SEC Company Response from NEW CENTURY PORTFOLIOS (CIK 0000838802) — Feb 28, 2005
NEW CENTURY PORTFOLIOS (CIK 0000838802)
Date: Feb. 28, 2005 · CIK: 0000838802 · Accession: 0000928816-05-000339
AI Filing Summary & Sentiment
File numbers found in text: 811-5646
Letter
February 28, 2005 VIA EDGAR TRANSMISSION Christian T. Sandoe U.S. Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, DC 20549
Re: New Century Portfolios (the "Trust") SEC File Nos. 33-24041/811-5646
Dear Mr. Sandoe:
On January 3, 2005, the Trust filed Post-Effective Amendment No. 22 to its Registration Statement on Form N-1A with the U.S. Securities and Exchange Commission (the "SEC"). PEA No. 22 was filed to comply with the SEC's new disclosure requirements concerning: (i) market timing policies; (ii) fair value pricing; and (iii) selective disclosure of portfolio holdings. The following letter responds to your comments to PEA No. 22, as discussed in our telephone call of January 17, 2005. Your comments are in italics and the Trust's response follows below.
1. On the Cover Page of the Prospectus, under the Aggressive Portfolio, the Trust needs to add language similar to that contained on page 2 of the Prospectus that indicates that the Aggressive Portfolio may also invest in other investment companies that seek appreciation by investing in a portfolio of debt securities, or delete such reference on page 2.
The Trust has complied with this comment. The Trust has added the following sentence to its Cover Page: "The Aggressive Portfolio may also invest in shares of registered investment companies that seek appreciation by investing in fixed income securities, including high-yield, lower rated debt securities."
2. On page 3 of the Prospectus, under paragraph three of the section on the International Portfolio, the Trust needs to add language that indicates that the underlying funds will invest in securities that are tied economically to a number of countries throughout the world.
The Trust has complied with this comment. The Trust has added the following language to Page 3 of the Prospectus: "The International Portfolio, through its investments in underlying funds, will have exposure to the securities of issuers located in at least three different countries outside of the U.S."
3. On page 3 of the Prospectus, under paragraph four of the section on the International Portfolio, the Trust needs to add disclosure defining what constitutes a "small-capitalization" security.
The Trust has complied with this comment. The Trust has added the following language to Page 3 of the Prospectus: "Small-capitalization" refers to underlying funds that invest in the securities of issuers with a total market capitalization of less than $1 billion.
4. On pages 4 to 6 of the Prospectus, under the various risk disclosures, the SEC wants the Trust to state which risk applies to which Portfolio. If the risks apply to all Portfolios, then add a statement to that effect under "Risks in General."
The Trust has complied with this comment. Most of the risks apply to all Portfolios and the Trust added to its introductory risk paragraph that: "Unless otherwise noted, each risk factor below applies to each of the Portfolios."
A few of the risks only applied to certain Portfolios and those risks now contain specific reference to the applicable Portfolios.
5. PEA No. 22 was filed without financial or performance information. For computer bar chart purposes, it used a "plug" number of 0.00%. For future filings, the SEC asked that the Trust not use 0.00%. They would rather see it blank.
The Trust has added 2004 performance information. In future filings it will not use a plug number.
6. On Page 14 of the Prospectus, the Operating Expenses for the Capital Portfolio are wrong. Total expenses should be 1.41% (to tie into the Financial Highlights table) but the numbers the Trust gave add up to 1.40%.
This has been corrected by increasing "Other Expenses" by 0.01%.
7. On Page 15 of the Prospectus, under the Expense Example for the Aggressive and International Portfolios, the SEC thinks that the Trust should not include the expense cap in the 1 Year numbers since the expense cap only runs through October 31, 2005.
The change you requested to the 1 Year Expense Example has been made.
8. On Page 29 of the Prospectus, under "Frequent Purchases and Redemptions of Shares," the SEC wants more specific disclosure concerning the risks involved with market timing.
The Trust has complied with this comment. The Trust has added the following disclosure: "Market timing may disrupt portfolio management strategies, harm the performance of a Portfolio, dilute the value of a Portfolio's shares held by long-term shareholders, increase brokerage and administrative costs, and generate taxable consequences by causing a Portfolio to sell securities to meet redemption request."
9. On Page 29 of the Prospectus, under "Frequent Purchases and Redemptions of Shares," the SEC asked the Trust to explain the legal analysis whereby the Trust could involuntarily redeem a market timer's account.
We agree that the Trust cannot involuntarily redeem such accounts but can restrict them from future purchases and, if they subsequently redeem, not allow them to repurchase into a Portfolio. The language has been amended to reflect this change.
10. On Page 29 of the Prospectus, under "Frequent Purchases and Redemptions of Shares," the SEC asked the Trust to delete the word "similar" from the second paragraph.
The language has been amended to reflect this change.
11. On Page 29 of the Prospectus, under "Frequent Purchases and Redemptions of Shares," the SEC asked for a statement whether the Trust's market timing policy was applied uniformly over all customer accounts.
The Trust's market timing policy does apply uniformly to all shareholder accounts. The following disclosure was added: "The Trust's market timing policies and procedures apply uniformly to all shareholder accounts."
12. On Page 29 of the Prospectus, under "Frequent Purchases and Redemptions of Shares," the SEC asked the Trust to describe any circumstances under which the market timing restrictions will not be imposed.
The Trust's market timing policy is applied uniformly to all accounts. There are no accounts that would not be subject to such policy.
13. On Pages B-15 to B-16 of the Statement of Additional Information (the "SAI"), the SEC asked the Trust to identify, with specificity, any arrangements to disclose Portfolio Holdings.
The Trust has made the requested change.
14. On Pages B-15 to B-16 of the SAI, under No. 3, the SEC wants to know specifically who the Trust would disclose to, such as another fund's investment adviser, a broker arranging the sale of the current adviser, etc. Similarly, for No. 6, the SEC wants to know specifically who would get redeemed in-kind.
The Trust has made the requested change. Number 3 has been amended to read: "If ever applicable, to another investment adviser or its independent certified public accountants solely for the purpose of due diligence regarding a merger or acquisition."
After discussions with the Trust, Number 6 was deleted.
15. On Pages B-15 to B-16 of the SAI, under Nos. 4-5, the SEC wants to know specifically who the Trust would disclose to (i.e., what rating agencies or service providers). If the Trust has no current agreements to disclose to ratings agencies, proxy voting service providers, portfolio management database providers, etc., then the Trust should state that there are no current arrangements but reserve the right, in the future, to disclose to such entities.
The Trust has made the requested change. Number 4 was amended to read: "To the following ratings and performance tracking agencies: Vicker's Stock Research, S & P, Morningstar, Inc., Bloomberg and Lipper, on a monthly basis, for use in developing a rating for a Portfolio."
For Number 5, there are currently no such specific arrangements in place. The language was amended to read: "To service providers, such as proxy voting service providers and portfolio-management database providers in connection with their providing services benefiting the Trust, although no such arrangements currently exist."
16. On Page B-16 of the SAI, under the first sentence of the first full paragraph, the SEC wants the Trust to expand the disclosure on the idea of restricting "the use of such information."
The Trust has made the requested change. After reviewing the Trust's relationships, it was determined that no confidentiality agreements currently exist. The Trust has amended the disclosure to read as follows: "In all instances of such non-standard disclosure, the receiving party will be instructed that such information must be kept confidential and that no trading on such information should be allowed."
17. On Page B-16 of the SAI, under the first paragraph, the SEC wants a description of any policies to monitor the use of this information.
The Trust has made the requested change. The Trust has amended the disclosure to read as follows: "The Board has reviewed and approved the list below of entities that may receive portfolio holdings information prior to and more frequently than the public disclosure of such information ("non-standard disclosure"). The Board has also delegated authority to the Trust's President to provide such information in certain circumstances (as described below). The Board is also notified of, and reviews any requests for non-standard disclosure approved by the Trust's President."
18. On Page B-16 of the SAI, the SEC wants a description of any procedures that the Trust uses to ensure that the disclosure of portfolio information is in the best interests of shareholders.
As noted in the disclosure, the Trust currently only releases portfolio information in very limited instances (e.g., its service agents, regulatory filings, advertising, to performance or ratings agencies, etc.) and has drafted procedures to deal with other situations that don't currently exist (e.g., another adviser that would be purchasing the Trust's current adviser or a proxy voting service, etc.). It has no other arrangements to, and does not, provide non-standard disclosures to any other party. The President of the Trust is authorized to consider such requests from others, but must promptly provide the Board with notice if he approves any request. In addition, if any appearance of a conflict exists, there is a procedure, described in the SAI, that states:
"There may be instances where the interests of the Trust's shareholders respecting the disclosure of information about portfolio holdings may conflict or appear to conflict with the interests of the Advisor, any principal underwriter for the Trust or an affiliated person of the Trust (including such affiliated person's investment adviser or principal underwriter). In such situations, the conflict must be disclosed to the Board of Trustees of the Trust, and the Board must be afforded the opportunity to determine whether or not to allow such disclosure."
19. On Page B-16 of the SAI, the SEC wants a description of the manner in which the Board exercises oversight of disclosure of the Trust's portfolio securities.
The Trust has made the requested change. The Trust has amended the disclosure to read as follows:
"The Trust maintains written policies and procedures regarding the disclosure of its portfolio holdings to ensure that disclosure of information about portfolio securities is in the best interests of a Portfolio's shareholders. The Board of Trustees reviews these policies and procedures on an annual basis. In addition, the Board has reviewed and approved the list below of entities that may receive portfolio holdings information prior to and more frequently than the public disclosure of such information ("non-standard disclosure"). The Board has also delegated authority to the Trust's President to provide such information in certain circumstances (as described below). The Board is also notified of, and reviews any requests for non-standard disclosure approved by the Trust's President."
20. On page B-25 of the SAI, the SEC asked that the Trust add the heading "Non-Interested Trustees" to the Trustees and Officers chart.
The Trust has made the requested change.
21. On pages B-25 and B-26 of the SAI, for Mr. Diorio and Ms. Tremblay, the SEC asked for a better description under "Principal Occupation(s) During the Past 5 Years and Other Directorships" than the term "consultant."
The Trust has made the requested change. Mr. Diorio was a CPA consulting with others. Ms. Tremblay was a "legal consultant," which reflects the fact that she was an attorney but was waiting for the results of her bar examination.
22. On page B-28 of the SAI, the SEC wants the Trust to revise the paragraph describing the approval of the investment advisory agreement to relate the factors considered to the specific circumstances of the Portfolios.
The Trust has made the requested change. The disclosure was amended to read (for your convenience, I've marked it to reflect changes from the version you commented upon):
"Approval of the Investment Advisory Agreements. The Board of Trustees most recently approved the terms and conditions of the Investment Advisory Agreements between the Advisor and the Trust, on behalf of the New Century Capital, New Century Balanced, New Century Aggressive, New Century International and New Century Alternative Strategies Portfolios, at a meeting held on September 23, 2004. At the meeting, the trustees considered, among other things, the terms and conditions of each agreement, the quality and scope of the investment advisory services received from the Advisor in the past and which were expected to continue in the future, the Advisor's personnel assigned to service the Portfolios, the unique aspects of the Advisor's operations, the fees paid by each Portfolio and in relation to similar funds within the industry, the expense limitation agreements with respect to the Portfolios, and information concerning the performance of each Portfolio. The trustees noted that the Portfolios had been performing competitively in the industry and were pleased with their results. In addition, the trustees stated that the fees and expenses of the Portfolios were deemed to be fair and reasonable based on the information provided at the meeting with respect to other funds in the industry. The trustees also reviewed and discussed other aspects of the Advisor, such as the profitability of the investment adviser, the relationship between the Trust and the Advisor, including the benefits each party received from such long term relationship, and the fact that the Advisor and its affiliates received other compensation from the relationship such as fees as administrator and fees unde
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GREENBERG TRAURIG, LLP
2700 Two Commerce Square
2001 Market Street
Philadelphia, PA 19103
Phone: (215) 988-7800
Facsimile: (215) 988-7801
Terrance James Reilly, Esq.
Direct Dial: (215) 988-7815
E-mail: reillyte@gtlaw.com
February 28, 2005
VIA EDGAR TRANSMISSION
Christian T. Sandoe
U.S. Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: New Century Portfolios (the "Trust")
SEC File Nos. 33-24041/811-5646
Dear Mr. Sandoe:
On January 3, 2005, the Trust filed Post-Effective Amendment No. 22 to
its Registration Statement on Form N-1A with the U.S. Securities and
Exchange Commission (the "SEC"). PEA No. 22 was filed to comply with
the SEC's new disclosure requirements concerning: (i) market timing
policies; (ii) fair value pricing; and (iii) selective disclosure of
portfolio holdings. The following letter responds to your comments to
PEA No. 22, as discussed in our telephone call of January 17, 2005.
Your comments are in italics and the Trust's response follows below.
1. On the Cover Page of the Prospectus, under the Aggressive
Portfolio, the Trust needs to add language similar to
that contained on page 2 of the Prospectus that
indicates that the Aggressive Portfolio may also invest
in other investment companies that seek appreciation by
investing in a portfolio of debt securities, or delete
such reference on page 2.
The Trust has complied with this comment. The Trust has added the
following sentence to its Cover Page: "The Aggressive
Portfolio may also invest in shares of registered
investment companies that seek appreciation by
investing in fixed income securities, including
high-yield, lower rated debt securities."
2. On page 3 of the Prospectus, under paragraph three of the section
on the International Portfolio, the Trust needs to add
language that indicates that the underlying funds will
invest in securities that are tied economically to a
number of countries throughout the world.
The Trust has complied with this comment. The Trust has added the
following language to Page 3 of the Prospectus: "The
International Portfolio, through its investments in
underlying funds, will have exposure to the securities
of issuers located in at least three different
countries outside of the U.S."
3. On page 3 of the Prospectus, under paragraph four of the section on
the International Portfolio, the Trust needs to add
disclosure defining what constitutes a
"small-capitalization" security.
The Trust has complied with this comment. The Trust has added the
following language to Page 3 of the Prospectus:
"Small-capitalization" refers to underlying funds that
invest in the securities of issuers with a total market
capitalization of less than $1 billion.
4. On pages 4 to 6 of the Prospectus, under the various risk
disclosures, the SEC wants the Trust to state which
risk applies to which Portfolio. If the risks apply to
all Portfolios, then add a statement to that effect
under "Risks in General."
The Trust has complied with this comment. Most of the risks apply to
all Portfolios and the Trust added to its introductory
risk paragraph that: "Unless otherwise noted, each risk
factor below applies to each of the Portfolios."
A few of the risks only applied to certain Portfolios and those risks
now contain specific reference to the applicable
Portfolios.
5. PEA No. 22 was filed without financial or performance information.
For computer bar chart purposes, it used a "plug"
number of 0.00%. For future filings, the SEC asked
that the Trust not use 0.00%. They would rather see it
blank.
The Trust has added 2004 performance information. In future filings
it will not use a plug number.
6. On Page 14 of the Prospectus, the Operating Expenses for the
Capital Portfolio are wrong. Total expenses should be
1.41% (to tie into the Financial Highlights table) but
the numbers the Trust gave add up to 1.40%.
This has been corrected by increasing "Other Expenses" by 0.01%.
7. On Page 15 of the Prospectus, under the Expense Example for the
Aggressive and International Portfolios, the SEC thinks
that the Trust should not include the expense cap in
the 1 Year numbers since the expense cap only runs
through October 31, 2005.
The change you requested to the 1 Year Expense Example has been made.
8. On Page 29 of the Prospectus, under "Frequent Purchases and
Redemptions of Shares," the SEC wants more specific
disclosure concerning the risks involved with market
timing.
The Trust has complied with this comment. The Trust has added the
following disclosure: "Market timing may disrupt
portfolio management strategies, harm the performance
of a Portfolio, dilute the value of a Portfolio's
shares held by long-term shareholders, increase
brokerage and administrative costs, and generate
taxable consequences by causing a Portfolio to sell
securities to meet redemption request."
9. On Page 29 of the Prospectus, under "Frequent Purchases and
Redemptions of Shares," the SEC asked the Trust to
explain the legal analysis whereby the Trust could
involuntarily redeem a market timer's account.
We agree that the Trust cannot involuntarily redeem such accounts but
can restrict them from future purchases and, if they
subsequently redeem, not allow them to repurchase into
a Portfolio. The language has been amended to reflect
this change.
10. On Page 29 of the Prospectus, under "Frequent Purchases and
Redemptions of Shares," the SEC asked the Trust to
delete the word "similar" from the second paragraph.
The language has been amended to reflect this change.
11. On Page 29 of the Prospectus, under "Frequent Purchases and
Redemptions of Shares," the SEC asked for a statement
whether the Trust's market timing policy was applied
uniformly over all customer accounts.
The Trust's market timing policy does apply uniformly to all
shareholder accounts. The following disclosure was
added: "The Trust's market timing policies and
procedures apply uniformly to all shareholder
accounts."
12. On Page 29 of the Prospectus, under "Frequent Purchases and
Redemptions of Shares," the SEC asked the Trust to
describe any circumstances under which the market
timing restrictions will not be imposed.
The Trust's market timing policy is applied uniformly to all accounts.
There are no accounts that would not be subject to
such policy.
13. On Pages B-15 to B-16 of the Statement of Additional Information
(the "SAI"), the SEC asked the Trust to identify, with
specificity, any arrangements to disclose Portfolio
Holdings.
The Trust has made the requested change.
14. On Pages B-15 to B-16 of the SAI, under No. 3, the SEC wants to
know specifically who the Trust would disclose to, such
as another fund's investment adviser, a broker
arranging the sale of the current adviser, etc.
Similarly, for No. 6, the SEC wants to know
specifically who would get redeemed in-kind.
The Trust has made the requested change. Number 3 has been
amended to read: "If ever applicable, to another investment
adviser or its independent certified public accountants
solely for the purpose of due diligence regarding a
merger or acquisition."
After discussions with the Trust, Number 6 was deleted.
15. On Pages B-15 to B-16 of the SAI, under Nos. 4-5, the SEC wants to
know specifically who the Trust would disclose to
(i.e., what rating agencies or service providers). If
the Trust has no current agreements to disclose to
ratings agencies, proxy voting service providers,
portfolio management database providers, etc., then the
Trust should state that there are no current
arrangements but reserve the right, in the future, to
disclose to such entities.
The Trust has made the requested change. Number 4 was
amended to read: "To the following ratings and performance
tracking agencies: Vicker's Stock Research, S & P,
Morningstar, Inc., Bloomberg and Lipper, on a monthly
basis, for use in developing a rating for a Portfolio."
For Number 5, there are currently no such specific arrangements in
place. The language was amended to read: "To service
providers, such as proxy voting service providers and
portfolio-management database providers in connection
with their providing services benefiting the Trust,
although no such arrangements currently exist."
16. On Page B-16 of the SAI, under the first sentence of the first
full paragraph, the SEC wants the Trust to expand the
disclosure on the idea of restricting "the use of such
information."
The Trust has made the requested change. After reviewing
the Trust's relationships, it was determined that no
confidentiality agreements currently exist. The Trust
has amended the disclosure to read as follows: "In all
instances of such non-standard disclosure, the
receiving party will be instructed that such
information must be kept confidential and that no
trading on such information should be allowed."
17. On Page B-16 of the SAI, under the first paragraph, the SEC wants
a description of any policies to monitor the use of
this information.
The Trust has made the requested change. The Trust has
amended the disclosure to read as follows: "The Board has
reviewed and approved the list below of entities that may
receive portfolio holdings information prior to and
more frequently than the public disclosure of such
information ("non-standard disclosure"). The Board has
also delegated authority to the Trust's President to
provide such information in certain circumstances (as
described below). The Board is also notified of, and
reviews any requests for non-standard disclosure
approved by the Trust's President."
18. On Page B-16 of the SAI, the SEC wants a description of any
procedures that the Trust uses to ensure that the
disclosure of portfolio information is in the best
interests of shareholders.
As noted in the disclosure, the Trust currently only releases
portfolio information in very limited instances (e.g.,
its service agents, regulatory filings, advertising, to
performance or ratings agencies, etc.) and has drafted
procedures to deal with other situations that don't
currently exist (e.g., another adviser that would be
purchasing the Trust's current adviser or a proxy
voting service, etc.). It has no other arrangements
to, and does not, provide non-standard disclosures to
any other party. The President of the Trust is
authorized to consider such requests from others, but
must promptly provide the Board with notice if he
approves any request. In addition, if any appearance
of a conflict exists, there is a procedure, described
in the SAI, that states:
"There may be instances where the interests of the Trust's
shareholders respecting the disclosure of information
about portfolio holdings may conflict or appear to
conflict with the interests of the Advisor, any
principal underwriter for the Trust or an affiliated
person of the Trust (including such affiliated person's
investment adviser or principal underwriter). In such
situations, the conflict must be disclosed to the Board
of Trustees of the Trust, and the Board must be
afforded the opportunity to determine whether or not to
allow such disclosure."
19. On Page B-16 of the SAI, the SEC wants a description of the manner
in which the Board exercises oversight of disclosure of
the Trust's portfolio securities.
The Trust has made the requested change. The Trust has amended the
disclosure to read as follows:
"The Trust maintains written policies and procedures regarding the
disclosure of its portfolio holdings to ensure that
disclosure of information about portfolio securities is
in the best interests of a Portfolio's shareholders.
The Board of Trustees reviews these policies and
procedures on an annual basis. In addition, the Board
has reviewed and approved the list below of entities
that may receive portfolio holdings information prior
to and more frequently than the public disclosure of
such information ("non-standard disclosure"). The
Board has also delegated authority to the Trust's
President to provide such information in certain
circumstances (as described below). The Board is also
notified of, and reviews any requests for non-standard
disclosure approved by the Trust's President."
20. On page B-25 of the SAI, the SEC asked that the Trust add the
heading "Non-Interested Trustees" to the Trustees and
Officers chart.
The Trust has made the requested change.
21. On pages B-25 and B-26 of the SAI, for Mr. Diorio and Ms.
Tremblay, the SEC asked for a better description under
"Principal Occupation(s) During the Past 5 Years and
Other Directorships" than the term "consultant."
The Trust has made the requested change. Mr. Diorio was a CPA
consulting with others. Ms. Tremblay was a "legal
consultant," which reflects the fact that she was an
attorney but was waiting for the results of her bar
examination.
22. On page B-28 of the SAI, the SEC wants the Trust to revise the
paragraph describing the approval of the investment
advisory agreement to relate the factors considered to
the specific circumstances of the Portfolios.
The Trust has made the requested change. The disclosure was
amended to read (for your convenience, I've marked
it to reflect changes from the version you
commented upon):
"Approval of the Investment Advisory Agreements. The Board of
Trustees most recently approved the terms and
conditions of the Investment Advisory Agreements
between the Advisor and the Trust, on behalf of the
New Century Capital, New Century Balanced, New
Century Aggressive, New Century International and
New Century Alternative Strategies Portfolios, at a
meeting held on September 23, 2004. At the
meeting, the trustees considered, among other
things, the terms and conditions of each agreement,
the quality and scope of the investment advisory
services received from the Advisor in the past and
which were expected to continue in the future, the
Advisor's personnel assigned to service the
Portfolios, the unique aspects of the Advisor's
operations, the fees paid by each Portfolio and in
relation to similar funds within the industry, the
expense limitation agreements with respect to the
Portfolios, and information concerning the
performance of each Portfolio. The trustees noted
that the Portfolios had been performing
competitively in the industry and were pleased with
their results. In addition, the trustees stated
that the fees and expenses of the Portfolios were
deemed to be fair and reasonable based on the
information provided at the meeting with respect to
other funds in the industry. The trustees also
reviewed and discussed other aspects of the
Advisor, such as the profitability of the
investment adviser, the relationship between the
Trust and the Advisor, including the benefits each
party received from such long term relationship,
and the fact that the Advisor and its affiliates
received other compensation from the relationship
such as fees as administrator and fees unde