29152 Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices

1Rule 11a–3 under the Act defines a ‘‘group of

investment companies’’ as two or more companies

that: (a) hold themselves out to investors as related

companies for purposes of investment and investor

services; and (b) that have a common investment

adviser or principal underwriter.

access to government energy-related

loan programs. Interest on loans and

imputed interest on lease payments will

range from zero percent to the then

prevailing market rate. The obligations

may either be secured or unsecured,

will generally be evidenced by

promissory notes and will have

maturities not exceeding five years. The

aggregate amount of such outstanding

obligations at any one time will not

exceed $20 million.

The authorization requested with

respect to the acquisition of securities of

an EIMCo or any EIM Subsidiaries or

EIM JVs shall expire upon the first to

occur of: (1) December 31, 1998; and (2)

the adoption by the Commission of

proposed rule 58 (HCAR No. 26313,

June 20, 1995) or such other rule,

regulation or order as shall exempt the

transactions as proposed from section

9(a) of the Act. The authorization

requested with respect to financing

transaction shall, upon the enactment of

Rule 58, extend to any energy-related

company, as defined in Rule 58, which

is a subsidiary company of GPU and

engaged in the EIM Business.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 96–14356 Filed 6–6–96; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

21999; 812–10010]

GMO Trust and Grantham, Mayo, Van

Otterloo & Co.; Notice of Application

May 31, 1996.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under the Investment Company

Act of 1940 (the ‘‘Act’’).

APPLICANTS: GMO Trust and Grantham,

Mayo, Van Otterloo & Co. (‘‘GMO’’).

RELEVANT ACT SECTIONS: Order requested

under section 6(c) of the Act from

sections 12(d)(1) (A) and (B) of the Act

and under sections 6(c) and 17(b) of the

Act from section 17(a) of the Act.

SUMMARY OF APPLICATION: Applicants

request an order that would permit

certain series of GMO Trust to operate

as ‘‘funds of funds.’’

FILING DATES: The application was filed

on February 23, 1996 and amended on

May 23, 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

mail. Hearing requests should be

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

June 25, 1996, and should be

accompanied by proof of service on

applicants, in the form of an affidavit,

or, for lawyers, a certificate or 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 SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

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

Applicants, 40 Rowes Wharf, Boston,

MA 02110.

FOR FURTHER INFORMATION CONTACT:

Marianne H. Khawly, Staff Attorney, at

(202) 942–0562, or Alison E. Baur,

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.

Applicants’ Representations

1. GMO Trust is an open-end series

management investment company

organized as a Massachusetts business

trust. GMO Trust’s existing and

prospective shareholders are highly

sophisticated individual investors and

institutional investors such as

endowments, foundations, international

tax-exempt organizations, and ERISA/

pension funds. The minimum initial

investment in the GMO Trust is

$10,000,000. GMO Trust consists of 22

separate series (each a ‘‘Portfolio’’),

including: International Equity

Allocation Fund; Global Equity

Allocation Fund; U.S. Equity with

International Allocation Fund; and

Global Balanced Allocation Fund

(collectively, the ‘‘Allocation Funds’’).

Each Allocation Fund is designed to

serve the needs and objectives of longterm investors who seek a simple and

cost-effective response to their asset

allocation demands.

2. GMO is a Massachusetts general

partnership registered as an investment

adviser under the Investment Advisers

Act of 1940 that serves each Portfolio,

including the Allocation Funds, as

investment adviser and principal

underwriter. With respect to each

Portfolio, GMO voluntarily reduces its

management fees and bears certain

expenses to the extent that each

portfolio’s total annual operating

expenses, excluding certain expenses

such as brokerage commissions,

extraordinary expenses, and transfer

taxes exceed specified percentages of

net assets (the ‘‘Voluntary Expense

Limits’’). The Voluntary Expense Limits

vary among Portfolios primarily because

of each Portfolio’s type of asset class

and the style of GMO’s management. In

the case of each Allocation Fund, GMO

expects to waive any advisory fees, and

bear expenses, to the extent that the

Allocation Fund’s total operating costs

would exceed the relevant Voluntary

Expense Limit.

3. Applicants propose a fund of funds

arrangement whereby each Allocation

Fund will invest in shares of Portfolios

other than Allocation Funds (the

‘‘Underlying Funds’’). Applicants

request that any relief granted pursuant

to the application also apply to any

future Portfolio and to any open-end

management investment company that

currently or in the future is part of the

same ‘‘group of investment companies,’’

as defined in rule 11a–3 under the Act,

as GMO Trust (collectively, the ‘‘GMO

Funds’’).1

Applicants’ Legal Analysis

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) 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 6(c) of the Act provides that

the SEC 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 order
Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices 29153

permitting each Allocation Fund to

acquire shares of the Underlying Funds

in excess of the limits imposed under

section 12(d)(1).

3. The restrictions in section 12(d)(1)

were intended to prevent certain abuses

perceived to be associated with the

pyramiding of investment companies,

including: (a) undue influence by the

fund holding company over its

underlying funds through the threat of

large scale redemptions of the securities

of the underlying funds; (b) layering of

costs, e.g. sales loads, advisory fees, and

administrative costs; and (c) creation of

structure that could cause investor

confusion. For the following reasons,

applicants believe that the proposed

arrangement will not create these

dangers and, therefore, that the

requested relief is appropriate.

4. Applicants argue that the proposed

arrangement will be structured to

minimize large scale redemption

concerns. Each Allocation Fund seeks to

provide existing and prospective longterm investors with a sophisticated asset

allocation service on a cost-effective

basis. This investment objective will not

result in large-scale redemptions from

the Underlying Funds, but rather will

involve small adjustments on a

continuing basis to maintain balance in

the allocation of investors’ assets among

the Underlying Funds. Thus, applicants

assert that the operation of each

Allocation Fund actually decreases the

possibility for undue influence to any

particular Underlying Fund through a

threat of redemption.

5. Applicants state that the proposed

arrangement will not raise the fee

layering concerns contemplated by

section 12(d)(1). The proposed

arrangement will not involve the

layering of advisory fees since, before

approving any advisory contract the

board of trustees of each Allocation

Fund, 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

Fund advisory contract. In addition, the

proposed structure will not involve

layering of sales charges. Currently,

neither the Allocation Funds nor the

Underlying Funds impose sales charges

or 12b–1 fees. Although one or more

GMO Funds may charge a sales load in

the future, any sales charges or service

fees relating to the shares of an

Allocation Fund will not exceed the

limits set forth in Article III, section 26

of the Rules of Fair Practice of the

National Association of Securities

Dealers, Inc. (‘‘NASD’’) when aggregated

with any sales charges or service fees

that an Allocation Fund pays relating to

Underlying Portfolio shares. Applicants

contend that although an Allocation

Fund shareholder may pay advisory fees

for the Allocation Funds directly and

advisory fees for the Underlying Funds

indirectly, these advisory fees are not

unfair nor excessive because the

shareholder is obtaining different

services through different advisory

contracts.

6. Applicants also state that the

proposed arrangement will not be

confusing to investors. Applicants assert

that each Allocation Fund’s structure

will illuminate rather than confuse its

shareholders about the value and nature

of their holdings. The prospectus for

each Allocation Fund will state its

investment objective and apprise

shareholders of what Portfolios

constitute Underlying Funds for their

investment. In addition, GMO Trust’s

existing and prospective shareholders

are highly sophisticated individuals or

institutional investors able to

understand and bear the risks of such

investments.

7. Section 17(a) of the Act makes it

unlawful for an affiliated person of a

registered investment company to sell

securities to, or purchase securities

from, the company. The Allocation

Funds and the Underlying Funds are

considered affiliated persons because

they are under the common control of

GMO. An Underlying Fund’s issuance

of its shares to an Allocation Fund may

be considered a sale prohibited by

section 17(a).

8. Section 17(b) of the Act provides

that the SEC shall exempt a proposed

transaction from section 17(a) if

evidence establishes that: (a) The terms

of the proposed transaction 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 provisions of the Act.

Applicants request an exemption under

sections 6(c) and 17(b) to allow the

above transactions.

9. Applicants believe that the

proposed transactions meet the

standards of sections 6(c) and 17(b). The

consideration paid for the sale and

redemption of Underlying Fund shares

will be without a sales load and at the

same price that is available to other

investors. The Allocation Funds’

purchase and sale of Underlying Fund

shares is consistent with the Allocation

Funds’ policies, as set forth in GMO

Trust’s registration statements.

Applicants also believe that the

proposed transactions are consistent

with the general purposes of the Act.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief shall be

subject to the following conditions:

1. Each Allocation Fund and each

Underlying Fund will be part of the

same ‘‘group of investment companies,’’

as defined in rule 11a–3 under the Act.

No Underlying Fund will acquire

securities of any other investment

company in excess of the limits

contained in section 12(d)(1)(A) of the

Act.

3. A majority of the board of trustees

of GMO Trust will not be ‘‘interested

persons,’’ as defined in section 2(a)(19)

of the Act.

4. Before approving any advisory

contract for an Allocation Fund under

section 15, the board of trustees

including a majority of the trustees who

are not ‘‘interested persons’’ as defined

in section 2(a)(19), shall find that

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 Fund’s advisory contract.

Such finding, and the basis upon which

the finding was made, will be recorded

fully in the minute books of GMO Trust.

5. Any sales charges or distributionrelated fees charged with respect to

shares of an Allocation Fund, when

aggregated with any sales charges and

distribution-related fees paid by the

Allocation Fund with respect to shares

of the Underlying Funds, shall not

exceed the limits set forth in Article III,

section 26, of the Rules of Fair Practice

of the NASD.

6. Applicants agree to provide the

following information, in electronic

format, to the Chief Financial Analyst of

the SEC’s Division of Investment

Management: monthly average total

assets for each Allocation Fund and

each of its Underlying Funds; monthly

purchases and redemptions (other than

by exchange) for each Allocation Fund

and each of its Underlying Funds;

monthly exchanges into and out of each

Allocation Fund and each Underlying

Fund; month-end allocations of each

Allocation Fund portfolio’s assets

among the Underlying Funds; annual

expense ratios for each Allocation Fund

and each Underlying Fund; and a

description of any vote taken by the

shareholders of any Underlying Fund,

including a statement of the percentage

of votes cast for and against the proposal

by each Allocation Fund and by the

other shareholders of the Underlying

Fund. Such information will be
29154 Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices

provided as soon as reasonably

practicable following each fiscal yearend of the GMO Trust (unless the Chief

Financial Analyst shall notify

applicants in writing that such

information need no longer be

submitted).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 96–14360 Filed 6–6–96; 8:45 am]

BILLING CODE 8010–01–M

Issuer Delisting; Notice of Application

To Withdraw From Listing and

Registration; (INCSTAR Corporation,

Common Stock, $.01 Par Value) File

No. 1-9800

June 3, 1996.

INCSTAR Corporation (‘‘Company’’)

has filed an application with the

Securities and Exchange Commission

(‘‘Commission’’), pursuant to Section

12(d) of the Securities Exchange Act of

1934 (‘‘Act’’) and Rule 12d2–2(d)

promulgated thereunder, to withdraw

the above specified security (‘‘Security’’)

from listing and registration on the

American Stock Exchange, Inc.

(‘‘Amex’’).

The reasons alleged in the application

for withdrawing the Security from

listing and registration include the

following:

According to the Company, its Board

of Directors unanimously approved

resolutions on February 28, 1996 to

withdraw the Security from listing on

the Amex and instead, to list the

Security on the National Association of

Securities Dealers Automated

Quotations National Market System

(‘‘Nasdaq/NMS’’).

The decision of the Board followed a

thorough study of the matter and was

based upon the belief that listing the

Security on the Nasdaq/NMS will be

more beneficial to the Company’s

stockholders than the present listing on

the Amex for the following reasons:

(a) The Nasdaq/NMS system of

competing market makers should result

in increased visibility and sponsorship

for the Security of the Company than is

currently the case under the single

specialist system on the Amex;

(b) Greater liquidity and less volatility

in prices per share when trading volume

is light might be expected as a result of

listing on the Nasdaq/NMS than is

presently the case on the Amex;

(c) Listing on the Nasdaq/NMS system

might be expected to result in there

being a greater number of market makers

in the Security of the Company and

expanded capital base available for

trading in such stock; and

(d) Because it might be expected that

a larger number of firms will make a

market in the Security, it might also be

expected that there will be a greater

interest in information and research

reports respecting the Company and as

a result there may be an increase in the

number of institutional research and

advisory reports reaching the

investment community with respect to

the Company.

Any interested person may, on or

before June 24, 1996 submit by letter to

the Secretary of the Securities and

Exchange Commission, 450 Fifth Street,

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

bearing upon whether the application

has been made in accordance with the

rules of the exchanges and what terms,

if any, should be imposed by the

Commission for the protection of

investors. The Commission, based on

the information submitted to it, will

issue an order granting the application

after the date mentioned above, unless

the Commission determines to order a

hearing on the matter.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan F. Katz,

Secretary.

[FR Doc. 96–14354 Filed 6–6–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37257; International Series

Release No. 989; File No. SR–CBOE–96–

33]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange,

Incorporated Relating To Strike Prices

for Options on the Mexican Indice de

Precios y Cotizaciones

May 30, 1996.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78c(b)(1), notice is

hereby given that on May 30, 1996, the

Chicago Board Options Exchange,

Incorporated (‘‘CBOE’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’)

the proposed rule change as described

in Items, I, II, and III below, which items

have been prepared by the CBOE. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE hereby gives notice that it

proposes to add Interpretation .06 to

Rule 24.9, Terms of Index Option

Contracts, concerning the use of

‘‘implied forward levels’’ instead of the

‘‘current index level’’ in determining the

strike prices to add for options on the

Indice de Precios y Cotizaciones (‘‘IPC’’

or ‘‘Index’’).

The text of the proposed rule change

is available at the Office of the

Secretary, CBOE and at the Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

CBOE included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The CBOE has

prepared summaries, set forth in

sections (A), (B), and (C) below, of the

most significant aspects of such

statements.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of this rule proposal is

to permit the Exchange to list strike

prices on the IPC based upon the

‘‘implied forward level’’ instead of upon

the current index level. Currently, under

Interpretation .05 to Rule 24.9, the

Exchange may list strike prices, except

in the case of long-term options, up to

the lesser of 50 points or 15% above or

below the current index level. In the

case of long-term options (other than

reduced value long-term options), the

Exchange may list strike prices within

25% of the current index level.

Because of the high prevailing market

interest rates in Mexico (currently about

28%), CBOE believes that centering

strike prices around the current index

value is impractical. Although IPC

options are traded in terms of U.S.

dollars, they are priced using these high

Mexican rates. According to CBOE, high

interest rates imply a high cost of

holding the underlying securities

because an investor must borrow at 28%

to purchase the Mexican securities ) or

forego earning 28% on money

previously invested). Therefore, over a

given period of time, for example three

months, the expected value of the IPC

is approximately 7% (28% times 1⁄4