Applications, hearings, determinations, etc.: Delaware Group Foundations Funds et al.,

[Federal Register: March 16, 1998 (Volume 63, Number 50)]

[Notices]

[Page 12845-12846]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr16mr98-151]

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23063; 812-10838]

Delaware Group Foundations Funds, et al.; Notice of Application

March 9, 1998. AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (the ``Act'') for an exemption from section 12(d)(1)(G)(i)(II).

SUMMARY OF THE APPLICATIONS: Applicants seek an order that would permit a fund of funds relying on section 12(d)(1)(G) of the Act to make direct investments in securities and other instruments.

APPLICANTS: Delaware Group Foundation Funds, Delaware Group Equity Funds I, Inc., Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds III, Inc., Delaware Group Equity Funds IV, Inc., Delaware Group Equity Funds V, Inc., Delaware Group Income Funds, Inc., Delaware Group Government Fund, Inc., Delaware Group Limited-Term Government Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Money Fund, Inc., Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free Fund, Inc., Delaware Pooled Trust, Inc., Delaware Group Premium Fund, Inc., Delaware Group Global & International Funds, Inc., Delaware Group Adviser Funds, Inc. (collectively, the ``Delaware Funds''), Voyageur Funds, Inc., Voyageur Insured Funds, Inc., Voyageur Intermediate Tax Free Funds, Inc., Voyageur Investment Trust, Voyageur Investment Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual Funds III, Inc., Voyageur Tax Free Funds, Inc. (collectively, the ``Delaware-Voyageur Funds''), any future registered open-end management investment companies or series thereof which are part of the same ``group of investment companies,'' as defined in section 12(d)(1)(G)(ii) of the Act as: (a) the Delaware or Delaware-Voyageur Funds; or (b) other registered open-end management investment companies that are advised by Delaware Management Company, Inc. or any entity that controls, is controlled by, or under common control with Delaware Management Company, Inc. (together with any future series of existing Delaware Funds or Delaware-Voyageur Funds, the ``Future Funds'') (Delaware Funds, Delaware-Voyageur Funds, and Future Funds, collectively, the ``Delaware Group Funds'') and Delaware Management Company, Inc. (``DMC''), Delaware International Advisers Ltd. (``DIAL'') (together, the ``Advisers''), and Delaware Distributors, L.P. All existing entities that currently intend to rely on the order are named as applicants.

FILING DATES: The application was filedon October 27, 1997 and amended on December 16, 1997. Applicants have agreed to file an additional amendment, the substance of which is incorporated in this notice, during the notice period.

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 the 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 April 3, 1998, 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 request should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons may request notification by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. Applicants, One Commerce Square, 2005 Market Street, Philadelphia, PA 19103.

FOR FURTHER INFORMATION CONTACT: Annmarie J. Zell, Staff Attorney, at (202) 942-0532, or Christine Y. Greenlees, 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 (telephone (202) 942-8090).

Applicants' Representations

1. Delaware Group Foundation Funds (the ``Asset Allocator Fund''), a Delaware business trust, is registered under the act as an open-end management investment company and currently intends to offer three series, the Income Portfolio, the Balanced Portfolio and the Growth Portfolio (collectively, the ``Asset Allocator Portfolios''). Each Asset Allocator Portfolio will invest primarily in a combination of Delaware Group Funds (the ``Underlying Funds'') and, pursuant to the relief requested in the application, directly in individual securities, such as equity or fixed income securities and investment instruments including options and futures on securities or indices.

2. DMC, an investment adviser registered under the Investment Advisers Act of 1940, will serve as investment adviser for the Asset Allocator Portfolios. DMC will charge an investment advisory fee that will be for services that are in addition to, rather than duplicative of, advisory services provided to the Underlying Funds, including asset allocation and re-allocation among the Underlying Funds and the management of direct investments in securities or other instruments. The Asset Allocator Portfolios will invest in the institutional class of shares of the Underlying Funds. These shares will be sold to and redeemed by the Asset Allocator Portfolios without the imposition of any front-end or deferred sales charges or redemption fees and will not carry rule 12b-1 fees.

   Applicant's 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 other 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 to be owned by investment companies.

2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) will not apply to securities of an acquired company purchased by an acquiring company if: (a) The acquiring company and the acquired company are part of the same group of investment companies; (b) the acquiring company holds only securities of acquired companies that are part of the same group of investment companies, government securities, and short-term

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   paper; (c) the aggregate sales loads and distribution-related fees of the acquiring company and the acquired company are limited; and (d) 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).

3. The Asset Allocator Fund requests relief from section 12(d)(1)(G)(i)(II) to the extent necessary to permit an Asset Allocator Portfolio and any Future Funds to operate as a fund of funds within each requirement of section 12(d)(1)(G) of the Act, with the exception of the requirement that the Asset Allocator Portfolios limit their investments in individual securities to Government securities and short-term paper.

4. Section 12(d)(1)(J) provides that the SEC may exempt persons or transactions from any provision of section 12(d)(1) if and to the extent the exemption is consistent with the public interest and the protection of investors. Applicants believe that the structure of the Asset Allocator Portfolios will be substantially the same as the statutory fund of funds now permitted under section 12(d)(1)(G). Applicants also believe that Asset Allocator Portfolios' proposed direct investments in securities and instruments as described in the application do not raise any of the concerns that the requirements of section 12(d)(1)(G) were designed to address.

   Applicants' Conditions

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

1. Applicants will company with all provisions of section 12(d)(1)(G), except for section 12(d)(1)(G)(i)(II) to the extent that it restricts the Asset Allocator Portfolios from investing in individual securities or instruments described in the application.

2. Before approving any investment advisory contract for the Asset Allocator Fund under section 15 of the Act, the Board of Trustees of the Asset Allocator Fund, including a majority of the Trustees who are not ``interested persons'' as defined in section 2(a)(19) of the Act, shall find that the investment advisory fee, if any, charged under the contract is based on services provided that are in addition to, rather than duplicative of, services provided pursuant to any Underlying Fund's investment advisory contract. The finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the Asset Allocator Fund.

   For the SEC, by the Division of Investment Management, under delegated authority. Margaret H. McFarland, Deputy Secretary.

   [FR Doc. 98-6595Filed3-13-98; 8:45 am]

   BILLING CODE 8010-01-M