[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]



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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'').

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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.
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    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.
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    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