[Federal Register Volume 64, Number 166 (Friday, August 27, 1999)]
[Notices]
[Pages 46963-46964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22263]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23959, 812-11724]
Clarion CMBS Capital Value Fund and Clarion Capital, LLC; Notice
of Application
August 20, 1999.
ACTION: Notice of an application 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.
Summary of Application: Applicants seek an order to permit in-kind
redemptions of shares of Clarion CMBS Value Fund, Inc. (the ``Fund'')
held by certain affiliated shareholders.
Applicants: The Fund and Clarion Capital, LLC (the ``Adviser'').
Filing Dates: The application was filed on August 6, 1999.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on September 14, 1999, 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 Commission's Secretary.
ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC
20549-0609. Applicants, c/o Shearman & Sterling 599, Lexington Avenue,
New York, New York 10022.
FOR FURTHER INFORMATION CONTACT: George J. Zornada, Branch Chief, at
(202) 942-0564 (Office of Investment Company Regulation, Division of
Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington,
DC 20549-0102 (tel. 202-942-8090).
Applicants' Representations
1. The Fund is registered under the Act as an open-end management
investment company and organized as a Maryland corporation. The Adviser
is registered as an investment adviser under the Investment Advisers
Act of 1940, and serves as investment adviser to the Fund.
2. Applicants request relief to permit the Fund, to satisfy
redemption requests made by any shareholder who, at the time of such
redemption request, is an affiliated person of the Fund solely by
reason of owning, controlling, or holding with the power to vote, five
percent or more of the Fund's shares (``Covered Shareholder'') by
distributing portfolio securities in-kind. The relief sought would not
extend to shareholders who are ``affiliated persons'' of the Fund
within the meaning of sections 2(a)(3)(B) through (F) of the Act.
3. The Fund's prospectus provides that, generally, the Fund may
satisfy all or part of a redemption request by a distribution in-kind
of portfolio securities.\1\ The board of directors of the Fund (the
``Board''), including a majority of the directors who are not
``interested persons'' as defined in section 2(a)(19) of the Act
(``Non-Interested Directors''), have determined that it would be in the
best interests of the Fund and its shareholders to pay to a Covered
Shareholder the redemption price for shares of the Fund in-kind.
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\1\ The Fund has elected to be governed by rule 18f-1 under the
Act.
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Applicants' Legal Analysis
1. Section 17(a)(2) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
such person, acting as principal, from knowingly purchasing any
security or other property (except securities of which the seller is
the issuer) from the registered investment company. Section 2(a)(3)(A)
of the Act defines ``affiliated person'' of another person to include
any person owning 5% or more of the outstanding voting securities of
the other person. Applicants state that to the extent that an in-kind
redemption could be deemed to involve the purchase of portfolio
securities (of which the Fund is not the issuer) by a Covered
Shareholder, the proposed redemption in-kind would be prohibited by
section 17(a)(2).
2. Section 17(b) of the Act provides that, notwithstanding section
17(a) of the Act, the Commission shall exempt a proposed transaction
from section 17(a) of the Act 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. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction, or any class or classes of
persons, securities or transactions, from the provisions of the Act, to
the extent that such 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.
4. Applicants request an order under sections 6(c) and 17(b) of the
Act exempting them from section 17(a) of the Act to permit Covered
Shareholders to redeem their shares of the Fund in-kind. The requested
order would not apply to redemptions by shareholders who are affiliated
persons of the Fund within the meaning of sections 2(a)(3)(B) through
(F) of the Act.
5. Applicants submit that the terms of the proposed in-kind
redemptions by Covered Shareholders meet the standards set forth in
sections 6(c) and 17(b) of the Act. Applicants assert that neither the
Fund nor the Covered Shareholders will have any choice as to the type
of consideration to be received in connection with a redemption
request, and neither the Adviser nor the Covered Shareholder will have
an opportunity to select the specific portfolio securities to be
distributed. Applicants further state that the portfolio securities to
be distributed will be valued according to an objective, verifiable
standard and that the in-kind redemptions are consistent with the
investment policies of the Fund. Applicants also state that the
proposed in-kind redemptions are consistent with the general purposes
of the Act because the Covered Shareholders would not receive any
advantage not available to other redeeming shareholders.
Applicants' Conditions
Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
1. The securities distributed to both Covered 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 prices are available.
2. The In-Kind Securities will be distributed by the Fund on a pro
rata basis after excluding: (a) securities which could not be publicly
offered or sold in the United States without being registered under the
Securities Act of 1933; (b) certain portfolio positions (such as
futures and options contracts and repurchase agreements) that, although
they may be liquid and
[[Page 46964]]
marketable, involve the assumption of contractual obligations, require
special trading facilities or can only be traded with an institutional
counterparty to the transaction; (c) cash equivalents (such as
certificates of deposit, commercial paper, and repurchase agreements);
(d) other assists which are not readily distributable (including
receivables and prepaid expenses); and (e) portfolio securities
representing fractional shares or units, odd lot securities and
accruals on such securities. Cash will be paid for the portion of the
in-kind distribution represented by assets set forth in (a)-(e) less
liabilities (including accounts payable).
3.The In-Kind Securities distributed to the Covered Shareholders
and non-affiliated shareholders will be valued in the same manner as
they would be valued for purposes of computing each Fund's net asset
value.
4. The Fund's Board, including a majority of the Non-Interested
Directors, will determine no less frequently than annually: (a) whether
the In-Kind Securities, if any, have been distributed in accordance
with conditions 1 and 2; (b) whether the In-Kind Securities, if any,
have been valued in accordance with condition 3; and (c) whether the
distribution of any such In-Kind Securities is consistent with the
policies of the Fund as reflected in its prospectus. In addition, the
Board will make and approve such changes in the procedures as it deems
necessary for monitoring the Fund's compliance with the terms and
conditions of this Application.
5. The Fund 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 by a Covered Shareholder occurs, the first two years in
an easily accessible place, a written record of each such redemption
setting forth the identity of the Covered Shareholder, a description of
each security distributed in-kind, the terms of the in-kind
distribution, and the information or materials upon which the valuation
was made.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-22263 Filed 8-26-99; 8:45 am]
BILLING CODE 8010-01-M
