[Federal Register Volume 59, Number 77 (Thursday, April 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9581]


[[Page Unknown]]

[Federal Register: April 21, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20220; International Series Release No. 650/812-7598]

 

The Irish Investment Fund, Inc.; Notice of Application

April 14, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (``1940 Act'').

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APPLICANT: The Irish Investment Fund, Inc.

RELEVANT 1940 ACT SECTIONS: Exemption requested pursuant to section 
10(f) from the provisions of that section.

SUMMARY OF APPLICATION: Applicant seeks a conditional order to permit 
it to purchase Irish securities during the existence of an underwriting 
syndicate in which affiliated persons of applicant's investment adviser 
participate as principal underwriters.

FILING DATES: The application was filed on September 25, 1990 and 
amended on November 14, 1991, May 13, 1992, and April 13, 1994.

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 May 9, 1994, and 
should be accompanied by proof of service on the 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, NW., Washington, DC 20549. 
Applicant, Exchange Place, Boston, MA 02109.

FOR FURTHER INFORMATION CONTACT:
Felice R. Foundos, Senior Attorney, at (202) 272-2190 or Barry D. 
Miller, Senior Special Counsel, at (202) 272-3018 (Division of 
Investment Management, Office of Investment Company Regulations).

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 Representatives

    1. Applicant, a Maryland corporation, is a registered closed-end 
management investment company. Applicant's investment objective is 
long-term capital appreciation through investment primarily in equity 
securities of Irish companies. In normal circumstances, at least 65% of 
applicant's total assets will be invested in such securities. Applicant 
also may invest in equity and fixed-income securities of companies 
domiciled outside of Ireland that are likely to be affected by 
developments in the Irish economy or in Ireland's international 
economic relations and in certain fixed-income securities, including 
those issued by Irish companies or Irish government entities.
    2. Bank of Ireland Asset Management Limited (``BIAM'') serves as 
applicant's investment adviser. Under an investment advisory agreement, 
BIAM makes investment decisions on behalf of the Fund, prepares and 
makes available research and statistical data, and supervises the 
purchase and sale of securities by the applicant.
    3. BIAM is an indirect wholly-owned subsidiary of the Governor and 
Company of the Bank of Ireland (the ``Bank of Ireland'') and therefore 
is an ``affiliated person'' of the bank within the meaning of section 
2(a)(3) of the Act. The Bank of Ireland is the second largest bank in 
Ireland and, as permitted by Irish law, is frequently involved in 
underwritten public offerings of equity securities in Ireland.

Applicant's Legal Analysis

    4. Section 10(f) of the Act prohibits a registered investment 
company from purchasing securities, during the existence of any 
underwriting or selling syndicate, any security a principal underwriter 
of which is an affiliated person of, among others, the investment 
adviser of such investment company. Because the Bank of Ireland is an 
affiliated person of applicant's investment adviser, applicant is 
prohibited from purchasing securities in underwritten public offerings 
in Ireland in which the Bank of Ireland participates as a principal 
underwriter.
    5. Rule 10f-3 exempts a transaction from the provisions of section 
10(f) if certain conditions are met. Subparagraph (a)(1) of rule 10f-3 
requires that the securities purchased be part of an issue registered 
under the Securities Act of 1933 (the ``Securities Act''). Unless the 
Irish securities are being offered publicly in the United States, they 
are not required to be registered under the Securities Act. 
Accordingly, most transactions in Irish securities cannot meet the 
above condition; however, applicant represents that it will be able to 
satisfy all of the other conditions of rule 10f-3. In addition, 
applicant submits that all securities purchased in Ireland under 
circumstances subject to section 10(f) will be purchased in public 
offerings conducted in accordance with Irish law and the rules and 
regulations of the Irish Stock Exchange; will be listed on the Official 
List (i.e., the First Market) of the Irish Stock Exchange;\1\ and all 
subject Irish issuers will have available to prospective purchasers 
financial statements, audited in accordance with the accounting 
standards of Ireland, for the two years prior to the purchase.
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    \1\The Irish Stock Exchange is comprised of four markets--the 
main market or the ``First Market,'' the Unlisted Securities Market, 
the Exploration Securities Market, and the Small Companies Market.
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    6. An offering in Ireland will be considered a public offering 
under Irish law if it can properly be regarded, in all circumstances, 
as being calculated to result, directly or indirectly, in the offered 
securities becoming available for subscription or purchase by persons 
other than those receiving the offer or invitation, or otherwise not 
being a domestic concern of the person making or receiving it.\2\ 
Primary public offerings take the form of public subscriptions, rights 
issues or open offers with a clawback.\3\ Secondary public offerings 
(i.e., offers to sell existing shares) take the form of public sales. 
Most new capital is raised on the Irish equity market through issuances 
of shares or rights by listed companies. Securityholders of Irish 
listed companies have preemptive rights. These securityholders, 
however, usually waive their preemptive rights on an annual basis to 
enable a nominal amount of shares to be issued on a non-preemptive 
basis. In the case of a large new issue, shareholder approval would be 
required in order to allot and issue new shares.
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    \2\The offer or invitation would be considered to be a domestic 
concern of the person receiving it if that person is a specific 
addressee, or if only that person can avail itself of such offer or 
invitation.
    \3\An open offer with a clawback is a pre-emptive offer made to 
shareholders of the issuer inviting them to apply for shares. The 
shareholders are guaranteed a minimum allotment in proportion to 
their respective holdings. If any shareholder does not apply for his 
minimum allotment, the shares not taken are allotted to persons who 
committed to purchase the shares in the open offer.
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    7. The public offering price is fixed at the time of initial 
issuance and published in the offering prospectus, and the securities 
offered to and purchased by affiliates of underwriters as part of a 
public offering will be offered and sold under the same terms as to the 
general public. With respect to a rights issue, applicant represents 
that the subscription price is fixed and is at a discount to the 
prevailing market price or at the market price. Applicant is aware of 
one unusual instance when the price was fixed at a premium to the 
market price. Applicant, however, will not purchase any securities that 
would be offered at such a premium to market price.
    8. A public offering in Ireland is usually underwritten pursuant to 
an underwriting agreement in which the primary underwriters (as opposed 
to the sub-underwriters) commit to purchase any of the offered 
securities that are not taken up by existing shareholders (after a 
stated subscription period) or sub-underwriters. Typically, sub-
underwriters irrevocably subscribe for a minimum portion of the issue 
at a fixed price. Applicant believes this underwriting arrangement 
effectively satisfies the ``firm commitment'' and ``any/all'' 
requirements of paragraph (a)(3) of rule 10f-3.\4\
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    \4\Rule 10f-3(a)(3) provides that the securities to be purchased 
are offered pursuant to an underwriting agreement under which the 
underwriters are committed to purchase all of the registered 
securities being offered, except those purchased by others pursuant 
to a rights offering, if the underwriters purchase any thereof.
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    9. Applicant represents that the number of subscribers 
participating in a public offering will vary depending on the nature of 
the existing trading market for an issuer's securities and other 
circumstances, either related to the status of the issuer or to general 
economic conditions. Generally, an offering will encompass 
approximately 20 institutional investors in each of Ireland and the 
United Kingdom, 20 other international institutional investors, and 
thousands of retail investors. The applicant is not aware of any 
instance where a public offering was not addressed to the entire 
investment community in Ireland.
    10. Applicant states that securities purchased pursuant to the 
relief granted will be listed or approved for listing on the Official 
List (i.e., the First Market). To be listed on the First Market, a 
company must have capitalization of 700,000 Irish Pounds (or 
approximately $980,000), publish three years of financial results, and 
have at least 25% of its shares in public hands, i.e., held by other 
than affiliates of such company.
    11. In addition to the above requirements, companies seeking to 
list on the Irish Stock Exchange must provide the exchange with a 
formal statement describing the company's business, management and 
financial condition. Companies listed on each of the markets also have 
ongoing reporting requirements which differ in extent according to the 
importance of the market. For instance, companies listed on the First 
Market must submit condensed half-yearly statements and full annual 
statements together with reports of share purchases and sales by 
directors and significant changes in holdings by individual 
shareholders. This information is publicly available. Further, Irish 
law requires, with certain exceptions, any invitation to subscribe or 
purchase shares in a public offering be accompanied by a prospectus 
meeting the disclosure requirements set forth in the Third Schedule to 
the Irish Companies Act. Among other things, the Act requires the 
company to disclose its dividend record, profits and losses for the 
preceding five years. Under the Irish Companies Act, the listing 
requirements for companies on the First Market will be deemed to be, 
for all purposes of the Act, a ``prospectus'' and, therefore, the 
requirement to make Third Schedule disclosures does not apply to these 
companies. The disclosure required under the Irish Stock Exchange rules 
for a company on the First Market, however, is generally more onerous 
than that required under the Irish Companies Act. A notable exception 
to this rule is the First Market companies must provide accounts for 
the preceding three years rather than five years.
    12. The Irish securities laws are essentially self-regulating and 
there is no central agency, except for the Irish Stock Exchange with 
respect to listed companies, with the specific responsibility of 
administering and enforcing the provision of Irish law described above. 
However, issuers are subject to civil claims and criminal prosecutions, 
including criminal prosecutions by the Director of Public Prosecutions 
(akin to the U.S. attorney General). In addition, issuers whose 
securities are listed on the Irish Stock Exchange are subject to 
regulation by the exchange and may be the subject of sanctions, such as 
suspension of trading or de-listing.
    13. The only condition of rule 10f-3 that applicant cannot satisfy 
is the requirement that the securities to be purchased be effectively 
registered under the Securities Act. Applicant states that the 
registration requirement was designed to ensure that the investment 
company will purchase the securities at the public offering price 
(which ordinarily would not exist absent registration), that the 
securities are issued in the ordinary course of business, and that 
adequate disclosure is made with respect to the securities. Applicant 
believes that purchasing the securities at issue pursuant to a public 
offering conducted in accordance with Irish law and the rules and 
regulations of the Irish Stock Exchange, together with a requirement 
that audited financial statements for the previous two years be 
available to all prospective purchasers, provide an adequate substitute 
for the registration requirement. Applicant submits that the 
availability of the financial statements as well as the disclosure 
required under the Irish Companies Act and the rules and regulations of 
the Irish Stock Exchange provide BIAM with sufficient information to 
make informed investment decisions. Taken together with the requirement 
that securities subject to section 10(f) be purchased in accordance 
with Irish law and the rule and regulations of the Irish Stock 
Exchange, investors can be assured that the securities are issued in 
the ``ordinary course of business.''
    14. Applicant further represents that the widespread distribution 
of securities in a public offering in Ireland, the applicable 
prospectus delivery requirements, the fixed offering price at which 
securities are offered and the fact that any such securities would be 
offered to and purchased by unaffiliated purchasers on the same terms 
as any securities purchased by applicant provide for the protection of 
investors.
    15. In light of the foregoing, as well as the protection afforded 
by subparagraphs (a)(2) through (i) of rule 10f-3, applicant believes 
that purchases of securities in the manner described above will not 
raise any of the concerns addressed by section 10(f) and that the 
granting of the requested exemptive order is consistent with the 
protection of investors and with the purposes intended by the 
provisions of rule 10f-3.

Applicant's Conditions

    Applicant requests an exemption from section 10(f) of the Act to 
the extent necessary to permit purchases of securities in underwritten 
offerings in Ireland in which affiliated persons of applicant's 
principal investment adviser participate as principal underwriters, 
subject to the conditions that:
    1. The securities purchased be listed or be approved for listing on 
the Official List (i.e., on the First Market) of the Irish Stock 
Exchange;
    2. With the exception of paragraph (a)(1) of rule 10f-3, all other 
conditions set forth in rule 10f-3 be satisfied;
    3. The foreign securities subject to section 10(f) will be 
purchased in a public offering conducted in accordance with Irish law 
and the rules and regulations of the Irish Stock Exchange; and
    4. All subject Irish issuers will have available to prospective 
purchasers financial statements, audited in accordance with the 
accounting standards of Ireland, for the two years prior to the 
purchase.

    For the Commission, by the Division of Investment Management 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-9581 Filed 4-20-94; 8:45 am]
BILLING CODE 8010-01-M