[Federal Register Volume 63, Number 141 (Thursday, July 23, 1998)]
[Notices]
[Pages 39606-39607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19650]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-23318; 812-11104]
The RBB Fund, Inc. and BEA Associates; Notice of Application
July 16, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (``Act'') for an exemption from
section 12(d)(1)(G)(i)(II) of the Act.
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SUMMARY OF APPLICATION: Applicants request an order that would permit a
fund of funds relying on section 12(d)(1)(G) to invest directly in
securities and other instruments.
APPLICANTS: The RBB Fund, Inc. (the ``Company'') and BEA Associates
(``BEA''). The requested order also would extend to any existing or
future open-end management investment company or series thereof advised
by BEA (an ``Upper Tier Fund'') that wishes to invest in a registered
open-end management investment company or series thereof that is
advised by BEA and is part of the same ``group of investment
companies'' (as defined in section 12(d)(1)(G)(ii) of the Act)
(together with the series of the Company excluding the BEA Long-Short
Equity Fund, the ``Underlying Funds'') as the investing Upper Tier
Fund.\1\
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\1\ All existing entities that currently intend to rely on the
order are named as applicants and any Upper Tier Fund that may rely
on this order in the future will do so only in accordance with the
terms and conditions of the application.
FILING DATES: The application was filed on April 15, 1998. Applicants
have agreed to file an amendment during the notice period, the
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substance of which is included in this notice.
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
[[Page 39607]]
August 10, 1998, 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
who wish to be notified of a hearing may request notification by
writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicants, 153 East 53rd Street, New York, New York 10022.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Staff Attorney, at
(202) 942-0574, or Edward P. Macdonald, 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 is available 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. The Company, an open-end management investment company
registered under the Act and organized as a Maryland corporation,
currently consists of twenty-two series (the ``Funds''). BEA, an
investment adviser registered under the Investment Advisers Act of
1940, is the investment adviser for twelve of the Funds, including the
BEA Long Short Equity Fund (the ``Equity Fund'') and the BEA Long-Short
Market Neutral Fund (the ``Market Neutral Fund'').
2. The Equity Fund will seek a total return greater than that of
the Standard & Poor's 500 Composite Stock Price Index (the ``S&P 500
Index'') by investing in shares of the Market Neutral Fund, while also
investing in S&P 500 Index futures, options on S&P 500 Index futures,
and equity swap contracts (collectively, ``Index Securities''). The
Market Neutral Fund seeks long-term capital appreciation while
maintaining minimal exposure to general equity market risk by taking
long positions in stocks that BEA has identified as undervalued and
short positions that BEA has identified as overvalued. By investing in
shares of the Market Neutral Fund, the Equity Fund seeks to add the
return generated by the ``market neutral strategy'' of the Market
Neutral Fund. The Equity Fund and the Upper Tier Funds would also like
to retain the flexibility to invest in securities and financial
instruments, including financial futures, swaps, reverse repurchase
agreements, and options on currencies.
3. With respect to the Market Neutral Fund and the Equity Fund, BEA
intends to reduce its advisory fees and bear certain expenses to the
extent that each Fund's total annual operating expenses (excluding
nonrecurring account fees and extraordinary expenses) exceed a
specified percentage of net assets, and, in the case of the Market
Neutral Fund, a performance adjustment will be applied to the advisory
fee of the Market Neutral Fund. Any advisory fee that BEA charges to
the Equity Fund or Upper Tier Funds will be for services that are in
addition to, rather than duplicative of, services provided to the
Market Neutral Fund and the Underlying Funds. Applicants believe that
the proposed operation of the Equity Fund and Upper Tier Funds will
benefit shareholders by lowering transaction and operational costs.
Applicants' Legal Analysis
1. Section 12(d)(1)(A) of the Act provides that no registered
investment company may acquire securities of another investment company
if such securities represent more than 3% of the acquired company's
outstanding voting stock, more than 5% of the acquiring company's total
assets, or if such securities, together with the securities of other
investment companies, represent more than 10% of the acquiring
company's total assets. Section 12(d)(1)(B) provides that no registered
open-end investment company may sell its securities to another
investment company if the sale will cause the acquiring company to own
more than 3% of the acquired company's voting stock, or if the sale
will cause more than 10% of the acquired company's voting stock to be
owned by investment companies.
2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1)
will not apply to securities of an acquired company purchased by an
acquiring company if: (a) The acquiring company and the acquired
company are part of the same group of investment companies; (b) the
acquiring company holds only securities of acquired companies that are
part of the same group of investment companies, government securities,
and short-term paper; (c) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) by a securities association registered under section 15A of the
Securities Exchange Act of 1934 or the Commission; and (d) the acquired
company has a policy that prohibits it from acquiring securities of
registered open-end investment companies or registered unit investment
trusts in reliance on section 12(d)(1)(F) or (G).
3. Applicants state that the proposed arrangement would comply with
the provisions of section 12(d)(1)(G), but for the fact that the Equity
Fund's investment policies contemplate that it will invest in Index
Securities and other securities and financial instruments.
4. Section 12(d)(1)(J) provides that the SEC may exempt persons or
transactions from any provision of section 12(d)(1) if and to the
extent the exemption is consistent with the public interest and the
protection of investors. Applicants believe that permitting the Equity
Fund or other Upper Tier Funds to invest in securities as described in
the application would not raise any of the concerns that the
requirements of section 12(d)(1)(G) were designed to address.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. Before approving any advisory contract under section 15 of the
Act, the board of directors of the Company on behalf of the Equity Fund
or Upper Tier Fund, including a majority of the directors who are not
``interested persons'' as defined in section 2(a)(19) of the Act, will
find that advisory fees, if any, charged under such contract are based
on services provided that are in addition to, rather than duplicative
of, services provided under any Underlying Fund's advisory contract.
The finding, and the basis upon which the finding was made, will be
recorded fully in the Company's minute books on behalf of the Equity
Fund or Upper Tier Fund.
2. Applicants will comply with all provisions of section
12(d)(1)(G) of the Act, except for section 12(d)(1)(G)(i)(II) to the
extent that it restricts the Equity Fund or an Upper Tier Fund from
investing in securities as described in the application.
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-19650 Filed 7-22-98; 8:45 am]
BILLING CODE 8010-01-M