[Federal Register Volume 62, Number 61 (Monday, March 31, 1997)]
[Notices]
[Pages 15208-15210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8073]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22581; 812-10474]
The Advisors' Inner Circle Fund; Notice of Application
March 25, 1997.
AGENCY: Securities and Exchange Commission (the ``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (``the Act'').
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APPLICANT: The Advisors' Inner Circle Fund (the ``Fund''), on behalf of
each series thereof, including any series created after the date of the
application (a ``Portfolio'' and together, the ``Portfolios'').
RELEVANT ACT SECTIONS: Exemptions requested under sections 6(c) and
17(b) from section 17(a) of the Act.
SUMMARY OF APPLICATION: Applicant seeks an order to permit redemptions
in kind shares of the Portfolios by shareholders who are ``affiliated
persons'' of the Portfolios within the meaning of section 2(a)(3)(A) of
the Act (``Affiliated Shareholders'').
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FILING DATES: The application was filed on December 30, 1996. Applicant
has agreed to file an additional amendment during the notice period,
the substance of which is incorporated herein.
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 April 21, 1997
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 5th Street, N.W., Washington, D.C.
20549. Applicant, 2 Oliver Street, Boston, MA 02109.
FOR FURTHER INFORMATION CONTACT Joseph B. McDonald, Jr., Senior
Counsel, at (202) 942-0533, or Mary Key Frech, 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
SEC's Public Reference Branch.
Applicants Representations
1. The Fund, an open-end management investment company established
as a Massachusetts business trust, currently offers twelve Portfolios.
The Fund currently consists of the following Portfolios: Clover Capital
Equity Value Fund, Clover Capital Fixed Income Fund, and Clover Capital
Small Cap Value Fund, each advised by Clover Capital Management, Inc.;
AIG Money Market Fund, advised by AIG Management Capital, Corp.; White
Oak Growth Stock Fund and Pin Oak Aggressive Stock Fund, each advised
by Oak Associates, Ltd.; HGK Fixed Income Fund, advised by HGK Asset
Management, Inc.; FMC Select Fund, advised by First Manhattan Co.; CRA
Realty Shares Portfolio, advised by CRA Real Estate Securities L.P.;
and Pinnacle Extended Liquidity Portfolio, Pinnacle Short Duration
Portfolio, and Pinnacle Intermediate Duration Portfolio, each advised
by TCB, L.P.
2. Shares of a Portfolio may be redeemed at the net asset value per
share next determined after the transfer agent receives a proper
redemption request. The Fund's prospectuses and statements of
additional information provide that, in limited circumstances, a
Portfolio may satisfy all or part of a redemption request by delivering
portfolio securities to a redeeming shareholder if the board of
trustees of the Fund (the ``Board'') \1\ determines that it is
appropriate in order to protect the best interests of the Portfolio and
its shareholders.
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\1\ Five of the Fund's seven trustees are no ``interested
persons'' as defined in section 2(a)(19) of the Act (the
``Independent Trustees'').
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3. The Fund, on behalf of each Portfolio, has elected to be
governed by the provisions of rule 18f-1 under the Act. This election
commits each Portfolio, during any 90-day period for any one
shareholder, to redeem its shares solely in cash up to the lesser of
$250,000 or 1% of the Portfolio's net asset value at the beginning of
such period. The Board, including all of the Independent Trustees, has
determined that it would be in the best interests of the Portfolios and
their shareholders to pay to each Affiliated Shareholder the redemption
price for its shares inkind to the extent permitted by the Fund's rule
18f-1 election.
4. Securities distributed to Affiliated Shareholders in connection
with redemptions in-kind will be selected and valued under the same
procedures used for the selection and valuation of shares distributed
to other shareholders (the ``non-affiliated shareholders'') as
redemptions in-kind. Thus, all such shares will be valued in the same
manner as they would be valued for purposes of computing a Portfolio's
net asset value, which is the last quoted sales price, or if there is
no reported sale, at the last quoted bid price.
5. Securities to be distributed in-kind 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 by entities in countries that (i) restrict or prohibit
the holding of securities by non-nationals other than through qualified
investment vehicles, such as the Portfolios, or (ii) permit transfers
of ownership of securities to be affected only by transactions
conducted on a local stock exchange; and (c) certain portfolio assets
(such as forward 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.
6. Cash will be paid for that portion of a Portfolio's assets
represented by cash equivalents (such as certificates of deposit,
commercial paper, and repurchase agreements) and other assets that are
not readily distributable (including receivables and prepaid expenses),
net of all liabilities (including accounts payable). A Portfolio also
will distribute cash in lieu of any securities held in its investment
portfolio not amounting to round lots (or which would not amount to
round lots if included in the in-kind distribution), fractional shares,
and accrual on such securities.
7. Applicant seeks relief to permit Affiliated Shareholders who are
``affiliated persons'' of a Portfolio only within the meaning of
section 2(a)(3)(A) of the act (i.e., by virtue of their ownership of 5%
or more of the voting securities thereof) to redeem their shares in-
kind, subject to the limitations of the Fund's rule 18f-1 election. The
relief sought would not extend to shareholders who are ``affiliated
persons'' of a Portfolio within the meaning of sections 2(a)(3) (B)-(F)
of the Act.
Legal Analysis
1. Section 17(a)(2) of the Act, in relevant part, 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).
Section 2(a)(3)(A) of the Act defines ``affiliated person'' to include
any person owning 5% or more of the outstanding voting securities of
such other person.
2. Section 17(b) provides that the SEC may, by order upon
application, grant exemptions from the prohibitions of section 17(a)
with respect to any particular transaction if the terms of the proposed
transaction are fair and reasonable and do not involve overreaching; if
the proposed transaction is consistent with the policy of each
registered investment company involved; and the proposed transaction is
consistent with the general purposes of the Act.
3. Section 6(c) of the Act provides, in part, that the SEC, by
order upon application, may conditionally or unconditionally exempt any
person, security or transaction from any provisions of the Act, if and
to the extent that such exemption is necessary or appropriate in the
public interest and
[[Page 15210]]
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act.
4. Applicant submits that is has satisfied the requirements of
sections 6(c) and 17(b). Applicant believes that the use of an
objective, verifiable standard for the selection and valuation of any
securities to be distributed in connection with a redemption in-kind
will ensure that all such redemptions will be on terms that are
reasonable and fair to the Portfolios, their shareholders and the
Affiliated Shareholders, and will not involve overreaching on the part
of any person. Similarly, the proposed transactions are consistent with
the investment policies of the Portfolios, which expressly disclose the
Portfolios' ability to redeem shares in-kind. Finally, applicant
believes that the terms of the proposed transactions are reasonable and
fair to all parties and are consistent with the protection of investors
and the provisions, policies and purposes of the Act.
Affiliate Shareholders who wish to redeem shares in-kind would
receive the same in-kind distribution of portfolio securities and cash
on the same basis as any other shareholder wishing to redeem shares,
and would not receive any advantage not available to any other
shareholder requesting a comparable redemption if the proposed in-kind
redemptions are permitted.
Applicant's Conditions
Applicant agrees that any order granting the requested relief will
be subject to the following conditions:
1. The securities distributed to both Affiliated Shareholders and
non-affiliated shareholders 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 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 by the Portfolio 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 the Portfolios, 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 the Portfolio'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 Portfolio 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 Board of Trustees of the Applicant, including a majority of
the Trustees who are not ``interested persons'' (as defined in Section
2(a)(19) of the Act) of the Fund, will determine no less frequently
than annually: (a) whether the In-Kind Securities, if any, have been
distributed in accordance with condition 1; and (b) whether the
distribution of any such In-Kind Securities is consistent with the
policies of the relevant Portfolio as reflected in the prospectus of
that Portfolio. In addition, the Board of Trustees shall make and
approve such changes as the Board deems necessary in its procedures for
monitoring Applicant's compliance with the terms and conditions of this
application.
4. The Portfolios will maintain and preserve for a period of not
less than six years from the end of the fiscal year in which a proposed
in-kind redemption occurs, the first two years in an easily accessible
place, a written record of each such redemption setting forth the
identity of the Affiliated Shareholder, 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 Secretary.
[FR Doc. 97-8073 Filed 3-28-97; 8:45 am]
BILLING CODE 8010-01-M
