[Federal Register Volume 61, Number 213 (Friday, November 1, 1996)]
[Notices]
[Pages 56580-56581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28075]



[[Page 56580]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22300; 812-10368]


HLM Global Equity Limited Partnership, et al.; Notice of 
Application

October 28, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').

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

-----------------------------------------------------------------------

APPLICANTS: HLM Global Equity Limited Partnership (the 
``Partnership''), Harding, Loevner Funds, Inc. (the ``Company''), and 
Harding Loevner Management, L.P. (``HLM'').

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 request an order that would permit 
the Partnership to transfer substantially all of its assets and 
liabilities to a series of the Company in exchange for the series' 
shares, which then would be distributed pro rata to partners of the 
Partnership.

FILING DATES: The application was filed on September 27, 1996. By 
letter dated October 24, 1996, applicants' counsel stated that an 
amendment, the substance of which is incorporated herein, will be filed 
during the notice period.

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 November 22, 
1996, and should be accompanied by proof of service on the 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, 600 Fifth Avenue, 26th Floor, New York, New York 
10020.

FOR FURTHER INFORMATION CONTACT:
Brian T. Hourihan, Senior Counsel, at (202) 942-0526, or Mary Kay 
Frech, 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 from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. The Partnership is a New Jersey limited partnership with an 
investment objective of seeking long-term capital appreciation through 
investments in equity securities of companies based both in and outside 
the United States. Investors may purchase or redeem Partnership 
interests (``Units'') at net asset value on a quarterly basis. The 
Partnership is not registered under the Act in reliance on section 
3(c)(1) of the Act. The Units are offered as private placements under 
section 4(2) of the Securities Act of 1933 and Regulation D promulgated 
thereunder, and are sold to institutional investors and high net worth 
individuals. The Partnership's operations are governed by a limited 
partnership agreement (the ``Partnership Agreement'').
    2. HLM is a registered investment adviser under the Investment 
Advisers Act of 1940. HLM serves as the sole general partner of the 
Partnership and has exclusive management and control of the business 
and assets of the Partnership. HLM has authority, on behalf of the 
Partnership, to do any acts that it deems advisable to further the 
purposes of the Partnership and that are not prohibited by the 
Partnership Agreement or applicable law.
    3. The Company, a Maryland corporation, is a registered open-end 
investment company formed as a series company. Currently, the Company 
has four portfolios in registration. The Company proposes to offer a 
portfolio designated as the Global Equity Portfolio (the ``GE 
Portfolio''), which will correspond to the Partnership in terms of 
investment to objectives and policies.
    4. The Company proposes to enter into an advisory agreement with 
HLM, which will provide advisory and portfolio management services to 
the Company that are substantially the same as those it currently 
renders to the Partnership. In addition, the Company proposes to enter 
into an administration agreement with AMT Capital Services, Inc. (``AMT 
Capital'') for the provision of administrative services to, and 
assistance in managing and supervising all aspects of, the general day-
to-day business activities and operations of the Company other than 
investment advisory activities. The Company will pay AMT Capital a 
monthly fee based on the average daily net assets of the Company. The 
GE Portfolio will pay a proportionate share of the fee based on its 
relative net assets.
    5. Applicants propose that, pursuant to an Agreement and Plan of 
Exchange (the ``Plan''), the Company, on behalf of the GE Portfolio, 
will acquire the assets and liabilities of the Partnership in exchange 
for GE Portfolio shares (the ``Exchange''). The GE Portfolio shares 
delivered to the Partnership in the Exchange will have an aggregate net 
asset value equivalent to the net asset value of the assets transferred 
by the Partnership to the Company (except for the effect of 
organizational expenses paid by the GE Portfolio). Upon the 
consummation of the Exchange, the Partnership will distribute the GE 
Portfolio shares to its partners, with each partner receiving a number 
of shares having an aggregate net asset value equivalent to the net 
asset value of the Units in the Partnership held by such partner prior 
to the Exchange (except for the effect of organizational expenses paid 
by the GE Portfolio and the effect of any retained assets and 
liabilities). The Partnership may retain sufficient assets to pay any 
accrued expenses that are not transferred to the GE Portfolio and may 
retain any assets that the GE Portfolio is not permitted to purchase or 
that are reasonably determined to be unsuitable for it. Assets retained 
in excess of any amounts needed to pay expenses will be distributed pro 
rata to the partners of the Partnership. The Partnership will be 
liquidated and dissolved following the distribution.
    6. The Partnership Agreement does not contemplate the conversion of 
the Partnership into a mutual fund format. Accordingly, the general 
partner, HLM, could be deemed not to have the authority under the terms 
of the Partnership Agreement to carry out the Plan unilaterally. HLM, 
therefore, has proposed in the proxy materials to be delivered to each 
limited partner that the limited partners approve the Plan and an 
amendment to the Partnership Agreement to allow it to carry out the 
terms of the Plan. The proxy materials will describe the nature of and 
reasons for the Exchange, the tax and other consequences to the limited 
partners, and other relevant matters, including investment objectives 
and policies, fee structures, and financial information. Limited 
partners who do not wish to participate in the conversion of the 
Partnership will have adequate opportunity to redeem their Partnership 
Units before the conversion occurs. As a result, no limited partner 
will receive GE Portfolio shares in exchange for his or her Partnership 
Units unless such limited partner determines to retain his or her 
investment.

[[Page 56581]]

    7. The expenses of the Exchange will be borne by HLM. GE Portfolio 
organizational expenses will be paid by GE Portfolio and amortized over 
five years. The amortization of such organizational expenses will be 
included in the calculation of annual expenses subject to an expense 
limitation. Any unamortized organizational expenses of the Company at 
the time HLM withdraws its initial investment in the Company will be 
borne by HLM and not the Company.
    8. The management fees for the GE Portfolio will not exceed the 
maximum fees currently paid by the limited partners in the Partnership. 
Applicants expect that other GE Portfolio expenses generally will be 
higher as a percentage of net asset value than the expenses of the 
Partnership. This is primarily because of the increased costs of 
operating as a registered investment company and compliance with 
additional regulatory requirements. HLM will, however, place a cap on 
annual expenses of the GE Portfolio at 1.25% of the average daily net 
assets. This cap will continue at the discretion of, and until further 
notice from, HLM.
    9. The Exchange will establish the GE Portfolio as a successor 
investment vehicle to the Partnership. After the exchange is 
accomplished, HLM intends, for the foreseeable future, to manage the 
assets of the GE Portfolio in substantially the same manner as it had 
previously managed the assets of the Partnership. The Exchange will 
permit partners to pursue as shareholders of the GE Portfolio the same 
investment objectives and policies they were expecting from the 
Partnership without sacrificing the pass-through tax features of the 
Partnership. In addition, shareholders of the GE Portfolio will be able 
to purchase and redeem shares on each business day, as opposed to only 
once per quarter as currently provided under the Partnership Agreement.
    10. The Company's board of directors and HLM have considered the 
desirability of the Exchange from the respective points of view of the 
Company and the Partnership. A majority of the members of the Company's 
board (including a majority of the independent directors) and HLM have 
approved the Exchange and have concluded respectively that: (a) the 
Exchange is desirable as a business matter for both the Company and the 
Partnership; (b) the Exchange is in the best interests of the Company 
and the Partnership; (c) the Exchange is reasonable and fair, does not 
involve overreaching, and is consistent with the policies of the Act; 
(d) the Exchange is consistent with the policies of the Company and the 
Partnership; and (e) the interests of existing shareholders in the 
Company and existing partners in the Partnership will not be diluted as 
a result of the Exchange. These findings, and the basis upon which such 
findings were made, are fully recorded in the respective minute books 
of the Company and HLM.
    11. The Exchange will not be effected unless and until the 
registration statements have been declared effective, the SEC has 
issued the requested order, and the Company has received a favorable 
opinion of counsel with respect to the tax consequences of the 
Exchange.

Applicants' Legal Analysis

    1. Section 17(a) of the Act prohibits any affiliated person of a 
registered investment company, or any affiliated person of such a 
person, from selling to or purchasing from such company any security or 
other property. Section 2(a)(3) of the Act defines an ``affiliated 
person,'' among other things, as any person directly or indirectly 
controlling, controlled by, or under common control with, such other 
person, any officer, director, partner, copartner, or employee of such 
other person, and, if such other person is an investment company, any 
investment adviser thereof. Therefore, the Partnership may be 
considered an affiliated person of the Company because the Partnership 
and the Company may be deemed to be under the common control of HLM, as 
the investment adviser. Similarly, the Partnership may be an affiliated 
person of an affiliated person of the Company because HLM is the 
general partner of the Partnership and also is the investment adviser 
to the Company. Thus, 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: (a) 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; (b) the proposed transaction is 
consistent with the policy of each registered investment company 
concerned; and (c) the proposed transaction is consistent with the 
general purposes of the Act.
    3. Applicants believe that the terms of the proposed Exchange are 
consistent with the standards of section 17(b). They represent, among 
other things, that the investment objectives and policies of the GE 
Portfolio are substantially similar to the Partnership and that the 
limited partners will hold substantially the same assets as GE 
Portfolio shareholders as they had previously held as limited partners. 
Applicants state that the Exchange will result in no gain or loss being 
recognized by the partners of the Partnership. Thus, the partners will 
become investors in an entity that offers greater liquidity and other 
advantages, without immediate tax consequences and without having 
incurred transaction and brokerage charges in order to do so. In 
addition, the shareholders of the Company will be able to purchase and 
redeem shares on each business day, as opposed to only once per quarter 
as is currently provided under the Partnership Agreement.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-28075 Filed 10-31-96; 8:45 am]
BILLING CODE 8010-01-M