[Federal Register Volume 63, Number 182 (Monday, September 21, 1998)]
[Notices]
[Pages 50264-50265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25131]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23437; 812-10744]


Z-Seven Fund, Inc.; Notice of Application

September 15, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 23(c)(3) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 23(c) 
of the Act.

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SUMMARY OF THE APPLICATION: The requested order would permit the Z-
Seven Fund, Inc. (the ``Company'') to repurchase 698,210 of its common 
shares from Agape Co., S.A. (``Agape'') in exchange for cash.

FILING DATES: The application was filed on August 7, 1997, and amended 
on September 14, 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 applicant with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on October 8, 1998, and should be accompanied by proof of service 
on applicant, 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 Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, N.W., Washington, D.C. 20549. Applicant, 1819 South Dobson 
Road, Suite 109, Mesa, Arizona 85202-5656.

FOR FURTHER INFORMATION CONTACT:
Kathleen L. Knisely, Staff Attorney, at (202) 942-0517, 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 may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, N.W., 
Washington, D.C. 20549 (tel. 202-942-8090).

Applicant's Representations

    1. The Company, a Maryland corporation, is registered under the Act 
as a closed-end management investment company. The Company has one 
class of common shares which are traded on The NASDAQ Stock Market and 
the Pacific Exchange.
    2. Agape, a Panamanian corporation, owns approximately 27% or 
698,210 of the Company's issued and outstanding shares (``Shares''). 
Agape purchased the Shares in December 1992 pursuant to a purchase 
agreement (``Purchase Agreement'') between Agape and the Company. The 
Purchase Agreement gave Agape the right, after the first anniversary of 
Agape's purchase, to require the Company to register, at the Company's 
expense, the Shares for resale to the public (``Registration Rights''). 
On November 27, 1996, Agape informed the Company of its desire to 
liquidate its interest in the Company and requested that the Company 
consider a repurchase of the Shares at their net asset value (``NAV'') 
in exchange for Agape waiving its Registration Rights.
    3. At special meetings of the board of directors of the Company 
(``Board'') on January 8, 1997, June 5, 1997, and July 29, 1998, the 
Board discussed the advantages and disadvantages associated with: (a) 
the sale of the Shares with a help of a broker/dealer; (b) the 
repurchase by the Company of the Shares at a negotiated price 
(``Repurchase''); and (c) the registration of the Shares for sale in 
brokerage or other open market transactions. The Board considered, 
among other things, the likely effect of each alternative on: (a) the 
market price of the Company's common shares; (b) Company's expense 
ratio; (c) the trading market for the Company's common shares; (d) the 
Company's total assets; and (e) the Company's expenses. The Board also 
considered the amount of time it would take to sell the Shares.
    4. The Board approved the Repurchase on the following terms: (a) 
the Repurchase would be effected in four different transactions over a 
period of eighteen months; (b) the purchase price for the Shares would 
be one-half of one percent below the NAV of the Shares as determined at 
the time of each Repurchase transaction, provided that no Repurchase 
transaction would occur unless the Company's shares are trading at or 
above NAV; and (c) Agape and the Company would issue joint press 
releases announcing each Repurchase transaction.
    5. The first Repurchase transaction will be for 200,000 shares and 
will occur two months after the order requested in the application is 
granted. The three subsequent Repurchase transaction will be for 
150,000 shares, 150,000 shares, and 198,210 shares, respectively, and 
will occur at six-month intervals thereafter. The specific timing of 
each Repurchase transaction will be determined by the Company, provided 
the shares are trading at or above NAV. If a Repurchase transaction 
cannot be completed because the shares are trading at a discount from 
NAV, the Repurchase period will be extended and the Repurchase will be 
completed as soon as the discount disappears.\1\
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    \1\ The Company has disclosed to shareholders, in its most 
recent annual report, that it was seeking an order from the 
Commission to repurchase the Shares from Agape over an 18-month 
period following receipt of the order, at a price of one-half of one 
percent below NAV at the time of each Repurchase transaction.
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    6. The Company intends to raise cash for the Repurchase through the 
orderly liquidation of its portfolio securities as is necessary as of 
the time of each Repurchase transaction. The Company

[[Page 50265]]

does not believe that the liquidation would disrupt the Company's 
portfolio for the remaining shareholders and states that the planned 
and longer term nature of the Repurchase would allow the Company 
appropriate time to plan for the necessary sale of portfolio 
securities.

Applicant's Legal Analysis

    1. Section 23(c) of the Act prohibits a registered closed-end 
investment company from purchasing its own securities other than on a 
securities exchange or pursuant to a tender offer. Section 23(c)(3) 
also allows purchases to be made under such other circumstances as the 
Commission may permit by order for ``the protection of investors to 
insure that such purchases are made in a manner or on a basis which 
does not unfairly discriminate against any holders of the class or 
classes of securities to be purchased.''
    2. Applicant states that the Repurchase permits the Company to 
satisfy its contractual obligation to Agape and will have less of an 
effect on the market value of the common shares than registering the 
Shares for resale on the open market. Applicant also asserts that their 
terms of the Repurchase were developed in response to Agape's 
Registration Rights under the Purchase Agreement and were not 
influenced by Agape's status as an affiliated person of the Company.\2\ 
Applicant also states that the Repurchase price will be one-half of one 
percent lower than NAV; thus there will be no dilution of the other 
shareholders' net interest in the Company. Applicant also states that 
because there will be no Repurchase transaction if the NAV per share 
exceeds market value per share, the price received by Agape will be no 
higher than the market price (the price that may be obtained by other 
shareholders that wish to sell their shares.) Applicant thus asserts 
that the Repurchase does not unfairly discriminate against the 
shareholders of the Company. Applicant also asserts that for the 
reasons discussed above, the Repurchase is in the best interests of the 
Company and its shareholders.

    \2\ Agape is an affiliated person of the Company because it owns 
more than 5% of the Company's voting securities. See section 2(a)(3) 
of the Act. Agape is presumed to control the Company by virtue of 
owning 25% or more of the Company's voting securities. See section 
2(a)(9) of the Act. The Company states that Agape represented in the 
Purchase Agreement that it was not investing in the Company for the 
purpose of exercising or obtaining control of the Company and that 
it was not the intention of Agape to directly or indirectly exercise 
a controlling influence over the management or policies of the 
Company. Agape does not have a representative on the Company's 
Board.
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    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-25131 Filed 9-18-98; 8:45 am]
BILLING CODE 8010-01-M