from the sales load 
limitation in section 12(d)(1)(F) of the Act. Applicants believe that 
the proposed structure of the Portfolios will provide a consolidated 
and efficient means through which investors can have access to a 
comprehensive investment vehicle.
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    \1\ Initially, the Great Plains Equity Fund will be the only 
Portfolio investing in an Underlying Portfolio, which will be the 
Great Plains International Equity Fund.
    \2\ Applicants also request relief for each registered open-end 
management investment company that currently, or in the future, is 
part of the same ``group of investment companies'' as the Trust as 
defined in section 12(d)(1)(G)(ii) of the Act. All registered open-
end management investment companies which currently intend to rely 
on the order are named as applicants. Any registered open-end 
management investment company that relies on the order in the future 
will do so only in accordance with the terms and conditions of the 
application.
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Applicants' Legal Analysis

Section 12(d)(1) of the Act

    1. Section 12(d)(1)(A) of the Act provides that no registered 
investment company may acquire securities of another investment company 
if such securities represent more than 3% of the acquired company's 
outstanding voting stock, more than 5% of the acquiring company's total 
assets, or if such securities, together with the securities of any 
other acquired investment companies, represent more than 10% of the 
acquiring company's total assets. Section 12(d)(1)(B) of the Act 
provides that no registered open-end investment company may sell its 
securities to another investment company if the sale will cause the 
acquiring company to own more than 3% of the acquired company's voting 
stock, or if the sale will cause more than 10% of the acquired 
company's voting stock to be owned by investment companies.
    2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) 
shall not apply to the securities of an acquired company purchased by 
an acquiring company if: (i) the acquiring company and the acquired 
company are part of the same group of investment companies; (ii) the 
acquiring company holds only securities of acquired companies that are 
part of the same group of investment companies, government securities, 
and short-term paper; (ii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not 
excessive under rules adopted pursuant to section 22(b) or section 
22(c) by a securities association registered under section 15A of the 
Securities Exchange Act of 1934, or the Commission; and (iv) the 
acquired company has a policy that prohibits it from acquiring 
securities of registered open-end investment companies or registered 
unit investment trusts in reliance on section 12(d)(1)(F) or (G). 
Section 12(d)(1)(G)(ii) defines the term ``group of investment 
companies'' to mean any two or more registered investment companies 
that hold themselves out to investors as related companies for purposes 
of investment and investor services. Because the Portfolios will invest 
in shares of the Other Portfolios and make Direct Investments, they 
cannot relay on the exemption from section 12(d)(1)(A) and (B) afforded 
by section 12(d)(1)(G).
    3. Section 12(d)(1)(F) of the Act provides that section 12(d)(1) 
shall not apply to an acquiring company if the company and its 
affiliates own no more than 3% of an acquired company's securities, 
provided that the acquiring company does not impose a sales load of 
more than 1.5% on its shares. In addition, the section provides that no 
acquired company is obligated to honor any acquiring company redemption 
request in excess of 1% of the acquired company's securities during any 
period of less than 30 days, and the acquiring company must vote its 
acquired company shares either in accordance with instructions from its 
shareholders or in the same proportion as all other shareholders of the 
acquired company. The Portfolios will invest in Other Portfolios in 
reliance on section 12(d)(1)(F). if the requested relief is granted, 
shares of the Portfolios will be sold with a sales load that exceeds 
1.5%.
    4. Section 12(d)(1)(J) provides that the Commission may exempt 
persons or transactions from any provision of section 12(d)(1) if and 
to the extent such exemption is consistent with the public interest and 
the protection of investors.
    5. Applicants request relief under section 12(d)(1)(J) of the Act 
from the limitations of sections 12(d)(1)(A) and (B) to permit the 
Portfolios to invest in the Underlying Portfolios and the Portfolios to 
sell shares to the public with a sales load that exceeds 1.5%.
    6. Applicants state that the Portfolios' investments in the 
Underlying Portfolios do not raise the concerns about undue influence 
that sections 12(d)(1)(A) and (B) were designed to address. Applicants 
further state that the proposed conditions would appropriately address 
any concerns about the layering of sales charges or other fees. The 
Portfolios will invest in Other Portfolios only within the limits of 
section 12(d)(1)(F). Applicants believe that an exemption from the 
sales load limitation in that section is consistent with the protection 
of investors because applicants' proposed sales load limit would cap 
the aggregate sales charges of both the Portfolio and the Other 
Portfolio in which it invests. Applicants have agreed, as a condition 
to the relief, that any sales charges, asset-based distribution and 
service fees relating to the Portfolios' shares, when aggregated with 
any sales charges, asset-based distribution and service fees paid by 
the Portfolios relating to its acquisition, holding, or disposition of 
shares of the Underlying Portfolios and Other Portfolios, will not 
exceed the limits set forth in Rule 2830 of the NASD Conduct Rules.

Section 17(a) of the Act

    7. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company from selling securities to, 
or purchasing securities from, the company. Section 2(a)(3) of the Act 
defines an ``affiliated person'' of another person to include: (a) any 
person that directly or indirectly owns, controls, or holds with power 
to vote 5% or more of the outstanding voting securities of the other 
person; (b) any person 5% or more of whose outstanding voting 
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; (d) if the other person is an investment company, any 
investment adviser of that company. Applicants submit that the 
Portfolios and Underlying Portfolios may be deemed to be affiliated 
persons of one another by virtue of being under common control of the 
Adviser, or because the Portfolios own 5% or more of the shares of an 
Underlying Portfolio. Applicants state that purchases and redemptions 
of shares of the Underlying Portfolios by the Portfolios could be 
deemed to be principal transactions between affiliated persons under 
section 17(a).
    8. Section 17(b) provides that the Commission shall exempt a 
proposed transaction from section 17(a) if evidence establishes that 
(a) the terms of the proposed transaction, including the consideration 
to be paid or received, are reasonable and fair and do not involve 
overreaching; (b) the proposed transaction is consistent with the 
policies of the registered investment company involved; and (c) the 
proposed transaction is consistent with the general purposes of the 
Act.
    9. Section 6(c) of the Act provides that the Commission may exempt 
persons or transactions from any provision of the Act if such 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 request an exemption under 
sections 6(c) and 17(b)

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to permit the Portfolios to purchase and redeem shares of the 
Underlying Portfolios.
    10. Applicants believe that the terms of the proposed transactions 
will be reasonable and fair and will not involve overreaching because 
shares of Underlying Portfolios will be sold and redeemed at their net 
asset values. Applicants also state that the investment by the 
Portfolios in the Underlying Portfolios will be effected in accordance 
with the investment restrictions of the Portfolios and will be 
consistent with the policies as set forth in the registration statement 
of the Portfolios.

Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:
    1. Each Portfolio and each Underlying Portfolio will be part of the 
same ``group of investment companies,'' as defined in section 
12(d)(G)(ii) of the Act.
    2. No Underlying Portfolio or Other Portfolio will acquire 
securities of any other investment company in excess of the limits 
contained in section 12(d)(1)(A) of the Act, except to the extent that 
such Underlying Portfolio or Other Portfolio (a) receives securities of 
another investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed 
to have acquired) securities of another investment company pursuant to 
exemptive relief from the Commission permitting such Underlying 
Portfolio or Other Portfolio to (i) acquire securities of one or more 
affiliated investment companies for short-term cash management 
purposes; or (ii) engage in interfund borrowing and lending 
transactions.
    3. Any sales charges, distribution-related fees, and service fees 
relating to the shares of the Portfolios, when aggregated with any 
sales charges, distribution-related fees, and service fees paid by the 
Portfolios relating to its acquisition, holding, or disposition of 
shares of the Underlying Portfolios and Other Portfolios, will not 
exceed the limits set froth in rule 2830 of the NASD Conduct Rules.
    4. Before approving any advisory contract under section 15 of the 
Act, the board of trustees of a Portfolio, including a majority of the 
trustees who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, will find that the advisory fees charged under the 
contract are based on services provided that are in addition to, rather 
than duplicative of, services provided under any Underlying Portfolio 
or Other Portfolio advisory contract. This finding, and the basis upon 
which the finding was made, will be recorded fully in the minute books 
of the Portfolio.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-20560 Filed 7-31-98; 8:45 am]
BILLING CODE 8010-01-M