[Federal Register Volume 63, Number 130 (Wednesday, July 8, 1998)]
[Notices]
[Pages 36975-36976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18056]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23297, 812-11036]


SR&F Base Trust, et al.; Notice of Application

July 1, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an 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: SR&F Base Trust (``Base Trust'') and Stein Roe 
Investment Trust (``Investment Trust'') (collectively the ``Trusts''), 
on behalf of their respective series SR&F Special Venture Portfolio 
(the ``Portfolio'') and Stein Roe Special Venture Fund (``Special 
Venture Fund''), seek an order to permit an in-kind redemption of 
shares of Special Venture Fund held by an affiliated person of Special 
Venture Fund, and a corresponding in-kind redemption of shares of the 
Portfolio held by Special Venture Fund.

APPLICANTS: Base Trust and Investment Trust.

FILING DATES: The application was filed on February 27, 1998 and 
amended on June 11, 1998.

HEARING OF NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on July 27, 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 
may request notification of a hearing by writing to the Commission's 
Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC 
20549, Applicants, c/o Kervin M. Carome, General Counsel, Stein Roe & 
Farnham Incorporated, One South Wacker Drive, Chicago, IL 60606.

FOR FURTHER INFORMATION CONTACT:
John K. Forst, Attorney Advisory, at (202) 942-0569, or George J. 
Zornada, Branch Chief, at (202) 942-0564 (Division of Investment 
Management, Officer of Investment Company Regulation).


[[Page 36976]]


SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549 (tel. (202) 942-8090).

Applicants' Representations

    1. Base trust as registered under the Act as an open-end management 
investment company and organized as a Massachusetts common law trust. 
Base Trust currently offers twelve series, including the Portfolio. 
Base Trust is organized so that its series, including the Portfolio, 
serve as ``master'' funds in a master-feeder structure. Stein Roe & 
Farnham Incorporated (``Adviser'') is registered under the Investment 
Advisers Act of 2940 and is the Portfolio's investment adviser.
    2. Investment Trust is registered under the Act as an open-end 
management investment company and organized as a Massachusetts business 
trust. Investment Trust currently offers ten series, including the 
Special Venture Fund (collectively with the Portfolio, the ``Funds''). 
Special Venture Fund is a ``feeder'' fund and invests all of its assets 
in the Portfolio. Liberty Mutual Insurance company (the ``Affiliated 
Shareholder''), parent company of the Advisers, owns, in a separate 
account, approximately 2.45% of the outstanding shares of Special 
Venture Fund.\1\
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    \1\ As of December 31, 1997, the Special Venture Fund owned 
approximately 99.5% of the outstanding interest in the Portfolio.
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    3. The Affiliated Shareholder has advised applicants that it 
expects to redeem its interest in the Special Venture Fund. the Special 
Venture Fund's prospectus and statement of additional information 
provide that in certain circumstances, the Special Venture Fund may 
satisfy all or part of a redemption request by a distribution in-kind 
of securities. the boards of trustees, including all of the independent 
trustees, have determined that it would be in the best interest of the 
Funds and their shareholders to pay to the Affiliated Shareholder the 
redemption price for its shares in-kinds

Applicant's Legal Analysis

    1. Section 17(a)(2) of the Act prohibits an affiliated person of a 
registered investment company, or an affiliated person of such person, 
acting as principal, form knowingly purchasing any security or other 
property except securities of which the seller is the issuer) from the 
registered investment company. Section 2(a)(3) of the Act defines 
``affiliated person'' to include any person owing 5% or more of the 
outstanding voting securities of the other person (section 2(a)(3)(A)), 
any person directly or indirectly controlling, controlled by, or under 
common control with, such other person (section 2(a)(3)(C)), and, in 
the case of an investment company, any investment adviser to the 
company (section 2(a)(3)(E)).
    2. Applicants state that, as the parent of the Adviser, the 
Affiliated Shareholder may be considered an affiliated person of an 
affiliated person of Special Venture Fund. The proposed in-kind 
redemption therefore may be prohibited by section 17(a)(2) of the Act.
    3. Section 17(b) of the Act provides that, notwithstanding section 
17(a) of the Act, the Commission 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.
    4. Applicants submit that the terms of the proposed in-kind 
redemption by the Affiliated Shareholder meet the standards set forth 
in section 17(b) of the Act. Applicants assert that the Affiliated 
Shareholder will have 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 will have any opportunity to 
select the specific portfolio securities to be distributed. Applicants 
further state that the Portfolio securities to be distributed in the 
proposed in-kind redemption will be valued according to an objective, 
verifiable standard and the in-kind redemption is consistent with the 
investment policies of the Funds. Applicants also believe that the 
proposed in-kind redemption is consistent with the general purposes of 
the Act because the Affiliated Shareholder would not receive any 
advantage not available to other shareholders.

Applicant's Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The portfolio securities of the Portfolio distributed to Special 
Venture Fund and ultimately to the Affiliated Shareholder pursuant to 
the in-kind redemption (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; 
and (b) certain Portfolio assets (such as 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 Special Venture Fund and 
the 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 sales 
price on the exchange on which the securities are primarily traded or 
at the last sales price on the national securities market, or, if the 
securities are not listed on an exchange or the national securities 
market or if there is no such reported price, the most recent bid 
price.
    4. The Funds will maintain and preserve for a period of not less 
than six years from the end of the fiscal year in which the 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 Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-18056 Filed 7-7-98; 8:45 am]
BILLING CODE 8010-01-M