[Federal Register Volume 63, Number 213 (Wednesday, November 4, 1998)]
[Notices]
[Pages 59604-59605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29511]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23511; 812-11252]
FPA Capital Fund, Inc.; Notice of Application
October 29, 1998.
AGENCY: 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.
SUMMARY OF APPLICATION: Applicant, FPA Capital Fund, Inc. (``Fund''),
seeks an order to permit an in-kind redemption of shares of the Fund by
an affiliated person of the Fund.
FILING DATES: The application was filed on August 6, 1998 and amended
on October 20, 1998.
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 applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on November 23, 1998, and should be accompanied by proof of
service on applicant, 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 may request notification of a hearing by writing to
the Commission's Secretary.
ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC
20549. Applicants, 11400 West Olympic Boulevard, Los Angeles,
California 90064.
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Attorney-Adviser, (202) 942-0574 or Edward P. Macdonald,
Branch Chief, at (202) 942-0564 (Division of Investment Management,
[[Page 59605]]
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 5th Street, NW., Washington,
DC 20549 (tel. no. 202-942-8090).
Applicant's Representation
1. The Fund, organized as a Maryland corporation, is registered
under the Act as an open-end management investment company. First
Pacific Advisors, Inc. (``Adviser''), registered under the Investment
Advisers Act of 1940 (``Advisers Act''), is the Fund's investment
adviser.
2. ICMA Retirement Trust (``Affiliated Shareholder'') is a
retirement trust for deferred compensation plans and qualified
retirement plans established by state and local governments and their
agencies and instrumentalities for their employees. The Affiliated
Shareholder is not registered under the Act in reliance upon section
2(b) of the Act. The ICMA Retirement Corporation (``Retirement
Corporation''), registered under the Advisers Act, serves as the
investment adviser to the Affiliated Shareholder. The Affiliated
Shareholder owns approximately 13.33% of the outstanding shares of the
Fund.
3. The Retirement Corporation, acting in its fiduciary capacity
with respect to the Affiliated Shareholder, has concluded that the
assets of the Affiliated Shareholder invested in the Fund should be
managed directly by the Adviser. Consequently, the Affiliated
Shareholder has notified the Fund that it expects to redeem all of its
shares of the Fund and place the proceeds in a separate account managed
by the Retirement Corporation and subadvised by the Adviser. On August
3, 1998, the Fund's board of directors, including all of the
independent directors, determined that it would be in the best
interests of the Fund and its shareholders to redeem the shares of the
Affiliated Shareholder in-kind.
Applicant's Legal Analysis
1. Section 17(a)(2) of the Act generally prohibits an affiliated
person of a registered investment company, acting as principal, from
knowingly purchasing any security from the company. Section 2(a)(3)(A)
of the Act defines ``affiliated person'' of another person to include
any person owning 5% or more of the outstanding voting securities of
the other person.
2. Section 17(b) of the Act provides that, notwithstanding section
17(a) of the Act, the Commission shall exempt a proposed transaction
from section 17(a) of the Act if evidence establishes that: (a) the
terms of the proposed transaction are reasonable and fair and do not
involve overreaching; (b) the proposed 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. Applicant states that the Affiliated Shareholder is an
affiliated person of the Fund under section 2(a)(3)(A) of the Act
because it owns beneficially in excess of 5% of the Fund's shares. To
the extent that the proposed in-kind redemption would be considered to
involve the ``purchase'' of the Fund's portfolio securities by the
Affiliated Shareholder, applicant states that the proposed in-kind
redemption would be prohibited by section 17(a)(2) of the Act.
4. Applicant submits that the terms of the proposed in-kind
redemption meet the standards set forth in section 17(b) of the Act.
Applicant asserts that neither the Adviser nor the Affiliated
Shareholder will have any opportunity to select the specific portfolio
securities to be distributed. Applicant further states that the
portfolio securities to be distributed to the Affiliated Shareholder
will be valued according to an objective, verifiable standard and that
the in-kind redemption is consistent with the investment policies of
the Fund. Applicant also states that the proposed in-kind redemption is
consistent with the general purposes of the Act.
Applicant's Conditions
Applicant agrees that any order granting the requested relief will
be subject to the following conditions:
1. The portfolio securities of the Fund distributed to the
Affiliated Shareholder pursuant to the in-kind redemption (the ``In-
Kind Securities'') will be limited to securities that are traded on a
public securities market or for which quoted bid prices are available.
2. The In-Kind Securities will be distributed by the Fund on a pro
rata basis after excluding: (a) securities which, if distributed, would
be required to be registered under the Securities Act of 1933; and (b)
certain portfolio assets (such as 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 the 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, the 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 distributed to the Affiliated Shareholders will be
valued in the same manner as they would be valued for purposes of
computing the 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 at 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 most recent bid price.
4. The Fund will maintain and preserve for a period of not less
that six years from the end of the fiscal year in which the proposed
in-kind redemption occurs, the first two years in as easily accessible
place, a written record of the redemption setting forth a description
of each security distributed, the terms of the distribution, and the
information or materials upon which the valuation was made.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Security.
[FR Doc. 98-29511 Filed 11-3-98; 8:45 am]
BILLING CODE 8010-01-M
