[Federal Register Volume 63, Number 175 (Thursday, September 10, 1998)]
[Notices]
[Pages 48540-48541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24207]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-23425; File No. 812-11110]
Scudder Spain and Portugal Fund, Inc. and Scudder Kemper
Investments, Inc.; Notice of Application
September 2, 1998.
AGENCY: Securities and Exchange Commission (``Commission'' or ``SEC'').
ACTION: Notice of application for an order under section 17(b) of the
Investment Company Act of 1940 (``Act'') for an exemption from section
17(a) of the Act.
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SUMMARY OF APPLICATION: Applicants, Scudder Spain and Portugal Fund,
Inc. (``Fund'') and Scudder Kemper Investments, Inc. (``Adviser''),
seek an order that would permit an in-kind redemption of shares of the
Fund held by affiliated persons of the Fund.
FILING DATES: The application was filed on April 20, 1998, and an
amendment to the application was filed on September 2, 1998.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested person 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 September 24,
1998, 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: Secrtary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, c/o Robert W. Helm, Esq., Dechert Price & Rhoads,
1775 Eye Street, N.W., Washington, D.C. 20006.
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 is available for a fee from
either the SEC's Public Reference Branch, 450 Fifth Street, N.W.,
Washington, D.C. 20549 (tel. 202-942--8090).
Applicants' Representations
1. The Fund, a Maryland corporation, is registered under the Act as
a close-end management investment company. The Adviser, a Delaware
corporation, is registered under the Investment Adviser's Act of 1940
as an investment adviser and serves as investment adviser to the Fund.
the Fund has one class of shares outstanding which is traded on the New
York Stock Exchange. At April 20, 1998, three stockholders of the Fund
each owned more than 5% of the Fund's outstanding shares.\1\
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\1\ Bankgesellschaft Berlin AG 9.6% Deep Discount Advisors, Inc.
owned 12.1% and Ron Olin Investment Management Company owned 9.7% of
the outstanding shares of the Fund.
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2. The board of directors of the Fund (``Board'') has approved a
plan under which the Fund will offer its stockholders the right to
demand a one-time in-kind redemption of their shares at net asset value
(``NAV ''). The redemption right will be offered pursuant to section
23(c)(2) of the Act and will registered as a tender offer under the
Securities Exchange Act of 1934. The redemption right will give each
stockholder of the Fund the right to demand that the Fund repurchase
all, but not less than all, of his or her shares of the Fund in
exchange for portfolio securities of the Fund. The portfolio securities
of the Fund to be exchanged for shares of the Fund will be selected in
accordance with guidelines established by the Board. No more than 75%
of the Funds's outstanding shares will be redeemed. If more than 75% of
the Fund's shares are tendered for repurchase, there will be a pro rata
reduction in the number of shares repurchased from each stockholder who
has tendered shares. Each redeeming stockholder will pay the
transaction costs associated with the redemption of his or her shares
of the Fund.
3. The redemption is designed to permit a significant amount of the
Fund's shares to be redeemed in-kind at NAV without changing the
closed-end structure of the Fund, and to ensure that only those
stockholders of the Fund who desire to redeem their shares recognize at
tax liability under the Internal Revenue code of 1986, as amended.
Applicants request relief to permit the Fund to satisfy redemption
requests on any stockholder of the Fund who, at the time of the
redemption request, is an ``affiliated person'' of the Fund by reason
of owning, controlling, or holding with the power to vote, 5% or more
of the Fund's shares (``Affiliated Stockholders'').
Applicants' Legal Analysis
1. Section 17(a)(2) of the Act prohibits an affiliated person of a
registered investment company, or any affiliated person of the person,
acting as principal, from knowingly purchasing any security or other
property from the company. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include any person who
directly or indirectly owns, controls, or holds with power to vote 5%
or more of the outstanding voting securities or the other person.
Appliances also state that to the extent that the proposed in-kind
redemption would constitute the purchase of securities by an Affiliate
stockholder, the redemption would be prohibited by Section 17(a)(2).
Accordingly, applicants request an exemption from section 17(a) of the
Act to permit the proposed in-kind redemption by affiliated
Stockholders.
2. Section 17(b) of the Act authorizes the Commission to exempt any
transaction from the provisions of Section 17(a) if 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, and the transaction is consistent with the policy of
each registered investment company and with the general purposes of the
Act
3. Applicants assert that the terms of the proposed in-kind
redemption meet the requirements of section 17(b) of the Act.
Applicants asset that neither the Fund nor the Affiliated Stockholders
has any choice as to the portfolio securities to be received as
redemption proceeds. Instead, stockholders will receive their pro rata
portio of each of the Funds' portfolio securities, excluding (a)
securities which, if distributed, would have to be registered under the
Securities Act of 1933 (``Securities Act''), and (b) securities issued
by entities in countries which restrict or prohibit the holding of
securities by non-nationals (other than qualified investment vehicles
such as the Fund), as well as certain portfolio assets which involves
the assumption of contractural obligations, require special trading
facilities, or may only be traded with the counterpart) to the
transaction. Moreover, applicants state that the portfolio securities
to be distributed in
[[Page 48541]]
the proposed in-kind redempiton will be valued according to an
objective, verifiable standard, and the redemption is consistent with
the divestment policies of the Fund. Applicants also believe that the
proposed in-kind redemption is consistent with the general purposes of
the Act because the Affiliated Stockholders would not receive any
advantage not available to any other redeeming stockholder.
Applicants' Conditions
Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
1. The securities distributed to the Affiliated Stockholders and
non-affiliated stockholders pursuant to a redemption in-kind (the ``In-
Kind Securities'') will be limited to securities that are traded on a
public securities market or for which quoted bid and asked prices are
available.
2. The In-Kind Securities will be distributed on a pro rata basis
after excluding: (a) securities which, if distributed, would be
required to be registered under the Securities Act, (b) securities
issued by entities in countries which restrict or prohibit the holding
of securities by non-nationals other than through qualified investment
vehicles, such as the Fund, and (c) certain portfolio positions (such
as forward foreign currency exchange contracts, futures and options
contracts, and repurchase agreements) that, although they may be liquid
and marketable, involve the assumption of contractual obligations,
require special trading facilities or can only be traded with the
counterparty to the transaction in order to effect a change in
beneficial ownership. Cash will be paid for that portion of the Fund's
assets represented by cash equivalents (such as certificates of
deposit, commercial paper and repurchase agreements) and other assets
which are not readily distributed (including receivables and prepaid
expenses), net of all liabilities (including accounts payable). In
addition, the Fund 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 the Affiliated
Stockholders and non-affiliated stockholders will be valued in the same
manner as they would be valued for the purposes of computing the Fund's
NAV, 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 average of the most
recent bid and asked price (or, if no such asked price is available,
the last quoted bid price).
4. The fund will maintain and preserve for a period of not less
than six years from the end of the fiscal year in which the proposed
in-kind redemption occurs, the first two years in an easily accessible
place, a written record of each redemption that includes 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. 98-24207 Filed 9-9-98; 8:45 am]
BILLING CODE 8010-01-M