[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Notices]
[Pages 43097-43098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21159]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22140; 812-10214]
The Adivsors' Inner Circle Fund; Notice of Application
August 14, 1996.
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 ``Trust''), on behalf
of A+P Large-Cap Value Fund (the ``Portfolio'').
RELEVANT ACT SECTIONS: Order requested under section 17(b) of the Act
for an exemption from section 17(a) of the Act.
SUMMARY OF APPLICATION: Applicant requests an order to permit certain
shareholders who are ``affiliated persons'' of its Portfolio series,
solely by reason of owning more than 5% of the Portfolio's shares, to
redeem Portfolio shares for payment in-kind.
FILING DATE: The application was filed on June 20, 1996.
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 September 9,
1996, 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, NW., Washington, DC 20549.
Applicant, 2 Oliver Street, Boston, MA 02109.
FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior
Counsel, at (202) 942-0581, 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.
Applicant's Representations
1. The Trust, an open-end management investment company established
as a Massachusetts business trust, currently offers nine portfolios,
including the Portfolio. Five of the Trust's seven trustees are not
``interested persons'' (as defined in section 2(a)(19) of the Act) (the
``Independent Trustees'') of the Trust. The investment objective of the
Portfolio is to seek total return. It seeks to achieve this objective
by investing primarily in common stocks of large capitalization
companies.
2. Aronson & Partners (the ``Adviser'') has acted as the
Portfolio's investment adviser since its date of inception pursuant to
an advisory agreement dated October 15, 1993. The Adviser is registered
as an investment adviser under the Investment Advisers Act of 1940.
3. As of June 17, 1996, Cooper Health Care Retirement Plan,
Medlantic Health Care (Corporate), Medlantic Health Care (Retirement)
and General Service Foundation (collectively, the ``Affiliated
Shareholders'') owned beneficially and of record approximately 17%,
33.4%, 35.6%, 10.6%, respectively, of the Portfolio's outstanding
shares. At such time, each Affiliated Shareholder was an ``affiliated
person'' of the Portfolio as defined in section 2(a)(3)(A) of the Act
because each owned more than 5% of the shares of the Portfolio. Each
Affiliated Shareholder will continue to be an affiliated person of the
Portfolio until the redemptions described below are effected.
4. Each Affiliated Shareholder has notified the Trust that it
expects to redeem its shares of the Portfolio and place the proceeds in
a separate investment advisory account to be managed by the Adviser.
Shares of the Portfolio may be redeemed at the net asset value per
share next determined after the Trust's transfer agency receives a
proper redemption request. The Portfolio's prospectus and statement of
additional information provide that, in limited circumstances, the
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 Trust determines that it is appropriate in order to
protect the best interests of the Portfolio and its shareholders. The
board (including all of the Independent Trustees) has determined that
it would be in the best interests of the Portfolio and its shareholders
to pay to each Affiliated Shareholder the redemption price for its
shares substantially in-kind.
5. The Trust, in accordance with its redemption policies,\1\
proposes to pay the first $250,000 of each such redemption in cash and
the remainder in the form of a proportionate distribution of each
portfolio security held by the Portfolio (the ``Proposed In-Kind
Redemptions'') 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 Portfolio, 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. Securities to be distributed
pursuant to the Proposed In-Kind Redemptions will be further limited to
securities which are traded on a public securities market or for which
quoted bid prices are available. 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 Proposed
In-Kind Redemptions), fractional shares, and accruals on such
securities.
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\1\ The Trust, on behalf of the Portfolio, has elected to be
governed by rule 18f-1 under the Act. This election commits the
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.
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Applicant's Legal Analysis
1. Section 17(a)(2) of the Act prohibits affiliated persons of a
registered investment company, 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
[[Page 43098]]
any person owning 5% or more of the outstanding voting securities of
such other person. Each Affiliated Shareholder owns beneficially and of
record in excess of 5% of the Portfolio's shares and thus, is an
affiliated person of the Portfolio. To the extent that a Proposed In-
Kind Redemption would be considered to involve the purchase of
portfolio securities (of which the Portfolio is not the issuer) by an
Affiliated Shareholder, the Proposed In-Kind Redemption would be
prohibited by section 17(a)(2).
2. Section 17(b) provides that the SEC shall exempt a proposed
transaction from section 17(a) 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 believes that the terms of each Proposed In-Kind
Redemption meet the standards set forth in section 17(b). Because the
board is responsible for making the determination and has decided to
redeem shares in-kind, an Affiliated Shareholder has no choice as to
the type of consideration to be received in connection with its
redemption request and neither the Adviser nor the Affiliated
Shareholder has any opportunity to select specific portfolio securities
to be distributed to an Affiliated Shareholder. Instead, the Proposed
In-Kind Redemptions will be effected through a pro rata distribution of
all portfolio securities held by the Portfolio after excluding certain
securities specified below. In addition, the Proposed In-Kind
Redemptions are consistent with the investment policies of the Trust
and the Portfolio, as set forth in the Portfolio's prospectus, which
expressly discloses the Portfolio's ability to redeem shares in-kind.
Finally, applicant believes that the Proposed In-Kind Redemptions are
consistent with the general purposes of the Act to protect security
holders of investment companies from discrimination among holders of
securities issued by such companies, and from self-dealing on the part
of investment company affiliates to the detriment of other security
holders. The Affiliated Shareholders would not receive any advantage
not available to any other shareholder requesting a comparable
redemption.
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 Portfolio distributed to an
Affiliated Shareholder 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 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 Portfolio, or (ii) permit
transfers of ownership of a 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 In-Kind Securities distributed to an Affiliated Shareholder
will be valued in the same manner as they would be valued for purposes
of computing the Portfolio'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 trade price on the exchange on
which the securities are principally traded, or, if there is no such
reported price, is the last quoted bid price.
4. The Portfolio 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 such 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 Secretary.
[FR Doc. 96-21159 Filed 8-19-96; 8:45 am]
BILLING CODE 8010-01-M
