[Federal Register Volume 63, Number 219 (Friday, November 13, 1998)]
[Notices]
[Pages 63518-63519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30405]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23526; 812-11292]
Simms Funds, et al.; Notice of Application
November 6, 1998.
agency: Securities and Exchange Commission (``SEC'').
action: Notice of application under section 17(b) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 17(a) of
the Act.
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summary of application: The requested order would permit certain
limited partnerships to transfer their assets and liabilities to
corresponding series of a new registered open-end management investment
company in exchange for the series' shares.
applicants: Simms Funds (``Trust''), Simms Capital Management, Inc.
(``Simms Capital''), Simms Partners (U.S.) L.P. (``U.S. Partnership''),
Simms Partners (International) L.P. (``International Partnership'')
(collectively, the ``Partnerships''), Robert A. Simms (``Simms''), and
Thomas L. Melly (``Melly'').
filing dates: The application was filed on September 3, 1998 and
amended on October 26, 1998. Applicants will amend the application
during the notice period, the substance of which as been included in
this notice.
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
request should be received by the SEC by 5:30 p.m. on November 27,
1998, and should 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 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, 55 Railroad Avenue, Greenwich, CT, 06830.
for further information contact: Deepak T. Pai, Attorney Adviser, at
(202) 942-0574, or Edward P. Macdonald, 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, 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. no. 202-942-8090).
Applicant's Representations
1. The Trust, a Delaware business trust, is registered under the
Act as an open-end management investment company. The Trust initially
will offer three portfolios, two of which (``Funds'') will correspond
to the partnerships in terms of investment objectives and policies. The
two Funds are the U.S. Equity Fund and the International Equity Fund.
2. The Partnerships were organized as Delaware limited partnerships
on July 1, 1996, and are not registered under the Act in reliance on
section 3(c)(1) of the Act.
3. Simms Capital serves as the managing general partner of the
Partnerships. Simms Capital is registered under the Investment Advisers
Act of 1940 (``Advisers Act'').
4. Simms is President and Chief Executive Officer of Simms Capital.
Simms also serves as a trustee of the Trust and is a general partner of
each Partnership. Melly, a principal of Simms Capital and a limited
partner of each Partnership, also serves as a trustee
[[Page 63519]]
of the Trust. As of September 30, 1998, Simms' interests in the U.S.
Partnership and International Partnership were 9.9% and 10./9%,
respectively. Melly's interests in the U.S. Partnership and
International Partnership were 14.83% and 35.24%, respectively.
5. Applicants propose that, pursuant to an Agreement and Plan of
Reorganization (``Plan''), each Partnership would transfer to the
corresponding Fund all of its assets and liabilities, in exchange for
shares of the Fund, and distribute the Fund shares received to the
partners of the Partnership in liquidation of the Partnership
(``Reorganization''). Following each Reorganization, the partners of
each Partnership will constitute all of the holders of the
corresponding Fund (except for shares representing seed capital). Fund
shares delivered to the Partnerships will have an aggregate net asset
value (``NAV'') equal to the NAV of the assets transferred by the
Partnerships to the Funds. Each Reorganization is expected to close on
or about December 1, 1998. The expenses of each Reorganization will be
borne by Simms Capital.
6. On September 14, 1998, the board of trustees of the Trust
(``Board''), including a majority of the disinterested trustees,
approved the Reorganizations as in the best interest of the Funds and
their shareholders. The Board concluded that: (a) the Reorganizations
are desirable as a business matter from the point of view of the Trust;
(b) the terms of each Reorganization are reasonable and fair, do not
involve overreaching on the part of any person concerned, and are
consistent with the policies of the Funds; and (c) the interests of the
existing shareholders of the Funds will not be diluted as a result of
the Reorganizations. Among other things, the Board considered the
possibility of adverse tax consequences to future shareholders of the
Funds resulting from the carrying forward of unrealized capital gains
from the Partnerships to the Funds. These findings, and the basis upon
which the findings were made, have been fully recorded in the minute
book of the Trust.
7. Simms Capital has determined that it would be in the best
interests of each Partnership to enter into the Reorganizations.
Accordingly, Simms Capital will execute the Plan on behalf of each
Partnership and will notify each limited partner of its actions. Simms
Capital also will provide each limited partner with a copy of the
corresponding Fund's prospectus or preliminary prospectus, and will
allow ample time for any limited partner who does not want to become a
shareholder of the corresponding Fund to liquidate their partnership
interest prior to the Reorganization.
8. Each Reorganization will not be effected until: (a) the Trust's
registration statement on Form N-1A is effective; (b) the SEC has
issued the requested order; and (c) the Trust and the Partnerships have
received an opinion of counsel that no gain or loss will be recognized
by the Funds upon the transfer of the Partnerships' assets and the
Funds' assumption of the Partnerships' liabilities.
Applicants' Legal Analysis
1. Section 17(a) of the Act prohibits any affiliated person of a
registered investment company, or any affiliated person of that person,
acting as principal, from selling to or purchasing from the registered
investment company any security or other property. Section 2(a)(3) of
the Act defines an ``affiliated person'' as, among other things, any
person directly or indirectly controlling, controlled by, or under
common control with, the other person; any officer, director, partner,
copartner or employee of the other person; or, if the other person is
an investment company, its investment adviser. Under section 2(a)(9) of
the Act a person who owns 25% or more of the outstanding voting
securities of a company is presumed to control such a company.
2. Applicants state that each partnership, Simms Capital (as
managing general partner of the Partnerships), Simms (as general
partner of the Partnerships), and Melly are affiliated persons of the
Trust or affiliated persons of an affiliated person of the Trust
because: (a) the Partnerships and the Trust may be deemed to be under
the control of Simms Capital and Simms; and (b) Melly, a trustee of the
Trust, may be deemed to control the International Partnership because
he owns more than 25% of that partnership. Thus, applicants state that
the proposed Reorganizations may be deemed to be prohibited under
section 17(a) of the Act.
3. Rule 17a-7 exempts certain purchase and sale transactions
otherwise prohibited by section 17(a) if an affiliation exists solely
by reason of having a common investment adviser, common directors, and/
or common officers, provided, among other requirements, that the
transaction involves a cash payment against prompt delivery of a
security. Applicants state that the relief provided by rule 17a-7 may
not be available for the Reorganization because the Reorganization will
be effected on a basis other than cash. Applicants also state that
Simms and Melly, trustees of the Trust, are deemed to be affiliated
persons of the partnerships because they own, control, or hold with
power to vote, individually, 5% or more of each partnership. As a
result, applicants state that the Funds and the partnerships are
affiliated in a manner other than that stated in rule 17a-7.
4. Section 17(b) of the Act authorizes the SEC to exempt any person
from the provisions of section 17(a) if the terms of the transaction,
including the consideration to be paid or received, are reasonable and
fair and do not involve overreaching on the part of any person
concerned and the proposed transaction is consistent with the policy of
each registered investment company concerned and the general purposes
of the Act.
5. Applicants state that each Reorganization satisfies the
requirements of section 17(b). Applicants state that because Fund
shares will be issued to the Partnerships and their partners at NAV
their interests will not be diluted. Applicants also state that the
investment objectives and policies of each Fund are substantially
similar to its corresponding Partnership and after the Reorganization
partners of the Partnerships will hold substantially the same assets as
Fund shareholders as they held as partners. Applicants also state that
the Trust's Board, including a majority of the disinterested trustees,
has approved the Reorganizations, and that each Reorganization will
comply with rule 17a-7(b) through (f).
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the condition:
1. The Reorganizations will comply with the terms of rule 17a-7(b)
through (f).
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-30405 Filed 11-12-98; 8:45 am]
BILLING CODE 8010-01-M
