[Federal Register Volume 64, Number 229 (Tuesday, November 30, 1999)]
[Notices]
[Pages 66944-66945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31032]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 24157; 812-11796]
The Alger Fund, et al.; Notice of Application
November 23, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under sections 6(c) and 17(b) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
section 17(a) of the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit
redemptions in-kind of shares of certain registered investment
companies by certain shareholders who are affiliated persons of the
investment companies.
APPLICANTS: The Alger Fund, The Alger American Fund, The Alger
Retirement Fund, Spectra Alger Management, Inc. (together, the
``Funds''), and Fred Alger Management, Inc. (the `'Adviser'').
FILING DATE: The application was filed on October 5, 1999. Applicants
have agreed to file an amendment during the notice period, the
substance of which is reflected in this notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on December 20, 1999, 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 Commission's Secretary.
ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC
20549-0609; Applicants: c/o Gregory S. Duch, Fred Alger Management,
Inc., One World Trade Center, Suite 9333, New York, NY 10048.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 942-0574 or Michael W. Mundt, 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 at the
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington,
DC 20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. Each of the Funds is registered under the Act as an open-end
management investment company and is organized as a Massachusetts
business trust. The Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940 and serves as investment
adviser to each Fund.
2. The prospectus of each of the Funds provides that, if the board
of trustees (``Board'') of the Fund determines that cash payments would
be detrimental to the interests of remaining shareholders, any request
for redemption of the Fund's shares may be honored by making payment in
whole or in part in securities. The payment would be made on a pro rata
basis, monitored by the Adviser, with the securities valued in the same
manner as they would be for purposes of computing the Fund's net asset
value. Each of the Funds also has elected to be governed by rule 18f-1
under the Act. This redemption procedure presently applies to all
shareholders other than shareholders who are ``affiliated persons'' of
the Funds within the meaning of section 2(a)(3) of the Act (``Non-
Covered Shareholders'').
3. Applicants request relief to permit the Funds to satisfy
redemption requests made by shareholders who are ``affiliated persons''
of a Fund solely within the meaning of section 2(a)(3)(A) of the Act
(``Covered Shareholders'') because they own 5% or more of the Fund's
outstanding shares by distributing portfolio securities in-kind.\1\
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\1\ Applicants request that the relief extend to any registered
open-end management investment company created in the future and
each series thereof, as well as each series of the Funds created in
the future, for which the Adviser or a person controlling,
controlled by or under common control with the Adviser acts as
investment adviser (``Future Funds''). Any Future Fund that relies
on the order requested will do so only in accordance with the terms
and conditions contained in the application.
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Applicants' Legal Analysis
1. Section 17(a)(2) of the Act makes it unlawful for an affiliated
person of a registered investment company or an affiliated person of
such a person, acting as principal, to knowingly ``purchase'' from such
registered investment company any security or other property (except
securities of which the seller is the issuer). Under section
29(a)(3)(A) of the Act, an ``affiliated person'' includes any person
owning 5% or more of the outstanding voting securities of such other
person. Applicants state that to the extent that an in-kind redemption
could be deemed to involve the purchase of portfolio securities by a
Covered Shareholder, the proposed redemptions in-kind would be
prohibited by section 17(a)(2).
2. Section 17(b) authorizes the Commission to exempt a proposed
transaction from section 17(a) provided that: (a) the terms of the
proposed transaction, including the consideration to be paid or
received, are fair and reasonable and do not involve overreaching on
the part of any person concerned; (b) the transaction is consistent
with the policy of each registered investment company involved; and (c)
the proposed transaction is consistent with the general purposes of the
Act.
3. Section 6(c) of the Act provides that the Commission may exempt
classes of persons or transactions from the Act, where an 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.
4. Applicants request an order under sections 6(c) and 17(b) of the
Act exempting them from the provisions of section 17(a) of the Act to
permit Covered Shareholders to redeem their shares in-kind from the
Funds. The requested order would not apply to redemptions by
shareholders who are affiliated persons of the Funds within the meaning
of sections 2(a)(3)(B) through (F) of the Act.
5. Applicants submit that the proposed transactions meet the
standards set forth in sections 6(c) and 17(b) of the Act. Applicants
assert that the terms of the proposed in-kind redemptions are
reasonable and fair. Applicants state that Covered Shareholders who
wish to redeem shares will receive the same ``in-kind'' distribution of
securities and cash on the same basis as Non-Covered Shareholders
wishing to redeem shares. Applicants state that the securities to be
distributed in-kind will be valued in the
[[Page 66945]]
same manner as that used by each Fund to determine its net asset value.
6. Applicants state that the proposed in-kind redemptions are
consistent with the policies of the Funds. Applicants also state that
the proposed in-kind redemptions are consistent with the general
purposes of the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The portfolio securities distributed pursuant to a redemption
in-kind (the ``In-Kind Securities'') will be limited to securities that
are traded on a public securities market or for which quoted bid and
asked prices are available.
2. The In-Kind Securities will be distributed on a pro-rata basis
after excluding: (a) securities which, if distributed, would be
required to be registered under the Securities Act of 1933; (b)
securities issued by entities in countries which (i) restrict or
prohibit the holding of securities by non-nationals other than through
qualified investment vehicles, such as a fund, or (ii) permit transfers
of ownership of securities to be effected only by transactions
conducted on a local stock exchange; and (c) certain portfolio assets
(such as forward foreign currency exchange contracts, futures and
options contracts and repurchase agreements) that, although they may be
liquid and marketable, must be traded through the marketplace or with
the counterparty to the transaction in order to effect a change in
beneficial ownership. Cash will be paid for that portion of a fund's
assets represented by cash equivalents (such as certificates of
deposit, commercial paper and repurchase agreements) and other assets
which are not readily distributable (including receivables and prepaid
expenses), net of all liabilities (including accounts payable). In
addition, a Fund will distribute cash in lieu of securities held in its
portfolio not amounting to round lots (or which would not amount to
round lots if included in the in-kind distribution), fractional shares
and accruals on such securities.
3. The In-Kind Securities will be valued in the same manner as they
would be valued for purposes of computing a Fund's net asset value,
which, in the case of securities traded on a public securities market
for which quotations are available, is their last reported sales price
on the exchange on which the securities are primarily traded or the
last sales price on the national securities market, or, if the
securities are not listed on an exchange or the national securities
market, or if there is no such reported price, the average of the most
recent bid and asked price (or, if no such price is available, the last
quoted bid price).
4. The Funds' boards, including a majority of the trustees who are
not ``interested persons'' of a Fund as defined in section 2(a)(19) of
the Act, will determine no less frequently than annually: (a) whether
the In-Kind Securities, if any, have been distributed in accordance
with conditions 1 and 2; (b) whether the In-Kind Securities, if any,
have been valued in accordance with conditions 3; and (c) whether the
distribution of any such In-Kind Securities is consistent with the
policies of each affected Fund as reflected in its prospectus. In
addition, the Boards will make and approve such changes as they deem
necessary in the procedures for monitoring the applicants' compliance
with the terms and conditions of the application.
5. The relevant Funds will maintain and preserve for a period of
not less than six years from the end of the fiscal year in which the
proposed in-kind redemption occurs, the first 2 years in an easily
accessible place, a written record of each redemption setting forth a
description of each security distributed, the identity of the Covered
Shareholder, the terms of the distribution, and the information or
materials upon which the valuation was made.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-31032 Filed 11-29-99; 8:45 am]
BILLING CODE 8010-01-M
