[Federal Register Volume 63, Number 135 (Wednesday, July 15, 1998)]
[Notices]
[Pages 38216-38218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18760]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23306; 812-10578]
Calvert Social Investment Fund, et al.; Notice of Application
July 8, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order 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 and under section 17(d) of the
Act and rule 17d-1 under the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered investment companies to invest up to a specified percentage
of their assets in an affiliated non-profit social and community
development foundation.
APPLICANTS: Calvert Social Investment Fund (``CSIF''), The Calvert
Fund, Calvert World Values Fund, Inc. and any existing or future
registered investment company, advised by Calvert Asset Management
Company, Inc. (``CAMCO'') and whose investment policies permit
investment in the Calvert Social Investment Foundation (``Funds'').\1\
\1\ All existing Funds that currently intend to rely on the
order have been named as applicants. Any other existing Funds and
any future Funds will rely on the order only in accordance with its
terms and conditions.
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FILING DATES: The application was filed on March 17, 1997, and amended
on September 2, 1997, May 18, 1998, and June 11, 1998.
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 August 3, 1998,
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 SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, 4550 Montgomery Avenue, Bethesda, MD 20814.
FOR FURTHER INFORMATION CONTACT:
Mary Kay 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 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. 202-942-8090).
Applicant's Representations
1. Each Fund is registered under the Act as an open-end management
investment company. CSIF and The Calvert Fund are organized as
Massachusetts business trusts. The Calvert World Values Fund, Inc. is
organized as a Maryland corporation.
[[Page 38217]]
The Funds' investment adviser is CAMCO, an investment adviser
registered under the Investment Advisers Act of 1940.
2. Each Fund's investment policy permits it to invest a specified
percentage of its assets in high social impact investments (``HSII'')
that offer a rate of return below the prevailing market rate and that
present attractive opportunities for furthering the Fund's social
criteria.\2\ HSII are typically illiquid and unrated and generally
considered non-investment grade debt securities which involve a greater
risk of default or price decline than investment-grade securities. Each
Funds' investments in HSII were approved by the Fund's shareholders.
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\2\ CSIF's investment policy permits investment of less than 1%
of its assets in HSII. The policies of the Calvert International
Equity Fund (a series of the Calvert World Values Fund, Inc.) and
the Calvert New Vision Small Cap Fund (a series of The Calvert Fund)
permit investment up to 1% and 3%, respectively, of their assets in
HSII. The policy of the Calvert Capital Accumulation Fund (a series
of Calvert World Values Fund, Inc.) permits investment of up to 3%
of its assets in HSII when its assets reach $100 million.
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3. The Funds currently invest directly in community organizations
and other HSII. Applicants propose to invest assets, allocated for
investment in HSII, in the Calvert Social Investment Foundation
(``Foundation''). The Foundation will then place the assets in the
community.
4. The Foundation is a non-profit organization that seeks to use
community development opportunities to assist the poor, correct social
injustices, and improve society in a pro-active way. The Foundation's
securities are exempt from registration under section 3(a)(4) of the
Securities Act of 1933. The Foundation is exempt from registration as
an investment company under section 3(c)(10)(A) of the Act. The
Foundation has nine directors, eight of whom are members of CSIF's
board of trustees, four of whom are members of The Calvert Fund's board
of trustees, and four of whom are members of the Calvert World Values
Fund, Inc.'s board of directors.
5. The Foundation receives grants and loans from various
foundations and Acacia Mutual Life Insurance Company (``Acacia''), the
parent company of the Funds' investment adviser. The Foundation also
receives funding from individual investors, through a program called
Calvert Community Investments (``CI''). Investments in the Foundation
are evidenced by Calvert Community Investments notes (``CI Notes'').
Investors in CI Notes are allowed to choose the interest rate (ranging
from 0% to 4%) that they would like to receive on their investment. The
average interest rate currently for CI Notes is 3%. The Foundation
generally realizes a basis point spread on each investment to cover
administrative and overhead costs. The basis point spread is the
difference between the interest rate that purchasers of the CI Notes
receive and the average interest rate at which the Foundation makes
investments in community development organizations.
6. Under the proposed arrangement, each Fund will receive a CI Note
evidencing its investment in the Foundation. The Funds' boards of
trustees/directors (``Boards'') will determine the interest rate and
the maturity of the CI Notes that the Funds receive from the
Foundation. The Funds' assets invested in the Foundation will be pooled
with the Foundation's other assets and will be used by the Foundation
to make investments in community development organizations. The
Foundation's investments are evidenced by promissory notes at below
market rates in amounts between $50,000 and $500,000 each and for terms
of one, three, or five years, with interest rate currently ranging from
4.5% to 8.8%. Applicants expect that a Fund will invest in the CI Notes
quarterly.
7. Each Fund will invest its HSII assets in the CI Notes only in
accordance with its investment objectives, policies and restrictions.
Each Fund's Board will monitor this proposed arrangement to ensure that
it is consistent with the Fund's investment objectives, policies and
restrictions. Each Fund's Board also will periodically review the
adequacy of the Fund's disclosure of the proposed arrangement and of
the possible risks of loss to the Fund and its shareholders. The
percentage of each Fund's assets which may be invested in HSII will not
be increased without shareholder approval. Any future Fund relying on
the requested relief will obtain prior shareholder approval to invest
in the Foundation.
8. Neither the Funds, CAMCO, nor the Funds' subadvisers will invest
directly in the organizations in which the Foundation invests or plans
to invest. Neither Acacia, CAMCO, nor the Funds' subadvisers will
invest in the Foundation by purchasing CI Notes. Further, neither CAMCO
nor any subadviser will receive any compensation for the Funds'
investment in CI Notes.
Applicants' Legal Analysis
A. Section 17(a)
1. Section 17(a) of the Act makes it unlawful for any affiliated
person of a registered investment company, acting as principal, to sell
or purchase any security to or from the company. Section 2(a)(3) of the
Act defines an affiliated person of an investment company as any person
directly or indirectly controlling, controlled by, or under common
control with such investment company, and any officer, director,
partner, copartner, or employee of the investment company. Section
2(a)(36) defines a security to include, among other things, any note,
stock treasury stock, or evidence of indebtedness. Applicants believe
that the Foundation may be considered to be an affiliated person of the
Funds due to common directors/trustees that serve on the boards of the
Funds and the Foundation. Thus, investment by the Funds in the CI Notes
may be prohibited by section 17(a).
2. Section 17(b) of the Act authorities the SEC to exempt a
transaction from section 17(a) if the terms of the proposed
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, and the proposed transaction is consistent with the
policy of each investment company concerned and the general purposes of
the Act. Section 6(c) authorizes the Commission to exempt transactions
from the provisions of the Act to the extent that such exemptions are
appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policies and
provisions of the Act.
3. Applicants believe that the Funds' proposed investment in the
Foundation meets the standards of section 17(b) and 6(c). Applicants
state that the Fund's investment in the Foundation will be consistent
with each Fund's investment objectives, policies and restrictions and
that investment in HSII has been approved by each Fund's shareholders.
Applicants assert that each Fund will likely recognize certain
economies of scale by having the Foundation undertake analysis, placing
and processing of prospective investments in HSII. Each Fund's
investments in HSII through the Foundation will be on the same terms
and in the same amounts as currently made directly, with comparable
rates of interest.
B. Section 17(d) and Rule 17d-1
1. Section 17(d) of the Act and rule 17d-1 prohibit an affiliated
person of a
[[Page 38218]]
registered investment company, acting as principal, from participating
in any joint arrangement with the investment company unless the SEC has
issued an order authorizing the arrangement. Applicants believe that
each Fund may be deemed to be participating in a joint transaction with
each other Fund through the pooling of assets in the Foundation, and
that the Funds could be deemed to be participating in a joint
transaction with the Foundation through their investments in HSII.
2. In determining whether to grant an exemption under rule 17d-1,
the SEC considers whether the investment company's participation in the
joint enterprises in consistent with the provisions, policies and
purposes of the Act, and the extend to which such participation is on a
basis different from or less advantageous than that of other
participants. Applicants assert that all investors in the Foundation
will participate on the same basis.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-18760 Filed 7-14-98; 8:45 am]
BILLING CODE 8010-01-M
