[Federal Register Volume 64, Number 229 (Tuesday, November 30, 1999)]
[Notices]
[Pages 66944-66945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31032]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24157; 812-11796]


The Alger Fund, et al.; Notice of Application

November 23, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').

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.

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SUMMARY OF APPLICATION: Applicants request an order to permit 
redemptions in-kind of shares of certain registered investment 
companies by certain shareholders who are affiliated persons of the 
investment companies.

APPLICANTS: The Alger Fund, The Alger American Fund, The Alger 
Retirement Fund, Spectra Alger Management, Inc. (together, the 
``Funds''), and Fred Alger Management, Inc. (the `'Adviser'').

FILING DATE: The application was filed on October 5, 1999. Applicants 
have agreed to file an amendment during the notice period, the 
substance of which is reflected in this notice.

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 December 20, 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 Gregory S. Duch, Fred Alger Management, 
Inc., One World Trade Center, Suite 9333, New York, NY 10048.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 942-0574 or Michael W. Mundt, 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. Each of the Funds is registered under the Act as an open-end 
management investment company and is organized as a Massachusetts 
business trust. The Adviser is registered as an investment adviser 
under the Investment Advisers Act of 1940 and serves as investment 
adviser to each Fund.
    2. The prospectus of each of the Funds provides that, if the board 
of trustees (``Board'') of the Fund determines that cash payments would 
be detrimental to the interests of remaining shareholders, any request 
for redemption of the Fund's shares may be honored by making payment in 
whole or in part in securities. The payment would be made on a pro rata 
basis, monitored by the Adviser, with the securities valued in the same 
manner as they would be for purposes of computing the Fund's net asset 
value. Each of the Funds also has elected to be governed by rule 18f-1 
under the Act. This redemption procedure presently applies to all 
shareholders other than shareholders who are ``affiliated persons'' of 
the Funds within the meaning of section 2(a)(3) of the Act (``Non-
Covered Shareholders'').
    3. Applicants request relief to permit the Funds to satisfy 
redemption requests made by shareholders who are ``affiliated persons'' 
of a Fund solely within the meaning of section 2(a)(3)(A) of the Act 
(``Covered Shareholders'') because they own 5% or more of the Fund's 
outstanding shares by distributing portfolio securities in-kind.\1\
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    \1\ Applicants request that the relief extend to any registered 
open-end management investment company created in the future and 
each series thereof, as well as each series of the Funds created in 
the future, for which the Adviser or a person controlling, 
controlled by or under common control with the Adviser acts as 
investment adviser (``Future Funds''). Any Future Fund that relies 
on the order requested will do so only in accordance with the terms 
and conditions contained in the application.
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Applicants' Legal Analysis

    1. Section 17(a)(2) of the Act makes it unlawful for an affiliated 
person of a registered investment company or an affiliated person of 
such a person, acting as principal, to knowingly ``purchase'' from such 
registered investment company any security or other property (except 
securities of which the seller is the issuer). Under section 
29(a)(3)(A) of the Act, an ``affiliated person'' includes any person 
owning 5% or more of the outstanding voting securities of such other 
person. Applicants state that to the extent that an in-kind redemption 
could be deemed to involve the purchase of portfolio securities by a 
Covered Shareholder, the proposed redemptions in-kind would be 
prohibited by section 17(a)(2).
    2. Section 17(b) authorizes the Commission to exempt a proposed 
transaction from section 17(a) provided that: (a) the terms of the 
proposed transaction, including the consideration to be paid or 
received, are fair and reasonable and do not involve overreaching on 
the part of any person concerned; (b) the 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 
classes of persons or transactions from the Act, where an 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 the provisions of section 17(a) of the Act to 
permit Covered Shareholders to redeem their shares in-kind from the 
Funds. The requested order would not apply to redemptions by 
shareholders who are affiliated persons of the Funds within the meaning 
of sections 2(a)(3)(B) through (F) of the Act.
    5. Applicants submit that the proposed transactions meet the 
standards set forth in sections 6(c) and 17(b) of the Act. Applicants 
assert that the terms of the proposed in-kind redemptions are 
reasonable and fair. Applicants state that Covered Shareholders who 
wish to redeem shares will receive the same ``in-kind'' distribution of 
securities and cash on the same basis as Non-Covered Shareholders 
wishing to redeem shares. Applicants state that the securities to be 
distributed in-kind will be valued in the

[[Page 66945]]

same manner as that used by each Fund to determine its net asset value.
    6. Applicants state that the proposed in-kind redemptions are 
consistent with the policies of the Funds. Applicants also state that 
the proposed in-kind redemptions are 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 portfolio securities distributed 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 of 1933; (b) 
securities issued by entities in countries which (i) restrict or 
prohibit the holding of securities by non-nationals other than through 
qualified investment vehicles, such as a fund, or (ii) permit transfers 
of ownership of securities to be effected only by transactions 
conducted on a local stock exchange; and (c) certain portfolio assets 
(such as forward foreign currency exchange contracts, 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 a fund'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, a 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 will be valued in the same manner as they 
would be valued for purposes of computing a Fund'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 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 price is available, the last 
quoted bid price).
    4. The Funds' boards, including a majority of the trustees who are 
not ``interested persons'' of a Fund as defined in section 2(a)(19) of 
the Act, 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 conditions 3; and (c) whether the 
distribution of any such In-Kind Securities is consistent with the 
policies of each affected Fund as reflected in its prospectus. In 
addition, the Boards will make and approve such changes as they deem 
necessary in the procedures for monitoring the applicants' compliance 
with the terms and conditions of the application.
    5. The relevant Funds 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 2 years in an easily 
accessible place, a written record of each redemption setting forth a 
description of each security distributed, the identity of the Covered 
Shareholder, 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. 99-31032 Filed 11-29-99; 8:45 am]
BILLING CODE 8010-01-M