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 under a
distribution (12b-1) plan. The trustees also noted
that two of the trustees, Messrs. Biggar and
Robbat, were affiliates of the Advisor and the
Distributor and would benefit by the investment
advisory, administration and distribution
agreements.
It was noted that during the Board's consideration of
the factors listed above, different trustees gave
different weight to different items. In general, the
trustees considered it to be significant that the
proposed investment advisory arrangements would
assure a continuity of relationships to service the
Portfolios because of the Advisor's familiarity
with each Portfolio, its investment objectives and
policies, its portfolio composition, and the
Trust's policies regarding matters such as
brokerage allocation, record-keeping systems, and
other operational issues. The Board specifically
noted the long-standing and cooperative working
relationship between the Advisor and the Trust."
23. On page B-28 of the SAI, the Trust needs to add the Interested
Trustees to the compensation table.
The Trust has made the requested change.
24. Add the appropriate "Tandy" representations.
In responding to the SEC's comments, please note that the Trust
acknowledges and represents:
* The Trust is responsible for the adequacy and accuracy of the
disclosure in PEA No. 22;
* Staff comments or changes to disclosure in response to staff
comments in PEA No. 22, which was reviewed by the staff, does not
foreclose the Commission from taking any action with respect to
PEA No. 22; and
* The Trust may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition to the above changes, and as we discussed, the Trust
would like to impose a redemption fee. This redemption fee is
being adopted to discourage short-term trading in the Trust's
Portfolios. A 2.00% redemption fee shall be imposed on any
shares redeemed within 30 days of their initial purchase. This
redemption fee shall apply to all shareholders and accounts, but
shall only apply to shares purchased after March 1, 2005. The
redemption fee shall not apply towards shares purchased with the
reinvestment of dividends nor shall it apply to exchanges between
the various Portfolios of the Trust. The redemption fee shall
equal 2.00% of the redemption proceeds. In determining the
amount of any redemption fee, the shares having been held the
longest in the account shall be considered redeemed first.
Redemption fees shall be retained by the applicable Portfolio.
As noted above, this redemption fee is meant to prevent
short-term trading in the Portfolios and to offset any
transaction and other costs associated with short-term trading.
A copy of the Trust's disclosures (e.g., its fee table and
relevant Prospectus disclosure) is attached hereto as Appendix A.
I believe that this fully covers your comments. Please note that
the Trust will be filing a further Post-Effective Amendment to
its Registration Statement on Form N-1A ("PEA No. 23") on March
1, 2005. PEA No. 23 is being filed to: (i) incorporate by
reference the audited financial information for the Trust for its
most recent fiscal year ended October 31, 2004; (ii) add
appropriate exhibits and consents; (iii) disclose the new
redemption fee discussed above and in Appendix A; and (iv)
complete the disclosures in the Prospectus and Statement of
Additional Information.
As we have discussed, under separate cover, the Trust is filing
an acceleration request for PEA Nos. 22 and 23 (and
Post-Effective Amendment No. 22 to the Trust's Registration
Statement on Form N-1A) to accelerate their effective dates to
Tuesday, March 1, 2005. The Trust is willing to work with you
towards achieving that goal.
If you should have any questions or comments, or need any
addition information, please do not hesitate to contact me
directly at (215) 988-7815.
Very truly yours,
/s/ Terrance James Reilly
Terrance James Reilly
cc: Nicole M. Tremblay
Steven M. Felsenstein
APPENDIX A
Expenses
As an investor, you pay certain fees and expenses in connection
with the Portfolios, which are described in the table below.
There are no sales loads or exchange fees associated with an
investment in the Portfolios. Portfolio operating expenses are
paid out of the assets of each Portfolio, so their effect is
included in each Portfolio's share price.
Shareholder Fees (fees paid directly from your investment)
Alternative
Capital Balanced Aggressive International Strategies
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- ---------- ------------- -----------
Maximum Sales Charge
(Load) Imposed on
Purchases None None None None None
Maximum Deferred Sales
Charge (Load) None None None None None
Redemption Fee* 2.00% 2.00% 2.00% 2.00% 2.00%
Wire Redemption Fee** $9.00 $9.00 $9.00 $9.00 $9.00
Exchange Fee None None None None None
Annual Portfolio Operating Expenses (expenses that are deducted
from Portfolio assets)
Alternative
Capital Balanced Aggressive International Strategies
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- ---------- ------------- -----------
Management Fees 0.99%(a) 1.00%(a) 1.00%(a) 1.00%(a) 0.75%
Distribution 12b-1 Fees(b) 0.18% 0.16% 0.23% 0.22% 0.06%
Other Expenses 0.24% 0.26% 1.48% 0.52% 0.31%
--------- --------- ---------- ------------- -----------
Total Portfolio Operating
Expenses 1.41% 1.42% 2.71% 1.74% 1.12%
Fee Waivers -- -- 1.21% 0.24% --
--------- --------- ---------- ------------- -----------
Net Expenses(c) 1.41% 1.42% 1.50% 1.50% 1.12%
========= ========= ========== ============= ===========
* Effective March 1, 2005, a 2.00% redemption fee shall be
imposed on any shares redeemed within 30 days of
their initial purchase. This redemption fee shall
apply to all shareholders and accounts, but only
on the purchase of shares made after March 1,
2005. This redemption fee shall equal 2.00% of
the amount being redeemed. In determining any
redemption fee, the shares held the longest in the
account shall be considered redeemed first. Any
redemption fees shall be credited to the
applicable Portfolio. This redemption fee is
being imposed to prevent short-term trading and to
offset transaction and other costs associated with
short-term trading.
** Wire redemption fees are only imposed upon shareholders
requesting a redemption or distribution via wire.
(a) For its services to the Capital, Balanced, Aggressive and
International Portfolios, the Advisor receives a
Management Fee, computed daily and payable
monthly, at the annualized rate of 1% of such
Portfolio's average daily net assets for the first
$100 million in assets and 0.75% of the assets
exceeding that amount.
(b) Under the Trust's Rule 12b-1 Plan, each Portfolio may pay up
to 0.25% of its average daily net assets to Weston
Securities Corporation (the "Distributor"). The
Distributor has voluntarily agreed to waive
payments made by each Portfolio pursuant to the
Trust's Rule 12b-1 Plan in amounts equal to any
sales commissions or other compensation received
by the Distributor in connection with purchasing
or holding investment company shares.
(c) The Advisor has agreed to contractually limit the total
expenses (excluding interest, taxes, brokerage and
extraordinary expenses) to an annual rate of 1.50%
of the average net assets of each Portfolio until
October 31, 2005. This fee waiver may be
terminated at any time after October 31, 2005.
The Advisor is entitled to reimbursement from a
Portfolio of any fees waived pursuant to these
arrangements if such reimbursement does not cause
the Portfolio to exceed existing expense
limitations and the reimbursement is made within
three years after the year in which the Advisor
incurred the expense.
HOW TO BUY AND SELL SHARES
Pricing of Portfolio Shares
The price you pay for a share of a Portfolio is called the
Portfolio's net asset value (the "NAV"). Generally, the price
you receive upon selling or redeeming a share of a Portfolio is
its NAV; except that, the redemption of shares held for less than
30 days from the date of initial purchase will be subject to a
redemption fee of 2.00% of the redemption proceeds. The NAV is
calculated by taking the total value of a Portfolio's assets,
subtracting its liabilities, and then dividing by the number of
shares that have already been issued. This is a standard
calculation, and forms the basis for all transactions involving
buying, selling, exchanging or reinvesting shares. The NAV is
generally calculated as of the close of trading on the New York
Stock Exchange (usually 4:00 p.m. Eastern time) every day the
Exchange is open. Your order will be priced at the next NAV
calculated after the Portfolios' transfer agent, Ultimus Fund
Solutions, LLC ("Ultimus," or the "Transfer Agent"), receives
your order in proper form. Each Portfolio's investments are
valued based on market value, or where market quotations are not
readily available, based on fair value as determined in good
faith by the Trust's Board of Trustees. The Portfolios may use
pricing services to determine market value. Each Portfolio's NAV
is calculated based upon the net asset values of the underlying
funds in which such Portfolio invests. The prospectuses for the
underlying funds explain the circumstances under which those
registered investment companies will use fair value pricing and
the effects of using fair value pricing.
Additional Redemption Information
Payment of Redemption Proceeds. You may redeem shares on any day
that the Portfolios are open for business. Your shares will be
sold at the next NAV per share calculated after the Transfer
Agent receives your order in proper form. A 2.00% redemption
fee shall be imposed on any shares redeemed within 30 days of
their initial purchase. This redemption fee shall apply to all
shareholders and accounts, but shall only apply to shares
purchased after March 1, 2005. The redemption fee shall not
apply towards shares purchased with the reinvestment of dividends
nor shall it apply to exchanges between the various Portfolios of
the Trust. The redemption fee shall equal 2.00% of the
redemption proceeds. In determining the amount of any redemption
fee, the shares having been held the longest in the account shall
be considered redeemed first. Redemption fees shall be retained
by the applicable Portfolio. This redemption fee is meant to
prevent short-term trading in the Portfolios and to offset any
transaction and other costs associated with short-term trading.
Your order will be processed promptly and you will receive the
proceeds within seven days after receiving your properly
completed request. Payment of the redemption proceeds for shares
of the Portfolios where you request wire payment will normally be
made in federal funds on the next business day.
Before selling recently purchased shares, please note that if the
Transfer Agent has not yet collected payment for the shares you
are selling, it may delay sending the proceeds for up to 10
calendar days. This procedure is intended to protect the
Portfolios and their shareholders from loss.
Frequent Purchases and Redemptions of Shares
The Portfolios are intended as long-term investment vehicles and
not to provide a means of speculating on short-term market
movements. The Board of Trustees of the Trust have adopted
policies and procedures to detect and prevent frequent and
abusive trading practices by shareholders. Such frequent trading
is commonly referred to as "market timing." 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. It is the policy
of the Trust not to permit market timing, by any shareholder, in
its Portfolios.
The Trust currently considers excessive trading to involve more
than six purchases followed by redemptions (or vice versa) within
one calendar year. If such market timing is detected within an
account (or accounts) held by a shareholder, it is the policy of
the Trust to issue warnings to the account, restrict future
account activity and reject future purchases from such
shareholder. If the account is subsequently redeemed, the
shareholder will not be permitted to make future purchases or
open new accounts.
In an effort to deter market timing or other abusive trading
activities, the Trust has adopted a redemption fee. A 2.00%
redemption fee shall be imposed on any shares redeemed within 30
days of their initial purchase. This redemption fee shall apply
to all shareholders and accounts, but shall only apply to shares
purchased after March 1, 2005. The redemption fee shall not
apply towards shares purchased with the reinvestment of dividends
nor shall it apply to exchanges between the various Portfolios of
the Trust. The redemption fee shall equal 2.00% of the
redemption proceeds. In determining the amount of any redemption
fee, the shares having been held the longest in the account shall
be considered redeemed first. Redemption fees shall be retained
by the applicable Portfolio. This redemption fee is meant to
prevent short-term trading in the Portfolios and to offset any
transaction and other costs associated with short-term trading.
The Trust has delegated to its Transfer Agent the primary
responsibility for monitoring excessive trading and money flows
within its Portfolios. However, the Advisor also periodically
monitors shareholder trades to determine if frequent trading
activity is occurring.
The Trust also has these policies and procedures in place to
detect and deter market timing activities through its exchange
privilege.
These policies and procedures have been developed to prevent
market timing by any shareholder. The Trust's market timing
policies and procedures apply uniformly to all shareholder
accounts. However, it may be difficult to determine frequent and
abusive trading within certain types of shareholder accounts,
such as those held by a broker-dealer in street name or by a
mutual fund supermarket in an omnibus shareholder account.