[Federal Register Volume 62, Number 206 (Friday, October 24, 1997)]
[Notices]
[Pages 55440-55441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28177]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22860; International Series Rel No. 1105; 812-10552]


Old Mutual South Africa Equity Trust, et al.; Notice of 
Application

October 17, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application under section 17(b) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 17(a) 
of the Act.

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SUMMARY OF APPLICATION: Order requested to permit a non-registered 
investment company to sell certain securities to a registered 
investment company.

APPLICANTS: Old Mutual South Africa Equity Trust (the ``Trust'') and 
Old Mutual Global Assets Fund Limited (the ``Global Fund'').

FILING DATES: The application was filed on March 7, 1997, and amended 
on August 28, 1997.

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 12, 
1997, 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, NW., Washington, DC 20549. 
Applicants, 61 Front Street, Hamilton, Bermuda, Attention: Melanie 
Saunders.

FOR FURTHER INFORMATION CONTACT: Lawrence W. Pisto, Senior Counsel, at 
(202) 942-0527, or Christine Y. Greenlees, Branch Chief, at (202) 942-
0564 (Office of Investment Company Regulation, Division of Investment 
Management).

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, 450 fifth Street, NW., Washington, D.C. 
20549 (tel. (202) 942-8090).

Applicants' Representations

    1. The Trust is an open-end management investment company organized 
as a trust under Massachusetts law and registered under the Act. The 
investment objective of the Trust is long-term total return in excess 
of that of the Johannesburg Stock Exchange (the ``JSE'') Actuaries All 
Share Index through investment in equity securities of South African 
issuers that are listed on a securities exchange. Beneficial interests 
in the Trust are issued solely in a private placement transactions to 
investment companies, common or commingled trust funds, or similar 
entities that are ``accredited investors'' within the meaning of 
Regulation D under the Securities Act of 1933, as well as to certain 
investment funds organized outside the United States. As of August 12, 
1997, 91.96% of the voting securities of the Trust was owned by Old 
Mutual Fund Holdings (Bermuda) Limited (``Old Mutual Fund Holdings''), 
a wholly-owned subsidiary of the South African Mutual Life Assurance 
Society (``Old Mutual'').

[[Page 55441]]

    2. The Global Fund is a fund organized under the laws of Bermuda 
that invests in a portfolio of South African and international 
securities. Old Mutual Fund Holdings is the sole shareholder of the 
Global Fund. The Trust and the Global Fund are managed by Old Mutual 
Asset Managers (Bermuda) Limited, a wholly-owned subsidiary of Old 
Mutual.
    3. Persetel Holdings Limited (``Persetel'') is a South African 
corporation. Its ordinary shares are listed on the JSE. In December of 
1996 Persetel conducted a private placement of 70.5 million of its 
ordinary shares for the purpose of financing an acquisition. On January 
15, 1997 (the ``Trade Date''), the Global Fund subscribed for a total 
of 2,000,000 ordinary shares of Persetel (the ``Persetel Shares'') at 
U.S. $6.23 per share, which represented a 10% discount from the 
Persetel Shares' market price on the Trade Date. On February 3, 1997 
(the ``Settlement Date''), the Global Fund purchased the Persetel 
Shares at U.S. $6.40, which represented a 14.67% discount from the 
market price (the ``February Price''). Applicants have stated that it 
is common practice in the South African equity markets for shares to be 
offered to large institutional investors at a discount to the market 
price.
    4. Applicants propose that the Global Fund sell the Persetel Shares 
to the Trust. The purchase price to be paid by the Trust will be the 
February Price plus carrying costs relating to the investment (the 
``Purchase Price''). These carrying costs will reimburse the Global 
Fund for its estimated cost of funds (the overnight LIBOR plus 0.5%) 
from the Settlement Date through the date on which the Trust purchases 
the Persetel Shares (the ``Trust Purchase Date'').

Applicants' Legal Analysis

    1. Section 17(a) of the Act prohibits any affiliated person of a 
registered investment company, acting as principal, knowingly to sell 
or purchase securities to or from the company. Section 2(a)(3) of the 
Act defines ``affiliated person'' of another person to include (a) any 
person directly or indirectly owning, controlling, or holding with 
power to vote 5% or more of the outstanding voting securities of the 
other person, (b) any person directly or indirectly controlling, 
controlled by, or under common control with the other person, or (c) if 
the other person is an investment company, any investment adviser of 
that person.
    2. The Trust and the Global Fund are controlled by Old Mutual. The 
Trust and the Global Fund also share a common investment adviser. Thus, 
the Trust and the Global Fund are ``affiliated persons'' within the 
meaning of section 2(a)(3) of the Act. As a result, a sale of 
securities by the Global Fund to the Trust is prohibited by section 
17(a) of the Act.
    3. Section 17(b) of the Act provides that the SEC may exempt a 
transaction from the prohibitions of section 17(a) if the terms of the 
proposed transaction, including the consideration to be paid, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and that the proposed transaction is consistent with 
the policy of the registered investment company concerned and with the 
general purposes of the Act.
    4. Applicants submit that the requested relief meets the standards 
set forth in section 17(b). Applicants state that the trustees of the 
Trust and the Adviser have reviewed the proposed investment in detail, 
taking into consideration and nature of the investment, the fairness of 
the Purchase Price, and each of the factors set forth in Section 17(b) 
of the Act. On February 14, 1997, the board of trustees of the Trust, 
including a majority of the independent trustees of the Trust, 
including a majority of the independent trustees, approved the Trust's 
purchase of the Persetel Shares.
    5. In evaluating the terms of the proposed transaction, the 
trustees of the Trust also considered the fact that the Purchase Price 
will include reimbursement of an affiliated person (i.e., the Global 
Fund) for its carrying costs from the Settlement Date through the Trust 
Purchase Date. Applicants state that the trustees of the Trust believe 
that it is fair for the Trust to reimburse the Global Fund for these 
amounts if it proceeds with the proposed transaction because the Trust 
will receive the benefit of the discounted price paid by the Global 
Fund for the Persetel Shares and any appreciation in the value of the 
Persetel Shares from the Settlement Date through the Trust Purchase 
Date. Applicants represent that, if the Purchase Price exceeds the 
current market price of the Persetel Shares on the Trust Purchase Date, 
the Trust will cancel the proposed transaction and not purchase the 
Persetel Shares from the Global Fund.
    6. Applicants state that the proposed transaction would comply with 
the requirements of rule 17a-7,\1\ except that the Purchase Price will 
be below market price and the Trust and the Global Fund are not 
affiliated persons solely by reason of having a common investment 
adviser or investment advisers which are affiliated persons of each 
other, common directors, and/or common officers.

    \1\ Rule 17a-7 permits certain purchase and sale transactions 
between an investment company and certain of its affiliated persons 
provided that certain conditions are met, including that the 
transaction be effected at the current market price of the security.
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    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-28177 Filed 11-23-97; 8:45 am]
BILLING CODE 8010-01-M