95-16926. Smith Hayes Trust, Inc.-Capital Builder Fund, et al.; Notice of Application  

  • [Federal Register Volume 60, Number 132 (Tuesday, July 11, 1995)]
    [Notices]
    [Pages 35782-35783]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-16926]
    
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    [Rel. No. IC-21180; 812-9606]
    
    
    Smith Hayes Trust, Inc.-Capital Builder Fund, et al.; Notice of 
    Application
    
    June 30, 1995.
    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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    APPLICANTS: Smith Hayes Trust, Inc.-Capital Builder Fund (the 
    ``Company''), Conley Partners Limited Partnership (the 
    ``Partnership''), Conley Investment Counsel, Inc. (``CIC''), and John 
    H. Conley (``Conley'').
    
    RELEVANT ACT SECTIONS: Orders requested under section 17(b) of the Act 
    for an exemption from section 17(a) of the Act.
    
    SUMMARY OF APPLICATION: Applicants request an order that would permit 
    the Partnership, a private investment company, to merge into a series 
    of the Company, an affiliated registered investment company.
    
    FILING DATE: The application was filed on May 15, 1995.
    
    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 
    requests should be received by the SEC by 5:30 p.m. on July 25, 1995 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, 500 Centre Terrace, 1225 ``L'' Street, Lincoln, 
    Nebraska 68508.
    
    FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Staff Attorney, at 
    (202) 942-0574, or Robert A. Robertson, 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 Company is a registered open-end investment company 
    organized as a Minnesota corporation. The Company currently is 
    comprised of nine portfolios, including the Capital Builder Fund (the 
    ``CB Fund''). The CB Fund became effective on April 4, 1995, and no 
    offering of shares has commenced. Conley Smith, Inc. (the ``Adviser''), 
    a subsidiary of Consolidated Investment Corporation, will act as 
    investment adviser to the CB Fund. Conley is the president of the 
    Adviser and owns approximately 5% of the voting securities of 
    Consolidated Investment Corporation. The principal underwriter for the 
    shares of the CB Fund will be Smith Hayes Financial Services 
    Corporation (the ``Distributor'').
        2. The Partnership was formed in 1989 as a limited partnership 
    under Nebraska state law. The Partnership has not been registered under 
    the Act in reliance upon section 3(c)(1) of the Act, and the 
    Partnership interests have not been registered under the Securities Act 
    of 1933 in reliance upon section 4(2) of the Act. CIC is the sole 
    general partner of the Partnership and has exclusive control over the 
    management of its business. Conley is the sole shareholder of CIC and 
    the portfolio manager for the Partnership. No person who is an officer 
    or director of the Distributor or the Adviser (except Conley) and no 
    person who is an officer or director of the CB Fund is a limited 
    partner of the Partnership.
        3. Applicants propose that, prior to the offering of CB Fund shares 
    to the public, the CB Fund would exchange shares for portfolio 
    securities of the Partnership. After the exchange (the ``Exchange''), 
    the Partnership would dissolve and distribute the shares of the CB Fund 
    pro rata, based on the net asset value of the Partnership, to the 
    partners of the Partnership, along with cash received, if any, from the 
    sale of the portfolio securities of the Partnership not acquired by the 
    CB Fund. Following the Exchange, partners of the Partnership will 
    constitute all of the shareholders of the CB Fund. The CB Fund has been 
    designed as a successor investment vehicle to the Partnership, with 
    investment objectives and policies substantially the same as those of 
    the Partnership.
        4. The proposed Exchange will be effected pursuant to an agreement 
    and plan of exchange (the ``Plan'') to be approved by the limited 
    partners of the Partnership. Solicitation of the limited partners for 
    approval of the Plan will be made by means of a Prospectus/Information 
    Statement and will be accompanied by a current CB Fund prospectus. 
    Under the Plan, the portfolio securities of the Partnership will be 
    acquired at their independent ``current market price,'' as defined in 
    rule 17a-7 under the Act. The CB Fund will not acquire securities that, 
    in the opinion of the Adviser, would result in a violation of the CB 
    Fund's investment objectives, policies, or restrictions.
        5. The Company's board of directors has considered the desirability 
    of the Exchange from the point of view of the Company and the 
    Partnership, and a majority of the board, including a majority of the 
    non-interested members, has concluded that (a) the Exchange is in the 
    best interest of the CB Fund, the Partnership, and the limited partners 
    of the Partnership; (b) the Exchange will not dilute the interests of 
    the partners of the Partnership when their interests are converted into 
    shares of the CB Fund; and (c) the terms of the Exchange as reflected 
    in the Plan have been designed to meet the criteria set forth in 
    section 17(b) of the Act that the Exchange be reasonable and fair, not 
    involve overreaching, and be consistent with the 
    
    [[Page 35783]]
    policies of the CB Fund and the Partnership. The board considered each 
    aspect of the Exchange, including (i) the method of valuing the 
    portfolio securities to be acquired from the Partnership; (ii) the net 
    asset value of the shares to be delivered to the Partnership; (iii) the 
    procedure for selecting among the portfolio securities of the 
    Partnership; (iv) the possibility of incurring excessive brokerage 
    costs as a result of redemptions of CB Fund shares by former partners 
    of the Partnership; (v) the allocation of the costs of the Exchange; 
    (vi) the possibility of adverse tax consequences to future shareholders 
    of the CB Fund; and (vii) the benefits from the Exchange accruing to 
    CIC and Conley.
        6. The Exchange will not be effected unless: (a) The registration 
    statement of the CB Fund has been declared effective; (b) the Plan has 
    been approved by a majority in interest of the limited partners of the 
    Partnership; (c) the requested order has been granted; and (d) the 
    limited partners have received an opinion of counsel that (i) the 
    distribution of CB Fund shares, which will be in liquidation of the 
    Partnership interests in the Partnership, will not cause taxable gain 
    or loss to be recognized by the limited partners; (ii) the basis of the 
    limited partners in CB Fund shares will be equal to the adjusted basis 
    of the limited partners' interests in the Partnership; and (iii) the 
    limited partners' holding periods with respect to CB Fund shares will 
    include the Partnership's holding period with respect to such shares.
        7. The Adviser will assume the costs of the Exchange, except for 
    registration and filing fees of the CB Fund shares, and will assume the 
    legal fees and expenses relating to the requested order and the 
    obtaining of the opinion of counsel on certain tax matters. No 
    brokerage commission, fee, or other remuneration will be paid in 
    connection with the Exchange.
        8. After the Exchange is accomplished, the Adviser intends for the 
    foreseeable future to manage the assets of the CB Fund in substantially 
    the same manner as the Partnership's assets were managed, except as may 
    be necessary or desirable (a) to qualify the CB Fund as a regulated 
    investment company under the Internal Revenue Code of 1986, as amended; 
    (b) to comply with the investment restrictions adopted by the CB Fund 
    in accordance with the requirements of the Act or securities laws of 
    states where CB Fund shares will be offered; or (c) in light of changed 
    market conditions.
    
    Applicants' Legal Conclusions
    
        1. Section 17(a) of the Act generally prohibits an affiliated 
    person of a registered investment company from selling to or purchasing 
    from such investment company any security. The Partnership may be an 
    affiliated person of the Company because the Partnership and the 
    Company may be deemed under the control of CIC (and, indirectly, 
    Conley) because of its role as general partner of the Partnership, 
    Conley's ownership of stock in the parent of the Adviser, and Conley's 
    position as an officer of the Adviser. Thus, the proposed Exchange may 
    be prohibited by section 17(a). Section 17(b) authorizes the SEC to 
    exempt a proposed transaction from section 17(a) if evidence 
    establishes that 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, the 
    transaction is consistent with the policies of the registered 
    investment company, and the transaction is consistent with the general 
    purposes of the Act.
        2. Applicants believe that the proposed transaction satisfies the 
    criteria of section 17(b). The investment objectives of the CB Fund and 
    the Partnership are substantially similar. In addition, the CB Fund 
    will acquire the Partnership portfolio securities at their independent 
    ``current market price.'' Applicants believe that the Exchange can be 
    viewed as a change in the form in which the assets are held, rather 
    than as a disposition giving rise to section 17(a) concerns.
    
        For the Commission, by the Division of Investment Management, 
    under delegated authority.
    Jonathan G. Katz,
    Secretary.
    [FR Doc. 95-16926 Filed 7-10-95; 8:45 am]
    BILLING CODE 8010-01-M
    
    

Document Information

Published:
07/11/1995
Department:
Securities and Exchange Commission
Entry Type:
Notice
Action:
Notice of Application for Exemption under the Investment Company Act of 1940 (the ``Act'').
Document Number:
95-16926
Dates:
The application was filed on May 15, 1995.
Pages:
35782-35783 (2 pages)
Docket Numbers:
Rel. No. IC-21180, 812-9606
PDF File:
95-16926.pdf