[Federal Register Volume 64, Number 166 (Friday, August 27, 1999)]
[Notices]
[Pages 46963-46964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22263]



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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23959, 812-11724]


Clarion CMBS Capital Value Fund and Clarion Capital, LLC; Notice 
of Application

August 20, 1999.
ACTION: Notice of an application under sections 6(c) and 17(b) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
section 17(a) of the Act.
    Summary of Application: Applicants seek an order to permit in-kind 
redemptions of shares of Clarion CMBS Value Fund, Inc. (the ``Fund'') 
held by certain affiliated shareholders.
    Applicants: The Fund and Clarion Capital, LLC (the ``Adviser'').
    Filing Dates: The application was filed on August 6, 1999.
    Hearing or Notification of Hearing: An order granting the requested 
relief 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 September 14, 1999, 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 Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC 
20549-0609. Applicants, c/o Shearman & Sterling 599, Lexington Avenue, 
New York, New York 10022.

FOR FURTHER INFORMATION CONTACT: George J. Zornada, Branch Chief, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Fund is registered under the Act as an open-end management 
investment company and organized as a Maryland corporation. The Adviser 
is registered as an investment adviser under the Investment Advisers 
Act of 1940, and serves as investment adviser to the Fund.
    2. Applicants request relief to permit the Fund, to satisfy 
redemption requests made by any shareholder who, at the time of such 
redemption request, is an affiliated person of the Fund solely by 
reason of owning, controlling, or holding with the power to vote, five 
percent or more of the Fund's shares (``Covered Shareholder'') by 
distributing portfolio securities in-kind. The relief sought would not 
extend to shareholders who are ``affiliated persons'' of the Fund 
within the meaning of sections 2(a)(3)(B) through (F) of the Act.
    3. The Fund's prospectus provides that, generally, the Fund may 
satisfy all or part of a redemption request by a distribution in-kind 
of portfolio securities.\1\ The board of directors of the Fund (the 
``Board''), including a majority of the directors who are not 
``interested persons'' as defined in section 2(a)(19) of the Act 
(``Non-Interested Directors''), have determined that it would be in the 
best interests of the Fund and its shareholders to pay to a Covered 
Shareholder the redemption price for shares of the Fund in-kind.
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    \1\ The Fund has elected to be governed by rule 18f-1 under the 
Act.
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Applicants' Legal Analysis

    1. Section 17(a)(2) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such person, acting as principal, from 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)(A) 
of the Act defines ``affiliated person'' of another person to include 
any person owning 5% or more of the outstanding voting securities of 
the other person. Applicants state that to the extent that an in-kind 
redemption could be deemed to involve the purchase of portfolio 
securities (of which the Fund is not the issuer) by a Covered 
Shareholder, the proposed redemption in-kind would be prohibited by 
section 17(a)(2).
    2. 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) of the Act 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.
    3. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class or classes of 
persons, securities or transactions, from the provisions of the Act, to 
the extent that such exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act.
    4. Applicants request an order under sections 6(c) and 17(b) of the 
Act exempting them from section 17(a) of the Act to permit Covered 
Shareholders to redeem their shares of the Fund in-kind. The requested 
order would not apply to redemptions by shareholders who are affiliated 
persons of the Fund within the meaning of sections 2(a)(3)(B) through 
(F) of the Act.
    5. Applicants submit that the terms of the proposed in-kind 
redemptions by Covered Shareholders meet the standards set forth in 
sections 6(c) and 17(b) of the Act. Applicants assert that neither the 
Fund nor the Covered Shareholders will have any choice as to the type 
of consideration to be received in connection with a redemption 
request, and neither the Adviser nor the Covered Shareholder will have 
an opportunity to select the specific portfolio securities to be 
distributed. Applicants further state that the portfolio securities to 
be distributed will be valued according to an objective, verifiable 
standard and that the in-kind redemptions are consistent with the 
investment policies of the Fund. Applicants also state that the 
proposed in-kind redemptions are consistent with the general purposes 
of the Act because the Covered Shareholders would not receive any 
advantage not available to other redeeming shareholders.

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 both Covered Shareholders and non-
affiliated shareholders 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 prices are available.
    2. The In-Kind Securities will be distributed by the Fund on a pro 
rata basis after excluding: (a) securities which could not be publicly 
offered or sold in the United States without being registered under the 
Securities Act of 1933; (b) certain portfolio positions (such as 
futures and options contracts and repurchase agreements) that, although 
they may be liquid and

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marketable, involve the assumption of contractual obligations, require 
special trading facilities or can only be traded with an institutional 
counterparty to the transaction; (c) cash equivalents (such as 
certificates of deposit, commercial paper, and repurchase agreements); 
(d) other assists which are not readily distributable (including 
receivables and prepaid expenses); and (e) portfolio securities 
representing fractional shares or units, odd lot securities and 
accruals on such securities. Cash will be paid for the portion of the 
in-kind distribution represented by assets set forth in (a)-(e) less 
liabilities (including accounts payable).
    3.The In-Kind Securities distributed to the Covered Shareholders 
and non-affiliated shareholders will be valued in the same manner as 
they would be valued for purposes of computing each Fund's net asset 
value.
    4. The Fund's Board, including a majority of the Non-Interested 
Directors, will determine no less frequently than annually: (a) whether 
the In-Kind Securities, if any, have been distributed in accordance 
with conditions 1 and 2; (b) whether the In-Kind Securities, if any, 
have been valued in accordance with condition 3; and (c) whether the 
distribution of any such In-Kind Securities is consistent with the 
policies of the Fund as reflected in its prospectus. In addition, the 
Board will make and approve such changes in the procedures as it deems 
necessary for monitoring the Fund's compliance with the terms and 
conditions of this Application.
    5. The Fund will maintain and preserve for a period of not less 
than six years from the end of the fiscal year in which a proposed in-
kind redemption by a Covered Shareholder occurs, the first two years in 
an easily accessible place, a written record of each such redemption 
setting forth the identity of the Covered Shareholder, a description of 
each security distributed in-kind, the terms of the in-kind 
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. 99-22263 Filed 8-26-99; 8:45 am]
BILLING CODE 8010-01-M