[Federal Register Volume 63, Number 104 (Monday, June 1, 1998)]
[Notices]
[Pages 29767-29769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14404]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-23205; International Series Rel No. 1137; 812-10810]


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

May 26, 1998.
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 Old Mutual South 
Africa Equity Trust (the ``Trust'') to purchase certain securities of 
DataTec Limited (``DataTec'') from Old Mutual Global Assets Fund 
Limited (the ``Global Fund''), an affiliated person of the Trust.

APPLICANTS: The Trust, the Global Fund, and Old Mutual Asset Managers 
(Bermuda) Limited (the ``Adviser'').

FILING DATES: The application was filed on October 6, 1997. Applicants 
have

[[Page 29768]]

agreed to file an amendment during the notice period, the substance of 
which is reflected in this notice.

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 June 22, 1998, 
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 Nadya B. 
Roytblat, Assistant Director, 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, DC 
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. Beneficial interests in the Trust are sold solely in 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 1993, as 
well as to certain investment funds organized outside the United 
States. Old Mutual Fund Holdings (Bermuda) Limited (``Old Mutual Fund 
Holdings''), a wholly-owned subsidiary of the South African Mutual Life 
Assurance Society (``Old Mutual''), owns approximately 88.24% of the 
voting securities of the Trust.\1\
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    \1\ Based on holdings as of April 24, 1998.
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    2. The Global Fund is organized under the laws of Bermuda Old 
Mutual Fund Holdings is the sole shareholder of the Global Fund.
    3. The Trust and the Global Fund are advised by the Adviser, a 
wholly-owned subsidiary of Old Mutual. The Adviser is registered under 
the Investment Advisers Act of 1940.
    4. The Adviser's sole place of business is Hamilton, Bermuda. All 
purchase and sale decisions with respect to securities to be purchased 
or sold by the Trust are made by Bermuda-based personnel of the 
Adviser, who do not have any portfolio management responsibilities for 
any other accounts managed by Old Mutual or any of its affiliates or in 
which Old Mutual or any of its affiliates has any direct or indirect 
beneficial interest, other than the Trust, the Global Fund, and certain 
other accounts holding primarily securities of non-South African 
issuers. Old Mutual's principal place of business is Cape Town, South 
Africa.
    5. Data Tec is a South African corporation. It is an Internet 
centric information technology group incorporating the leading Internet 
service provider in South Africa. DataTec's ordinary shares are listed 
on the JSE. Applicants state that, for the period beginning January 19, 
1998 and ending April 24, 1998, the unweighted average weekly volume of 
ordinary shares of DataTec traded on the JSE, as a percentage of the 
total number of ordinary shares of DataTec outstanding and calculated 
on an annualized basis, was 52.75%.
    6. Old Mutual, its wholly-owned subsidiaries and investment 
vehicles managed by Old Mutual and its wholly-owned subsidiaries, but 
excluding the Trust and the Global Fund (collectively, the ``Old Mutual 
Group''), own approximately 28.34% of the total outstanding ordinary 
shares of DataTec.\2\
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    \2\ Based on holdings as of April 24, 1998.
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    7. Applicants state that it is common practice in the South African 
equity markets for placements to be offered to large institutional 
investors at a discount to the market price. Applicants also state that 
the Old Mutual Group is a major participant in the South African equity 
markets.
    8. In June 1997, DataTec privately placed 1,774,318 of its ordinary 
shares in order to fund the acquisition of Logical Networks Plc, a UK 
based company (``Logical Networks''). On August 11, 1997, the Global 
Fund purchased 1,619,555 of these DataTec shares, representing 
approximately 2.78% of DataTec's total outstanding ordinary shares, at 
an average weighted price of SA R24.94 per share, and at a 19.02% 
discount from the market price.
    9. In March, 1998, DataTec privately placed 2,367,984 of its 
ordinary shares in order to fund the acquisition of Blue Sky (UK) Plc 
(``Blue Sky'') and to complete the funding of Logical Networks. On 
March 20, 1998, the Global Fund purchased 1,677,894 of these DataTec 
shares, representing approximately 2.88% of DataTec's total outstanding 
ordinary shares, at an average weighted price of SA R28.35 per share, 
and at a 60.07% discount from the market price. The DataTec shares 
purchased by the Global Fund on August 11, 1997 and March 20, 1998 (the 
``Settlement Dates'') are referred to as the ``DataTec Shares.''
    10. Applicants propose that the Trust purchase the DataTec Shares 
from the Global Fund. The purchase price to be paid by the Trust will 
be the price paid by the Global Fund on the respective Settlement Data 
plus carrying costs (the ``Purchase Price''). The carrying costs will 
reimburse the Global Fund for its estimated cost of funds (the 
Eurodollar overnight deposit rate plus 0.5%) from the respective 
Settlement Date through the date on which the Trust purchases the 
DataTec Shares (the ``Trust Purchase Date'').
    11. Applicants state that the proposed transaction is of 
substantial value to the Trust. Since October 1997, the price of 
DataTec ordinary shares has increased by 206% from SA R30.70 per share 
to SA R94.00 per share on April 24, 1998. If the Trust completed the 
proposed purchase of the DataTec Shares on April 24, 1998, the Trust 
would have realized an immediate benefit of SA R220 million (U.S. $44 
million), based on a purchase price that represented a 71% discount 
from the market value of the DataTec shares on that date.
    12. Applicants represent that the DataTec Shares have all the 
attributes of the DataTec ordinary shares listed on the JSE, and that 
the DataTec Shares are freely transferable under South African law. 
Applicants also state that the Trust has not entered into, and will not 
be subject to, any agreement or understanding, express or implied, that 
the Trust may not sell the DataTec Shares on the open market at any 
time after its proposed purchase.

Applicants' Legal Analysis

    1. Section 17(a) of the Act makes it unlawful for any affiliated 
person of a registered investment company, or any affiliated person of 
such person, acting

[[Page 29769]]

as principal, knowingly to sell any security to 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 and 
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, and the sale of the DataTec Shares 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, while the Adviser 
utilizes analysts employed by Old Mutual, the decision to purchase the 
DataTec Shares was an independent decision made by the Adviser solely 
in the interests of the Trust and was not improperly influenced by Old 
Mutual or its personnel. Applicants further state that the board of 
trustees of the Trust, including a majority of the trustees who are not 
interested persons of the Trust (the ``Board''), approved the Trust's 
purchase of the DataTec Shares. In evaluating the terms of the proposed 
transaction, the Board considered the fact that the Trust Purchase 
Price will include reimbursement of the carrying costs.
    5. Applicants state that the transaction will comply with the 
requirements of rule 17a-7 under the Act, except that (i) the Trust 
Purchase Price will be below the current market price, and (ii) the 
Trust and the Global Fund are affiliated persons by reason other than 
having a common investment adviser, common directors, and/or officers. 
Applicants further represent that the Trust will not purchase the 
DataTec Shares if on the Trust Purchase Date the market price of the 
DataTec Shares falls below the Trust Purchase Price. Thus, applicants 
believe that the terms of the proposed transaction, including the 
consideration to be paid, are fair and reasonable.
    6. Applicants believe that the transaction does not involve 
overreaching on the part of any person concerned. Applicants state 
that, although under section 2(a)(9) of the Act, the Old Mutual Group 
presumptively controls DataTec through ownership of 28.34% of DataTec's 
voting securities, the Old Mutual Group does not exercise any control 
over the management or day-to-day operations of DataTec. Applicants 
state that Old Mutual Group's holdings in DataTec include approximately 
6.0% of the total outstanding shares of DataTec held by accounts 
managed by Old Mutual for external clients, such as pension funds for 
charitable organizations and publicly traded companies. Old Mutual 
seeks instructions from these external clients regarding the voting of 
DataTec shares on non-routine matters, including the election of 
directors other than the nominees of DataTec management.
    7. Applicants represent that the Old Mutual Group holds DataTec 
shares for investment purposes as a passive investor. None of the 
officers or directors of DataTec are officers or directors of any 
entity within the Old Mutual Group; the Old Mutual Group has never 
sought to elect its nominees to the board of directors of DataTec and 
has always either abstained from voting or voted for the nominees of 
DataTec management. Applicants state that, according to independent 
research reports, the directors of DataTec own approximately 24.70% of 
DataTec's ordinary shares and are the controlling shareholders of 
DataTec.
    8. Applicants further represent that, other than the ownership of 
the DataTec ordinary shares, the Old Mutual Group does not have any 
ownership, investment or lending relationship with DataTec. Finally, 
applicants represent that the Old Mutual Group has no ownership, 
investment or lending relationship with Logical Networks or Blue Sky.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-14404 Filed 5-29-98; 8:45 am]
BILLING CODE 8010-01-M