[Federal Register Volume 64, Number 55 (Tuesday, March 23, 1999)]
[Notices]
[Pages 14023-14024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6972]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-2371; 812-11322]
The Brinson Funds, et al.; Notice of Application
March 17, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under sections 6(c) and
17(b) of the Investment Company Act of 1940 (the ``Act'') from section
17(a) of the Act.
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SUMMARY OF APPLICATION: Applicants seek an order to permit redemptions
in-kind of shares of certain registered investment companies by certain
shareholders who are affiliated persons of the investment companies.
APPLICANTS: The Brinson Funds (``Brinson''), Brinson Relationship Funds
(the ``Trust''), and Brinson Partners, Inc. (``Partners'').
FILING DATES: The application was filed on September 24, 1998, and
amended on March 3, 1999.
HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief 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 April
12, 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 may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC 450 5th Street, NW, Washington, D.C. 20549-
0609. Applicants, Brinson Partners, Inc., 209 South LaSalle Street,
Chicago, IL 60604-1295.
FOR FURTHER INFORMATION CONTACT:
Lisa McCrea, Attorney Adviser, at (202) 942-0562, or Nadya B. Roytblat,
Assistant Director, 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 5th Street, NW., Washington, DC
20549-0102 (tel. 202-942-8090).
Applicants' Representations
1. Brinson, a Delaware business trust, is an open-end management
investment company registered under the Act, and currently consists of
thirteen series (the ``Brinson Funds''). The Trust, a Delaware business
trust, is an open-end management investment company registered under
the Act, and currently consists of seventeen series (the ``Trust
Funds''). The Brinson Funds, the Trust Funds, and other registered
open-end management investment companies or series thereof that may in
the future be advised by Partners or any person controlling, controlled
by, or under common control with Partners, are referred to collectively
as the ``Funds.''
2. Partners is registered as an investment adviser under the
Investment Advisers Act of 1940. Partners provides investment advisory
services to the Funds, and manages the daily investment and business
affairs of the Funds, subject to the policies of the boards of trustees
of Brinson and the Trust (the ``Boards''). Each of the Boards has three
trustees, all of whom are not ``interested persons'' as defined in
section 2(a)(19) of the Act (the ``Non-Interested Trustees'').
3. The prospectuses of the Brinson Funds and the Trust Funds
provide that, if condition exist which make cash payments undesirable,
any request for redemption of a Fund's shares may be honored by making
payment in whole or impart in securities. The payment would be made on
a pro rata basis, monitored by Partners, which the securities valued in
the same manner as they would be for purposes of computing the Fund's
net asset value. This redemption procedure presently applies to all
shareholders other than shareholders who are ``affiliated persons'' of
the Funds within the meaning of section 2(a)(3) of the Act (``Non-
Covered Shareholders'').
4. Applicants request relief to permit the Funds to satisfy
redemption requests make by shareholders who are ``affiliated persons''
of the Funds solely within the meaning of section 2(a)(3)(A) of the Act
(``Covered Shareholders'') because they own 5% or more of a Fund's
outstanding shares by distributing portfolio securities in kind.
Applicant's Legal Analysis
1. Section 17(a)(2) of the Act makes it unlawful for an affiliated
person of a registered investment company or an affiliated person of
such a person, 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). Under section 2(a)(3)(A)
of the Act, an ``affiliated person'' includes any person owning 5% or
more of the outstanding voting securities of such other person.
Applicants state that to the extent that an in-kind redemption could be
deemed to involve the purchase of portfolio securities by a Covered
Shareholder, the proposed redemption in-kind would be prohibited by
section 19(a)(2).
2. Section 17(b) authorizes the SEC to exempt a proposed
transaction from section 17(a) provided that: (a) the terms of the
proposed transaction, including the consideration to be paid or
received, are fair and reasonable and do not involve overreaching on
the part of any person concerned; (b) the 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 SEC may exempt classes
of persons or transactions from the Act, where an 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 the provisions of section 17(a) of the Act to
permit Covered Shareholders to redeem their shares in-kind from the
Funds. 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 proposed transactions meet the
standards set forth in sections 6(c) and 17(b) of the Act. Applicants
assert that the terms of the proposed in-kind redemptions are
reasonable and fair. Applicants state that Covered Shareholders who
wish to redeem shares receive the same ``in-kind'' distribution of
securities and cash on the same basis as Non-Covered Shareholders
wishing to redeemshares. Applicants further state that the securities
to be distributed in-kind will be valued in the same manner as that
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used by each Fund to determine its net asset value.
6. Applicants state that the proposed in-kind redemptions are
consistent with the investment policies of the Funds. Applicants also
state that the proposed in-kind redemptions are consistent with the
general purposes of the Act because there will not be discriminatory
practices on the part of investment company affiliates to the detriment
of other security holders.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The portfolio securities distributed 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 and
asked prices are available.
2. The In-Kind Securities will be distributed 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 a Fund, 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. Cash will be paid for that portion of a Fund'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 receivable sand prepaid
expenses), net of all liabilities (including accounts payable). In
addition, a Fund 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 will be valued in the same manner as they
would be valued for purposes of computing a Fund'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 sales price
on the exchange on which the securities are primarily traded or the
last sales price on the national securities market, or, if the
securities are not listed on an exchange or the national securities
market, or if there is no such reported price, the average of the most
recent bid and asked price (or, if no such price is available, the last
quoted bid price).
4. The Trusts' Boards, including a majority of the Non-Interested
Trustees, will determine no less frequently then 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 each affected Fund as reflected in its prospectus. In
addition, the Boards will make and approve such changes as they deem
necessary in the procedures for monitoring the applicants' compliance
with the terms and conditions of the application.
5. The relevant Funds will maintain and preserve for a period of
not less than six years from the end of the fiscal year in which the
proposed in-kind redemption occurs, the first two years in an easily
accessible place, a written record of each such redemption setting
forth a description of each security distributed, the identity of the
Covered Shareholder, 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. 99-6972 Filed 3-22-99; 8:45 am]
BILLING CODE 8010-01-M