[Federal Register Volume 61, Number 25 (Tuesday, February 6, 1996)]
[Notices]
[Pages 4496-4498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2404]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21723; 812-9768]
The Lipper Fund, Inc., et al.; Notice of Application
January 30, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
-----------------------------------------------------------------------
APPLICANTS: The Lipper Funds (the ``Fund''), Lipper Intermediate
Investment Fund No. 2, L.P. (the ``Debt Partnership''), Prime Lipper
Europe Fund, L.P. (the ``European Equities Partnership'' and, together
with the Debt Partnership, the ``Partnerships''), Lipper & Company,
L.P. (``Lipper''), Lipper & Company, L.L.C. (``LAC''), and Prime Lipper
Asset Management (``Prime Lipper'').
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: Applicants seek an order that would permit the
exchange of assets of the Partnerships for shares of series of the
Fund, after which each Partnership will dissolve and distribute the
shares pro rata to its partners.
FILING DATE: The application was filed on August 23, 1995 and amended
on November 30, 1995 and January 11, 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
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 February 26,
1996, 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
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, 101 Park Avenue, New York, New York 10178.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Staff Attorney, at
(202) 942-0574, or Alison E. Baur, 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.
Applicants' Representations
1. The Partnerships are Delaware limited partnerships that
commenced operations in 1992. Each Partnership is an investment
partnership which is not registered under the Act in reliance on
section 3(c)(1) of the Act. Interests in the Partnerships have not been
registered under the Securities Act of 1933 in reliance on section 4(2)
of the Securities Act.
2. The Fund is an open-end management investment company organized
as a Maryland corporation. The Fund filed a notification of
registration under the Act and a registration statement on Form N-1A on
October 10, 1995. The Fund's registration statement was declared
effective on December 29, 1995. The Fund will offer series of shares,
including Lipper High Income Bond Fund (``LHIF'') and Prime Lipper
Europe Equity Fund (``PLEF,'' and, together with LHIF, the
``Portfolios''). Each Portfolio has separate classes of shares
consistent with applicable state law and rule 18f-3 under the Act.
3. Lipper, a Delaware limited partnership, is the sole general
partner of the Debt Partnership. LAC, a Delaware limited liability
company, is an affiliate of Lipper and serves as investment adviser for
LHIF. Prime Lipper, a New York general partnership,
[[Page 4497]]
is the sole general partner of the European Equities Partnership and is
PLEF's investment adviser. Lipper, LAC and Prime Lipper are each
registered under the Investment Advisers Act of 1940. Each of Lipper
and Prime Lipper has maintained an investment in the Partnerships for
which it is general partner of not less than $500,000 or 1% of the net
assets of such Partnerships, and is allocated net income, gains, and
losses of the Partnerships in accordance with its investment.\1\
\1\ Lipper and Prime Lipper received their respective general
partnership interests in the Debt Partnership and the European
Equities Partnership exclusively in exchange for cash and/or
securities.
---------------------------------------------------------------------------
4. Applicants propose that each Partnership exchange its assets for
Portfolio shares, after which the Partnerships would dissolve and
distribute the shares of its partners on a pro rata basis (``Portfolio
Transfers''). After the Portfolio Transfers, partners of the
Partnership will constitute all of the holders of the Portfolio shares.
The Portfolio Transfers were proposed to permit the limited partners to
pursue, as shareholders of the Portfolios, substantially the same
investment objectives and policies in a potentially larger fund with
potentially greater economies of scale, with a substantially lower
minimum initial investment, greater liquidity, and more frequent access
to information concerning the value of their investments.
5. Under the Portfolio Transfers, the Debt Partnership will
exchange its Partnership interests for shares of LHIF. The investment
objective of the Debt Partnership is to achieve high yields while
preserving capital, and LHIF's investment objective is high current
income. The Debt Partnership invests primarily in a diversified
portfolio of yield-oriented securities with maturities of less than 10
years, and LHIF will do the same. The portfolio manager of the Debt
Partnership serves as the portfolio manager of LHIF.
6. The European Equities Partnership will exchange its Partnership
interests for shares of PLEF. The investment objective of the European
Equities Partnership is to achieve capital appreciation by investing in
European stocks with attractive growth potential, and PLEF's investment
objective is substantially the same. The portfolio manager of the
European Equities Partnership will serve as the portfolio manager of
PLEF.
7. Each limited partner of each Partnership may elect to (a)
request that the general partner of the Partnership transfer all or a
portion of the limited partner's distributive share of assets to the
corresponding Portfolio in exchange for shares of the Portfolio, and/or
(b) receive portfolio securities, cash and/or cash equivalents.
Following the liquidations, each Partnership will be terminated in
accordance with the appropriate limited partnership agreement and
Delaware law.
8. Prior to the liquidations, each Partnership will discharge all
of its known liabilities and obligations. If necessary, each
Partnership also will establish reserves to cover unknown and
contingent liabilities and obligations. Any amounts remaining in a
reserve that are not used to pay such liabilities will be distributed
pro rata to the limited partners of the corresponding Partnership. All
unsatisfied liabilities and obligations of a Partnership will be the
responsibility of its general partner. The Portfolios are not expected
to assume any liabilities, expenses or obligations of the Partnerships.
9. The general partners of the Partnerships have considered the
desirability of the Portfolio Transfers from the point of view of the
Partnerships, and have concluded that (a) the Portfolio Transfers are
in the best interests of each Partnership and its limited partners, and
(b) the Portfolio Transfers will not dilute the interests of the
limited partners when their Partnership interests are converted to
Portfolio shares.
10. In a meeting of the Fund's Board of Directors, a majority of
the directors, including a majority of the non-interested directors,
concluded that (i) the Portfolio Transfers are in the best interests of
each Portfolio and the limited partners, (ii) the Portfolio Transfers
will not dilute the interests of each Portfolios' shareholders and the
Partnerships' limited partners, and (iii) the terms of the Portfolio
Transfers have been designed to meet the criteria contained in section
17(b) of the Act, that the Portfolio Transfers are reasonable and fair,
do not involve overreaching, and are consistent with the policies of
each Portfolio.
11. The Portfolios will acquire the Partnerships' portfolio
securities at their independent ``current market price,' as defined in
rule 17a-7 under the Act.\2\ No Portfolio will acquire securities that,
in the opinion of its adviser, would result in a violation of the
Portfolio's investment objectives, policies, or restrictions.
\2\ Rule 17a-7 exempts purchases or sales of securities from
section 17(a) for which market quotations are readily available
between investment companies affiliated solely by reason of having a
common adviser, common directors, and or common officers.
---------------------------------------------------------------------------
12. Lipper, LAC and Prime Lipper have agreed to pay all expenses of
the Portfolio Transfers, other than the initial organizational expenses
of the Fund. There are expected to be no additional expenses incurred
in connection with the transaction, and no brokerage commission or
other remuneration will be paid in connection with the transfers.
Applicants' Legal Conclusions
1. Section 17(a) of the Act prohibits an affiliated person of a
registered investment company, or an affiliated person of such person,
from selling to or purchasing from such investment company any security
or other property. Section 2(a)(3) of the Act provides, in pertinent
part, that an affiliated person includes any person directly or
indirectly controlling, controlled by, or under common control with,
such other person. Applicants contend that the Partnerships may be
affiliated persons of the Fund by, among other reasons, being under the
common control of Lipper or the advisers. LAC and Prime Lipper may be
affiliated persons of the Fund because, at the time of the Portfolio
Transfers, they are expected to be the sole shareholders of the Fund.
Thus, applicants submit, the proposed exchange may be prohibited by
section 17(a).
2. Section 17(b) authorizes the SEC to exempt a proposed
transaction from section 17(a) if evidence establishes that the terms
of the transaction, including the consideration to be paid or received,
are reasonable and fair and do not involve overreaching on the part of
any person concerned, the transaction is consistent with the policies
of the registered investment company, and the transaction is consistent
with the general purposes of the Act.
3. Applicants assert that the Portfolio Transfers satisfy the
criteria of section 17(b). They contend that, given that each Portfolio
and its corresponding Partnership has similar investment objectives and
policies, the Portfolios will attempt to assemble a portfolio of
securities substantially similar to that held by the Partnerships.
Applicants assert that, by acquiring the Partnerships' portfolio
securities at their independent ``current market price,'' the price
will be as advantageous to the Fund as open-market purchases. In
addition, by acquiring suitable securities from the Partnerships, the
Portfolios will avoid incurring brokerage and other transaction costs.
4. Applicants contend that the Portfolio Transfers can be viewed as
a change in the form in which the assets are held, rather than as a
disposition giving rise to section 17(a) concerns.
[[Page 4498]]
Applicants submit that the Portfolio Transfers are consistent with the
general purposes of the Act because they do not give rise to the abuses
that section 17(a) was designed to prevent, and, in fact, are
consistent with the purposes underlying rule 17a-7.
For the Commission, by the Division of Investment Management
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-2404 Filed 2-5-96; 8:45 am]
BILLING CODE 8010-01-M