[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