[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Notices]
[Pages 43097-43098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21159]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22140; 812-10214]


The Adivsors' Inner Circle Fund; Notice of Application

August 14, 1996.
AGENCY: Securities and Exchange Commission (the ``SEC'').

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

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APPLICANT: The Advisors' Inner Circle Fund (the ``Trust''), on behalf 
of A+P Large-Cap Value Fund (the ``Portfolio'').

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: Applicant requests an order to permit certain 
shareholders who are ``affiliated persons'' of its Portfolio series, 
solely by reason of owning more than 5% of the Portfolio's shares, to 
redeem Portfolio shares for payment in-kind.

FILING DATE: The application was filed on June 20, 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 
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 September 9, 
1996, 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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street, NW., Washington, DC 20549. 
Applicant, 2 Oliver Street, Boston, MA 02109.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 942-0581, or Robert A. Robertson, 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.

Applicant's Representations

    1. The Trust, an open-end management investment company established 
as a Massachusetts business trust, currently offers nine portfolios, 
including the Portfolio. Five of the Trust's seven trustees are not 
``interested persons'' (as defined in section 2(a)(19) of the Act) (the 
``Independent Trustees'') of the Trust. The investment objective of the 
Portfolio is to seek total return. It seeks to achieve this objective 
by investing primarily in common stocks of large capitalization 
companies.
    2. Aronson & Partners (the ``Adviser'') has acted as the 
Portfolio's investment adviser since its date of inception pursuant to 
an advisory agreement dated October 15, 1993. The Adviser is registered 
as an investment adviser under the Investment Advisers Act of 1940.
    3. As of June 17, 1996, Cooper Health Care Retirement Plan, 
Medlantic Health Care (Corporate), Medlantic Health Care (Retirement) 
and General Service Foundation (collectively, the ``Affiliated 
Shareholders'') owned beneficially and of record approximately 17%, 
33.4%, 35.6%, 10.6%, respectively, of the Portfolio's outstanding 
shares. At such time, each Affiliated Shareholder was an ``affiliated 
person'' of the Portfolio as defined in section 2(a)(3)(A) of the Act 
because each owned more than 5% of the shares of the Portfolio. Each 
Affiliated Shareholder will continue to be an affiliated person of the 
Portfolio until the redemptions described below are effected.
    4. Each Affiliated Shareholder has notified the Trust that it 
expects to redeem its shares of the Portfolio and place the proceeds in 
a separate investment advisory account to be managed by the Adviser. 
Shares of the Portfolio may be redeemed at the net asset value per 
share next determined after the Trust's transfer agency receives a 
proper redemption request. The Portfolio's prospectus and statement of 
additional information provide that, in limited circumstances, the 
Portfolio may satisfy all or part of a redemption request by delivering 
portfolio securities to a redeeming shareholder if the board of 
trustees of the Trust determines that it is appropriate in order to 
protect the best interests of the Portfolio and its shareholders. The 
board (including all of the Independent Trustees) has determined that 
it would be in the best interests of the Portfolio and its shareholders 
to pay to each Affiliated Shareholder the redemption price for its 
shares substantially in-kind.
    5. The Trust, in accordance with its redemption policies,\1\ 
proposes to pay the first $250,000 of each such redemption in cash and 
the remainder in the form of a proportionate distribution of each 
portfolio security held by the Portfolio (the ``Proposed In-Kind 
Redemptions'') 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 the Portfolio, 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. Securities to be distributed 
pursuant to the Proposed In-Kind Redemptions will be further limited to 
securities which are traded on a public securities market or for which 
quoted bid prices are available. Cash will be paid for that portion of 
the Portfolio'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 
receivables and prepaid expenses), net of all liabilities (including 
accounts payable). In addition, the Portfolio 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 Proposed 
In-Kind Redemptions), fractional shares, and accruals on such 
securities.
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    \1\ The Trust, on behalf of the Portfolio, has elected to be 
governed by rule 18f-1 under the Act. This election commits the 
Portfolio, during any 90-day period for any one shareholder, to 
redeem its shares solely in cash up to the lesser of $250,000 or 1% 
of the Portfolio's net asset value at the beginning of such period.
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Applicant's Legal Analysis

    1. Section 17(a)(2) of the Act prohibits affiliated persons of a 
registered investment company, 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). Section 
2(a)(3)(A) of the Act defines ``affiliated person'' to include

[[Page 43098]]

any person owning 5% or more of the outstanding voting securities of 
such other person. Each Affiliated Shareholder owns beneficially and of 
record in excess of 5% of the Portfolio's shares and thus, is an 
affiliated person of the Portfolio. To the extent that a Proposed In-
Kind Redemption would be considered to involve the purchase of 
portfolio securities (of which the Portfolio is not the issuer) by an 
Affiliated Shareholder, the Proposed In-Kind Redemption would be 
prohibited by section 17(a)(2).
    2. Section 17(b) provides that the SEC shall exempt a proposed 
transaction from section 17(a) if evidence establishes that: (a) The 
terms of the proposed transaction are reasonable and fair and do not 
involve overreaching; (b) the proposed 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. Applicant believes that the terms of each Proposed In-Kind 
Redemption meet the standards set forth in section 17(b). Because the 
board is responsible for making the determination and has decided to 
redeem shares in-kind, an Affiliated Shareholder has no choice as to 
the type of consideration to be received in connection with its 
redemption request and neither the Adviser nor the Affiliated 
Shareholder has any opportunity to select specific portfolio securities 
to be distributed to an Affiliated Shareholder. Instead, the Proposed 
In-Kind Redemptions will be effected through a pro rata distribution of 
all portfolio securities held by the Portfolio after excluding certain 
securities specified below. In addition, the Proposed In-Kind 
Redemptions are consistent with the investment policies of the Trust 
and the Portfolio, as set forth in the Portfolio's prospectus, which 
expressly discloses the Portfolio's ability to redeem shares in-kind. 
Finally, applicant believes that the Proposed In-Kind Redemptions are 
consistent with the general purposes of the Act to protect security 
holders of investment companies from discrimination among holders of 
securities issued by such companies, and from self-dealing on the part 
of investment company affiliates to the detriment of other security 
holders. The Affiliated Shareholders would not receive any advantage 
not available to any other shareholder requesting a comparable 
redemption.

Applicant's Conditions

    Applicant agrees that any order granting the requested relief will 
be subject to the following conditions:
    1. The portfolio securities of the Portfolio distributed to an 
Affiliated Shareholder 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 prices are available.
    2. The In-Kind Securities will be distributed by the Portfolio 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 the Portfolio, or (ii) permit 
transfers of ownership of a 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 the Portfolio'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 receivables and prepaid expenses), net of all liabilities 
(including accounts payable). In addition, the Portfolio 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 distributed to an Affiliated Shareholder 
will be valued in the same manner as they would be valued for purposes 
of computing the Portfolio'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 trade price on the exchange on 
which the securities are principally traded, or, if there is no such 
reported price, is the last quoted bid price.
    4. The Portfolio will maintain and preserve for a period of not 
less than six years from the end of the fiscal year in which a proposed 
in-kind redemption occurs, the first two years in an easily accessible 
place, a written record of such redemption setting forth a description 
of each security distributed, 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. 96-21159 Filed 8-19-96; 8:45 am]
BILLING CODE 8010-01-M