[Federal Register Volume 64, Number 204 (Friday, October 22, 1999)]
[Notices]
[Pages 57161-57162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27597]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24086; 812-11812]


Equity Managers Trust and Neuberger Berman Equity Trust; Notice 
of Application

October 15, 1999.
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: Applicants, Equity Managers Trust (``Managers 
Trust'') and Neuberger Berman Equity Trust (``Berman Trust''), seek an 
order to permit an in-kind redemption of shares of a series of the 
Berman Trust (``Feeder Fund'') by an affiliated person of the Feeder 
Fund.

FILING DATES: The application was filed on October 13, 1999. Applicants 
have agreed to file an amendment, the substance of which is reflected 
in this notice, during the notice period.

HEARING OR 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 November 9, 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, 605 Third Avenue, 2nd Floor, New York, New York 
10158-0180.

FOR FURTHER INFORMATION CONTACT: Elaine M. Boggs, Senior Counsel, at 
(202) 942-0572 or Christine Y. Greenlees, 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, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Managers Trust, a New York common law trust, and the Berman 
Trust, a Delaware business trust, are registered under the Act as open-
end management investment companies. The Managers Trust offers shares 
in nine separate series, including the Neuberger Berman Socially 
Responsive Portfolio (the ``Master fund''). The Feeder Fund is one of 
ten series of the Berman Trust. The Feeder Fund and the Master Fund are 
organized in a ``master-feeder'' structure under which the Feeder Fund 
invests all of its net assets in the Master Fund. Neuberger Berman 
Management Inc. and Neuberger Berman, LLC (collectively, the 
``Advisers'') serve as investment adviser and sub-adviser, 
respectively, to the Master Fund. The Advisers are registered under the 
Investment Advisers Act of 1940.
    2. As of August 31, 1999, the Feeder Fund owned 63.74% of the 
Master Fund. The Feeder Fund's sole shareholder is the Deferred 
Compensation Plan of the City of New York and Related Agencies and 
Instrumentalities (the ``Plan''), a tax-exempt qualified employee 
benefit plan for employees of the City of New York and its related 
agencies and instrumentalities.
    3. The Plan has advised the Feeder Fund that it intends to redeem 
all of it shares of the Feeder Fund and that it would like to be paid 
in-kind. To effect the in-kind redemption, the Master Fund would 
transfer portfolio securities to the Feeder Fund, which would then 
transfer the securities to the Plan. The Plan will then transfer its 
assets to an account managed by Citizens Advisors, which is not 
affiliated with applicants, the Advisers, or any other entity in the 
Neuberger Berman complex.
    4. The Master Fund's and the Feeder Fund's registration statements 
provide that, under certain circumstances, each Fund may satisfy a 
request for redemption in-kind with portfolio securities. The boards of 
trustees of the Managers Trust and the Berman Trust, including in each 
case a majority of the trustees who are not ``interested persons,'' as 
that term is defined in section 2(a)(19) of the Act, have determined 
that it would be in the best interests of the shareholders of the 
Managers Trust and the Berman Trust to redeem the shares of the Plan 
in-kind.

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 company. Section 2(a)(3) of the Act defines 
``affiliated person'' of another person to include, among others, any 
person owning 5% or more of the outstanding voting securities of the 
other person and any person controlling, controlled by or under common 
control with the other person. Under section 2(a)(9) of the Act, a 
person that owns beneficially more than 25% of the voting securities of 
a company is presumed to control the company.
    2. Applicants state that the Feeder Fund, as the holder of 63.74% 
of the outstanding voting securities of the Master Fund, would be an 
affiliated person of the Master Fund and would be presumed to control 
the Master Fund. In addition, as the sole shareholder of the Feeder 
Fund, the Plan is an affiliated person of the Feeder Fund and is 
presumed to control the Feeder Fund.

[[Page 57162]]

Applicants state that to the extent that an in-kind redemption could be 
viewed as involving the ``purchase'' of portfolio securities by the 
Feeder Fund from the Master Fund, and by the Plan from the Feeder Fund, 
section 17(a)(2) may prohibit the transaction.
    3. Section 17(b) of the Act provides that, notwithstanding section 
17(a) of the Act, the Commission will 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.
    4. Applicants submit that the terms of the transaction meet the 
standards set forth in section 17(b) of the Act. Applicants state that 
neither the Advisers nor the Plan will have any opportunity to select 
the specific portfolio securities to be distributed. Rather, the Plan 
will receive a pro rata share of each portfolio security held by the 
Master Fund, except for odd lot securities, fractional shares, and 
accruals on such securities, certificates of deposit, and proceeds from 
the liquidation of S&P 500 Index futures contracts held by the Master 
Fund. Applicants further state that the portfolio securities to be 
distributed to the Plan will be valued according to an objective, 
verifiable standard and that the in-kind redemption is consistent with 
the investment policies of the Feeder Fund and the Master Fund. 
Applicants also state that the proposed in-kind redemption is 
consistent with the general purposes of the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The securities distributed pursuant to the redemption in-kind 
(the ``In-Kind Securities'') will be distributed on a pro rata basis, 
provided that cash will be distributed: (a) For certificates of 
deposit; (b) in lieu of shares not amounting to round lots, fractional 
shares, and accruals on such securities; and (c) as proceeds from the 
liquidation of S&P 500 Index future contracts held by the Master Fund.
    2. The In-Kind Securities distributed to the Plan will be valued in 
the same manner as they would be valued for purposes of computing each 
of the Feeder Fund's and the Master Fund's net asset value.
    3. The Feeder Fund and the Master Fund 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 the redemption setting 
forth 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.
Jonathan G. Katz,
Secretary.
[FR Doc. 99-27597 Filed 10-21-99; 8:45 am]
BILLING CODE 8010-01-M