24968 Federal Register / Vol. 61, No. 97 / Friday, May 17, 1996 / Notices

Applicant’s Legal Analysis

1. Section 19(b) provides that

registered investment companies may

not, in contravention of such rules,

regulations, or orders as the SEC may

prescribe, distribute long-term capital

gains more often than once every twelve

months. Rule 19b–1 limits the number

of capital gains distributions, as defined

in section 852(b)(3)(C) of the Internal

Revenue Code of 1986, as amended, (the

‘‘Code’’), that applicant may make with

respect to any one taxable year to one,

plus a supplemental distribution made

pursuant to section 855 of the Code not

exceeding 10% of the total amount

distributed for the year, plus one

additional long-term capital gains

distribution made to avoid the excise

tax under section 4982 of the Code.

2. Rule 19b–1, by limiting the number

of net long-term capital gain

distributions that applicant may make

with respect to any one year, has

prevented the operation of the Pay-Out

Policy because applicant’s realized net

long-term capital gains in any year may

exceed the total of the fixed quarterly

distributions that under rule 19b–1 may

include such capital gains. In that

situation, the rule effectively forces the

fixed quarterly distributions, that under

the rule may not include such capital

gains, to be funded with returns of

capital (to the extent net investment

income and realized short-term capital

gains are insufficient), even though net

realized long-term capital gains would

otherwise be available therefor. The

long-term capital gains in excess of the

fixed quarterly distributions permitted

by the rule then must either be added

as an ‘‘extra’’ on one of the permitted

capital gains distributions, thus

exceeding the total annual amount

called for by the Pay-Out Policy, or be

retained by applicant (with applicant

paying taxes thereon).

3. Applicant believes that granting the

required relief would limit applicant’s

return of capital distributions to that

amount necessary to make up any

shortfall between applicant’s guaranteed

distribution and the total of its

investment income and capital gains.

The likelihood that applicant’s

shareholders would be subject to

additional tax return complexities

involved when applicant retains and

pays taxes on long-term capital gains

would therefore be avoided.

4. One of the concerns leading to the

adoption of section 19(b) and rule 19b–

1 was that shareholders might be unable

to distinguish between frequent

distributions of capital gains and

dividends from investment income. In

accordance with rule 19a–1, a separate

statement showing the source of the

distribution (net investment income, net

realized capital gains, or returns of

capital) will accompany each

distribution (or the confirmation of the

reinvestment thereof under applicant’s

dividend reinvestment plan). In

addition, a statement showing the

amount and source of distributions

received during the year will be

included with applicant’s IRS Form

1099–DIV reports sent to each

shareholder who received distributions

during the year (including shareholders

who sold shares during the year). This

information will also be included in

applicant’s annual report to

shareholders. Through these disclosures

and other communications with

shareholders, applicant states that its

shareholders will understand that

applicant’s fixed distributions are not

tied to its investment income and

realized capital gains and will not

represent yield or investment return.

5. Another concern that led to the

adoption of section 19(b) and rule 19b–

1 was that frequent capital gain

distributions could facilitate improper

fund distribution practices, including

the practice of urging an investor to

purchase fund shares on the basis of an

upcoming dividend (‘‘selling the

dividend’’), where the dividend results

in an immediate corresponding

reduction in net asset value and is in

effect a return of the investor’s capital.

Applicant believes that this concern

does not apply to closed-end investment

companies, such as applicant, which do

not continuously distribute shares.

Although, to date, applicant has

completed one rights offering of

additional shares to shareholders, the

rights offering was short in duration and

involved a relatively small number of

new shares. The rights in the rights

offering were non-transferable and

offered only to existing shareholders.

The rights were offered only by means

of the statutory prospectus, without

solicitation by brokers and without

payment of any commission or other

underwriting fee.

6. Applicant states that another

concern leading to the adoption of

section 19(b) and rule 19b–1, increase in

administrative costs, is not present

because applicant will continue to make

quarterly distributions regardless of

what portion thereof is composed of

capital gains.

7. Section 6(c) of the Act provides that

the SEC may exempt any person,

security, or transaction, or any class or

classes of persons, securities, or

transactions, from any provisions of the

Act, if and to the extent 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. For the reasons

stated above, applicant believes that the

requested exemption meets the

standards set forth in section 6(c).

Applicant’s Condition

Applicant agrees that the order

granting the exemption shall terminate

upon the effective date of a registration

statement under the Securities Act of

1933 for any future public offering by

applicant of its shares other than: (i) a

non-transferable rights offering to

shareholders of applicant, provided that

such offering does not include

solicitation by brokers or the payment of

any commissions or underwriting fee;

and (ii) an offering in connection with

a merger, consolidation, acquisition, or

reorganization.

For the Commission, by the Division

of Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12465 Filed 5–16–96; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC—21952; 812–10064]

Emerging Markets Growth Fund, Inc. et

al.; Notice of Application

May 10, 1996.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Emerging Markets Growth

Fund, Inc. (‘‘EMGF’’), New World

Investment Fund (‘‘NWIF’’), IBM

Retirement Plan Trust (‘‘Trust I’’), and

General Motors Employees Global

Group pension Trust (‘‘Trust II’’).

RELEVANT ACT SECTIONS: Order requested

under section 17(b) of the Act granting

an exemption from section 17(a).

SUMMARY OF APPLICATION: Applicants

request an order to permit EMGF to

acquire all of the assets of NWIF.

Because of certain affiliations, the two

funds may not rely on rule 17a–8 under

the Act.

FILING DATES: The application was filed

on March 28, 1996 and amended on

May 9, 1996.

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
Federal Register / Vol. 61, No. 97 / Friday, May 17, 1996 / Notices 24969

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

June 4, 1996, and should be

accompanied by proof of service on the

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: EMGF and NWIF c/o The

Capital Group Companies, Inc. 11100

Santa Monica Boulevard, Los Angeles,

California 90025; and Trust I and Trust

II c/o Chase Manhattan Bank, N.A.,

Chase Metro Tech Center, Brooklyn,

New York 11245.

FOR FURTHER INFORMATION CONTACT:

Marianne H. Khawly, Staff Attorney, at

(202) 942–0562, or Alison E. Baur,

Branch Chief, 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 SEC’s

Public Reference Branch.

Applicants’ Representations

1. EMGF is a closed-end management

investment company organized as a

Maryland corporation and registered

under the Act. NWIF is a closed-end

management investment company

organized as a Massachusetts business

trust and registered under the Act.

Capital International, Inc. (the

‘‘Adviser’’) serves as investment adviser

to EMGF and NWIF. The Adviser is an

indirect, wholly-owned subsidiary of

The Capital Group Companies, Inc.

2. The International Business

Machines Corporation established Trust

I to provide monthly income to eligible

retired employees. General Motors

Corporation (‘‘GM’’) created Trust II for

the benefit of certain employee benefit

plans of GM and its subsidiaries. Trust

I and Trust II each owns greater than 5%

of the outstanding shares of each of

EMGF and NWIF.

3. Applicants propose that NWIF (the

‘‘Acquired Fund’’) be combined with

and into EMGF (the ‘‘Acquiring Fund’’

and together with the Acquiring Fund,

the ‘‘Funds’’) in a tax-free reorganization

(the Reorganization’’). In the

Reorganization, the Acquiring Fund will

acquire all of the assets and liabilities,

of the Acquired Fund in exchange for

shares of the Acquiring Fund, which

then will be distributed pro rata to

former shareholders of the Acquired

Fund. The transfer of the assets of the

Acquired Fund to the Acquiring Fund,

and in exchange the issuance of the

Acquired Fund’s shares, will be based

on the relative net asset values of each

of the Funds as of the close of the New

York Exchange on the last business day

immediately preceding the effective

date of the Reorganization. Each Fund

will bear its own expenses in

connection with the Reorganization.

4. Shares of the Acquired Fund are

offered to the public on a continuous

basis to investors meeting the Acquired

Fund’s investor suitability and

minimum purchase requirements. The

Acquiring Fund’s investor suitability

requirement provides that each

prospective investor that is a

‘‘company’’, as defined in the Act, must

have total assets in excess of $5 million.

Each prospective investor that is a

natural person must be an ‘‘accredited

investor’’ within the meaning of

Regulation D under the Securities Act of

1933. Shares of the Acquired Fund are

offered to the public on a continuous

basis under the same conditions and

subject to the same suitability

limitations.

5. At a meeting on January 26, 1996,

the board of directors of the Acquiring

Fund, including the disinterested

directors, approved the Reorganization.

Also on January 26, 1996, the board of

trustees of the Acquired Fund,

including the disinterested trustees,

approved the Reorganization. Each

board made the findings required under

rule 17a–8 and determined that

participation in the Reorganization is in

the best interests of its registered

investment company and that the

interests of existing shareholders of its

registered investment company will not

be diluted as a result of its effecting the

Reorganization. Such findings, and the

basis upon which such findings were

made, are recorded fully in the minute

books of each registered investment

company. In addition, the board of

trustees of the Acquired Fund

considered (a) the potential benefits of

the Reorganization to the shareholders

of the Acquired Fund, (b) the

investment objectives, policies,

restrictions, and investment holdings of

the Funds, (c) the terms and conditions

of the Reorganization that might affect

the price of the outstanding shares of

the Acquired Fund, and (b) the direct or

indirect costs to be incurred by the

Acquired Fund or shareholders thereof.

6. In considering the compatibility of

the two Funds, the boards noted that the

investment objectives of the Funds are

similar, in that both Funds seek capital

appreciation and income. The principal

difference in objectives is that the

Acquired Fund concentrates its

investments in Latin American

countries, and is permitted to invest a

greater percentage of its assets in debt

securities, while the Acquiring Fund

invests in a broader range of emerging

market countries, with a greater percent

of its assets in equity securities.

Nevertheless, the Acquiring Fund’s

investment policies permit it to invest

in substantially all of the securities in

which the Acquired Fund may invest.

7. The expected advantages of the

Reorganization include: the benefit to

shareholders of the Acquired Fund of

the Acquiring Fund’s lower expense

ratio; the elimination of certain

duplicative expenses of separate funds,

such as separate audit and legal fees; a

larger asset base; and enhanced liquidity

and portfolio diversification. In

addition, shareholders of the Acquiring

Fund should benefit from the

Reorganization in that it will permit the

Acquiring Fund to acquire portfolios

securities in the amount of the assets of

the Acquired Fund without incurring

the expenses that would normally be

associated with purchasing such

securities in the open market. The

Adviser estimates the potential cost

savings to the Acquiring Fund to be

$344,000.

8. The consummation of the

Reorganization is subject to certain

conditions, including that the parties

shall have received from the SEC the

order requested herein, and the receipt

of an opinion of tax counsel that the

Reorganization will qualify as a tax-free

reorganization under the Internal

Revenue Code of 1986 and will not

result in the recognition of any taxable

gain or loss to the Acquiring Fund or the

Acquired Fund, or to any shareholders

thereof. In addition, applicants agree not

to make any material changes to the

reorganization agreement that affect the

application without the prior approval

of the SEC. Applicants also agree not to

waive, amend, or modify any provision

of the reorganization agreement that is

required by state or federal law in order

to effect the Reorganization.

9. A registration statement on Form

N–14 with respect to the Reorganization

will be filed with the SEC. A special

meeting of shareholders of the Acquired

Fund will be held to consider and act

upon the Reorganization.

Applicants’ Legal Analysis

1. Section 17(a), in pertinent part,

prohibits an affiliated person of a

registered investment company, or any

affiliated person of such a person, acting

as principal, from selling to or

purchasing from such registered

company, or any company controlled by
24970 Federal Register / Vol. 61, No. 97 / Friday, May 17, 1996 / Notices

such registered company, any security

or other property.

2. Section 2(a)(3)(A) of the Act

provides that any person directly or

indirectly owning, controlling, or

holding with power to vote 5% or more

of the outstanding voting securities of

any other person is an affiliated person

of that person. Section 2(a)(3)(B)

provides that any person 5% or more of

whose outstanding voting securities are

directly or indirectly owned, controlled,

or held with power to vote by another

person is an affiliated person of that

person.

3. Rule 17a–8 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 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.

4. As noted above, the Funds have a

common investment adviser. Thus, the

Reorganization would be exempt from

the provisions of section 17(a) by virtue

of rule 17a–8, but for the fact that the

Funds may be affiliated for reasons

other than those set forth in the rule. As

previously stated, Trust I and Trust II

each owns more than 5% of the

outstanding voting securities of each of

the Funds. Because of this greater than

5% holding, Trust I and Trust II each is

an affiliated person of each of the Funds

under section 2(a)(3)(A) and each of the

Funds is an affiliated person of each of

Trust I and Trust II under section

2(a)(3)(B). Therefore, the Acquiring

Fund is an affiliated person of an

affiliated person of the Acquired Fund

and vice versa.

5. Section 17(b) provides that the SEC

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, 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 the registered investment company

concerned and with the general

purposes of the Act.

6. Applicants submit that the

Reorganization meets the standards for

relief under section 17(b), in that the

terms of the Reorganization, including

the consideration to be paid or received,

are reasonable and fair and do not

involve overreaching on the part of any

person concerned; the Reorganization is

consistent with the investment policy of

the Funds; and the Reorganization is

consistent with the general purposes of

the Act. In addition, applicants submit

that each board made the

determinations under rule 17a–8 that

the Reorganization is in the best

interests of its registered investment

company and that the interests of

existing shareholders of its registered

investment company will not be diluted

as a result of its effecting the

Reorganization.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12386 Filed 5–16–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21951; No. 812–9978]

John Hancock Mutual Life Insurance

Company, et al.

May 10, 1996.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of Application for an

Order pursuant to the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: John Hancock Mutual Life

Insurance Company (‘‘John Hancock

Mutual’’), John Hancock Variable Life

Insurance Company (‘‘John Hancock

Variable,’’ together with John Hancock

Mutual, the ‘‘Companies’’), John

Hancock Variable Annuity Account JF

(the ‘‘Account’’), and John Hancock

Funds, Inc. (‘‘JHFI’’).

RELEVANT ACT SECTIONS: Order requested

pursuant to Section 6(c) of the Act

granting exemptions from the provisions

of Sections 26(a)(2)(C) and 27(c)(2)

thereof.

SUMMARY OF APPLICATION: Applicants

seek an order permitting the deduction

of mortality and expense risk and

certain optional benefit rider charges

from the assets of: (a) the Account in

connection with the offer and sale of

certain variable annuity contracts

(‘‘Existing Contracts’’); (b) the Account

in connection with the issuance of

variable annuity contracts that are

materially similar to the Existing

Contracts (‘‘Future Contracts,’’ together

with Existing Contracts, the

‘‘Contracts’’); and (c) any other separate

account established in the future by the

Companies (‘‘Future Account’’) in

connection with the issuance of

Contracts, for which JHFI or certain

other broker-dealers may act as

distributor and principal underwriter.

To the extent the Contracts are issued

on a group basis, the term ‘‘Contract,’’

when used herein, includes any

individual certificates or other

participations thereunder.

FILING DATE: The application was filed

on February 5, 1996.

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 Secretary of

the Commission and serving Applicants

with a copy of the request, personally or

by mail. Hearing requests must be

received by the Commission by 5:30

p.m. on June 4, 1996, and must 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 may request notification of a

hearing by writing to the Secretary of

the Commission.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 5th Street,

N.W., Washington, D.C. 20549.

Applicants, c/o Sandra M. DaDalt,

Associate Counsel, John Hancock

Mutual Life Insurance Company, John

Hancock Place, Post Office Box 111,

Boston, Massachusetts 02117.

FOR FURTHER INFORMATION CONTACT:

Kevin M. Kirchoff, Senior Counsel, or

Patrice M. Pitts, Special Counsel, Office

of Insurance Products (Division of

Investment Management), at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application; the

complete application is available for a

fee from the public Reference Branch of

the Commission.

Applicants’ Representations

1. John Hancock Variable, a stock life

insurance company incorporated under

the laws of the Commonwealth of

Massachusetts, is a wholly-owned

subsidiary of John Hancock Mutual, a

mutual life insurance company

organized under the laws of the

Commonwealth of Massachusetts.

2. John Hancock Variable is the

depositor of the Account, and will serve

as depositor for Future Accounts.

3. The Account was established as a

separate investment account under the

laws of the Commonwealth of

Massachusetts on November 13, 1995,

pursuant to a resolution of the Board of

Directors of John Hancock Variable. The

Future Accounts will be separate

accounts of either John Hancock Mutual

or John Hancock Variable and will be

registered with the Commission under

the Act.

4. JHFI, an indirect, wholly-owned

subsidiary of John Hancock Mutual, is