[Federal Register Volume 59, Number 24 (Friday, February 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2492]
[[Page Unknown]]
[Federal Register: February 4, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel No. IC-20040; 812-8412]
Heber J. Grant & Company; Notice of Application
January 27, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANT: Heber J. Grant & Company.
RELEVANT ACT SECTION: Section 6(c).
SUMMARY OF APPLICATION: Applicant, a privately held company
substantially owned and controlled by one family and certain persons
and entities employed by, controlled by, affiliated with, or otherwise
related to members of that family, seeks an exemption from all
provisions of the Act.
FILING DATE: The application was filed on May 20, 1993, and amended on
September 17, 1993, December 10, 1993, and January 26, 1994.
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
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on February 22,
1994, 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 SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549,
Applicant, 447 East 100 South, Salt Lake City, Utah 84147.
FOR FURTHER INFORMATION CONTACT: Felicia H. Kung, Senior Attorney, at
(202) 504-2803, or Elizabeth G. Osterman, Branch Chief, at (202) 272-
3016 (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
SEC's Public Reference Branch.
Applicant's Representations
1. Heber J. Grant & Company, a Utah corporation, was organized in
1888 by its founder, Heber J. Grant, to consolidate his various
business interests into a single enterprise. Applicant operates as an
insurance agency, engaged in both wholesale activities as a general
agent and as a retail agent selling directly to the public, through an
83.5 percent-owned subsidiary. Applicant proposes to dispose of its
insurance subsidiary, after which applicant's principal asset would be
investment securities.
2. Currently, there are 148,856 shares of applicant's common stock
($1.00 par value) outstanding, held by approximately 250 shareholders.
During his lifetime, applicant's founder transferred or donated shares
of applicant's stock to family members, and to other parties.
Applicant's stock has never been offered or sold to the public, and
applicant has not sold its shares to any person since before 1920. Of
the issued and outstanding stock, 60.4 percent is held by direct
descendants of Heber J. Grant, their spouses, and 32 family trusts and
one partnership for the exclusive benefit of direct descendants of
Heber J. Grant or their spouses and in which such persons collectively
exercise sole voting and dispositive power; 16.5 percent is owned by
the Church of Jesus Christ of Latter-Day Saints (the ``LDS Church''),
for which Heber J. Grant served as president between 1919 and 1945;
13.7 percent is held by 66 present or former executive employees of
applicant, and the remaining 9.4 percent is held by 53 descendants of
donees of Heber J. Grant. To the best of applicant's knowledge, its
stock has not been quoted in any active trading market, and no stock
has been sold through securities broker-dealers.
3. Applicant's transfer records for the past twelve years indicate
that transfers of applicant's stock were made as part of the estate
planning of living shareholders, and as a result of the death of other
shareholders and the transfer of stock to descendants. Applicant
believes that all of such transfers were made to family members of
applicant's founder, Heber J. Grant. In addition, all purchases and
sales of applicant's stock noted in such transfer records were executed
among existing shareholders.
4. Five of the nine members of applicant's board of directors are
direct descendants of Heber J. Grant. The other directors consist of a
high governing official of the LDS Church, former and current officers
of applicant's subsidiary, and a former president of a principal
insurance customer of applicant's subsidiary that is the real estate
arm of the LDS Church.
5. For more than fifteen years, applicant has furnished annually to
its shareholders consolidated financial statements prepared in
accordance with generally accepted accounting principles. Applicant
intends to continue to provide such annual financial statements to its
shareholders. Such financial statements will not be audited because of
the small amount of the assets involved and the limited nature of
applicant's operations.
Applicant's Legal Analysis
1. Section 3(a)(3) of the Act generally provides that an investment
company includes any issuer that is engaged in the business of
investing, reinvesting, owning, holding or trading in securities, and
owns or proposes to acquire investment securities having a value
exceeding 40 percent of the value of such issuer's total unconsolidated
assets. Applicant states that it currently is not subject to the Act
because of the nature of the assets and operations conducted by its
insurance subsidiary. After applicant's disposal of its subsidiary,
investment securities will constitute applicant's principal assets.
Accordingly, applicant may be subject to the Act.
2. Section 3(c)(1) of the Act excepts from the definition of
``investment company'' any issuer whose outstanding securities are
beneficially owned by not more than 100 persons and which is not
making, and does not presently propose to make, a public offering of
its securities. Applicant asserts that section 3(c)(1) was not intended
to include ``private'' investment companies within the purview of the
Act and that under section 6(c) the SEC may exempt private investment
companies that have more than 100 beneficial owners. See Maritime
Corporation, 9 SEC 906, 909 (1941). Applicant contends that its request
for a conditional order under section 6(c) of the Act is consistent
with relief granted to other private investment companies substantially
owned and controlled by a single family. See, e.g., Bessemer Securities
Corporation, Investment Company Act Release Nos. 18529 (notice) (Feb.
5, 1992) and 18594 (order) (March 3, 1992); Richardson Corporation,
Investment Company Act Release Nos. 16566 (notice) (Sept. 22, 1988) and
16606 (order) (Oct. 21, 1988); 5600, Inc., Investment Company Act
Release Nos. 16004 (notice) (Sept. 25, 1987) and 16067 (order) (Oct.
21, 1987). These orders were issued subject to restrictions that
ensured that the investment vehicles would remain family controlled,
private enterprises.
3. Applicant seeks a conditional order under section 6(c) of the
Act to exempt it from all provisions of the Act and all rules and
regulations promulgated thereunder. Applicant states that it is
essentially a closely-held, private company for which the protections
provided to investors under the Act are not necessary or appropriate in
the public interest. Applicant represents that it does not seek
additional capital through the sale of securities, but focuses its
investment strategy on preserving, protecting, and obtaining
appreciation on the capital accumulated as a result of the business
activities of its founder during his lifetime. Applicant asserts that
after disposition of its insurance subsidiary, it will remain a private
investment vehicle for the continuation of the business and investment
principles of its founder. Applicant states that it has not taken any
steps to facilitate development of a trading market for applicant's
common stock, and that conditions 5 and 6, as stated below, ensure that
applicant will continue to be at least 80 percent owned by the
categories of shareholders that currently hold applicant's stock.
4. Applicant states that, in accordance with the Utah Revised
Business Corporation Act, it will adopt an amendment to its articles of
incorporation that will provide a corporate right of redemption
tantamount to a right of refusal in the event that an existing
shareholder proposes to sell shares of applicant's stock to a person
not included in the category of shareholders described in condition 4.
Applicant believes that this right of redemption will enable applicant
to maintain its essentially private nature.
5. Applicant believes that the requested 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.
Applicant's Conditions
If the requested relief is granted, applicants agree to the
following conditions:
1. Applicant will continue to hold annual meetings of its
stockholders for the purpose of electing directors and transacting such
other business as may properly come before such meetings.
2. Applicant will continue to furnish annually to its stockholders
its financial statement prepared in accordance with generally accepted
accounting principles, consistently applied, together with a brief
description of the business done by applicant during the most recent
fiscal year which will, in the opinion of management, indicate the
general nature and scope of the business of applicant. Because of the
small amount of assets involved and the limited nature of applicant's
operations, such financial statement will not be audited.
3. Applicant will not knowingly make available to any broker or
dealer registered under the Securities Exchange Act of 1934 any
financial information concerning applicant for the purpose of knowingly
enabling that broker or dealer to initiate any regular trading market
for applicant's common stock.
4. Applicant will be at least 80 percent owned by or for the
benefit of the direct descendants of Heber J. Grant and/or their
spouses; direct descendants of donees of Heber J. Grant; family trusts,
estates, partnerships or corporations established for the exclusive
benefit of direct descendants of Heber J. Grant, direct descendants of
donees of Heber J. Grant, or their spouses and in which such persons
collectively exercise sole voting and dispositive power; the LDS Church
or another tax-exempt religious or charitable institution as defined in
section 501(c)(3) of the Internal Revenue Code, as amended, controlled
by or under common control with the LDS Church; and natural persons
who, at the time they receive an interest in applicant, are executive
employees or former executive employees of applicant; and any portion
of applicant which is not owned by or for the benefit of these
categories of shareholders will be beneficially owned (as the term is
used in section 3(c)(1) of the Act) by not more than 35 persons and
will not have been publicly offered.
5. Applicant will limit the sale or other issuance of additional
shares of common stock so that after such sale or other issuance
applicant will be in compliance with the last preceding condition.
6. Applicant will obtain approval by the holders of a majority of
the issued and outstanding shares of an amendment to applicant's
articles of incorporation granting to applicant a right of redemption
in the event of a proposed sale or other transfer by any shareholder of
shares in applicant, except in the case of a proposed sale or other
transfer to direct descendants of Heber J. Grant and/or their spouses;
direct descendants of donees of Heber J. Grant; family trusts, estates,
partnerships or corporations established for the exclusive benefit of
direct descendants of Heber J. Grant, direct descendants of donees of
Heber J. Grant, or their spouses and in which such persons collectively
exercise sole voting and dispositive power; the LDS Church or another
tax-exempt religious or charitable institution as defined in section
501(c)(3) of the Internal Revenue Code, as amended, controlled by or
under common control with the LDS Church; and natural persons who, at
the time they receive an interest in applicant, are executive employees
or former executive employees of applicant.
For the Commission, by the Division of Investment Management,
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-2492 Filed 2-3-94; 8:45 am]
BILLING CODE 8010-01-M
