[Federal Register Volume 65, Number 134 (Wednesday, July 12, 2000)]
[Notices]
[Pages 43058-43059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17594]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24553; 812-11908]


The Pitcairn Trust Company, et al.; Notice of Application

July 6, 2000.
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 the Application: Applicants request an order to permit 
certain common and collective trust funds, certain individual trust 
accounts and certain limited partnerships to transfer their assets to 
certain series of a registered open-end management investment company 
in exchange for shares of the series.

Applicants: The Pitcairn Trust Company (``PTC''), Pitcairn Funds (the 
``Trust''), Diversified Value Fund, Diversified Growth Fund, Select 
Value Fund, Select Growth Fund, Small Cap Value Fund, Small Cap Growth 
Fund, Tax Exempt Bond Fund, Family Heritage Fund and International 
Equity Fund (collectively, the ``Common Trust Funds''), Employee 
Benefit Large-Capitalization Fund, Employee Benefit Mid-Capitalization 
Fund, Employee Benefit Small-Capitalization Fund, Employee Benefit 
Fixed Income Fund and Employee Benefit International Equity Fund 
(collectively, the ``Collective Trust Funds,'' together with the Common 
Trust Funds, the ``CTFs''). Collectively, PTC, the Trust and the CTFs 
are referred to as ``Applicants.''

FILING DATES: The application was filed on December 23, 1999 and 
amended on June 29, 2000. 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 July 27, 2000, 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 One Pitcairn Place, 165 Township Line Road, 
Suite 3000, Jenkintown, PA 19046.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel, 
at (202) 942-0714, or Janet M. Grossnickle, 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 from 
the Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Trust, a Delaware trust, will be registered under the Act as 
an open-end management investment company and will offer a number of 
series (each a ``Fund'') to the public, each with separate investment 
objectives, policies, and restrictions. PTC will serve as investment 
adviser to each Fund.\1\
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    \1\ As a ``bank'' within the meaning of section 202(a)(2) of the 
Investment Advisers Act of 1940 (``Advisers Act''), PTC currently is 
not subject to the registration requirements of the Advisers Act.
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    2. PTC is a wholly-owned subsidiary of Pitcairn Company, which is 
wholly-owned by Pitcairn Group L.P. (``PGLP''), a limited partnership. 
PGLP's limited partnership units are owned by approximately 85 adult 
Pitcairn family members and related trusts, trusts governed by the 
Uniform Transfers to Minors Act, foundations and religious 
organizations supported by the Pitcairn family. For some of these 
family members, the beneficial ownership interests in PGLP partnership 
units are in excess of 5% of total units outstanding, both in terms of 
economic interest and voting power. Pitcairn family members also 
beneficially own, primarily through trusts, approximately 63% of the 
interests in the Common Trust Funds. A number of Pitcairn family 
members serve as co-trustees for trusts with, in the aggregate, more 
than 5% of the total beneficial interests in one or more common Trust 
Funds. Certain employee benefit plans maintained for the benefit of 
employees of PTC and its affiliates, including three members of the 
Pitcairn family who are employees of PTC (``PTC Plans''), own 70%-85% 
of the assets of the Collective Trust Funds.
    3. Each CFT is maintained by PTC and is either (i) a ``common trust 
fund'' as defined in section 584(a) of the Internal Revenue Code of 
1986, as amended (``Code''), or (ii) a collective trust fund that meets 
the requirements of section 401 of the Code. The CTFs are excluded from 
the definition of ``investment company'' under sections 3(c)(3) (for 
the Common Trust Funds) and 3(c)(11) (for the Collective Trust Funds) 
of the Act. Participants in the CFTs are persons or entities for which 
PTC acts as either trustee, executor, administrator, guardian, or 
custodian (``Participants''). Pitcairn company serves as the general 
partner of certain limited partnerships (``Partnerships''), the units 
of which are beneficially owned by clients of PTC. PTC serves as 
trustee for certain individual trust accounts (``ITAs'') that are held 
by PTC as sole or co-trustee for the benefit of individual clients, 
none of which is a Pitcairn family member or an entity in which a 
Pitcairn family member has a pecuniary interest.
    4. Applicants propose to transfer in-kind all of the assets of each 
CFT, ITA and Partnership to one of the Funds with generally similar 
investment objectives in exchange for Class I shares of the respective 
Fund having an aggregate net asset value equal to that of the assets 
transferred (the ``Conversions'').\2\ Class I shares will not be 
subject to a front-end or contingent deferred sales charge, redemption 
fees or rule 12b-1 distribution fees, although there may be a 
shareholder service fee of 0.25%. The assets of the CFTs to be 
transferred will be valued in accordance with the provisions of rule 
17a-7(b) under the Act, and the shares of the Funds issued will have an 
aggregate net asset value equal to the value of the assets transferred. 
The shares of the

[[Page 43059]]

Funds issued to the CTFs will be credited to the account of each 
Participant, pro rata, according to the Participant's interest in the 
relevant CTF owned immediately prior to the Conversions. Following the 
Conversions, the CTFs will be terminated and the Fund shares will be 
held by PTC (together with any co-trustees). In addition, the 
Partnerships will terminate at the time of their Conversions. The 
Conversions of the CTFs are scheduled to occur on or before August 11, 
2000. The Conversions of the Partnerships and ITAs will occur 
approximately one week before the Conversion of the CTFs. PTC will pay 
all expenses incurred in connection with the Conversions.
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    \2\ Applicants also request relief for future transactions in 
which the assets of a terminating common or collective trust fund 
maintained by PTC are exchanged for shares of a registered open-end 
management investment company, or a series thereof, advised by PTC, 
or any entity controlling, controlled by, or under common control 
with PTC when owners of PTC or the PTC Plans own 5% or more of such 
trust fund or such registered investment company, or series thereof 
(``Future Transactions''). Applicants state that they will rely on 
the requested relief for Future Transactions only in accordance with 
the terms and conditions contained in the application.
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Applicants' Legal Analysis

    1. Section 17(a) of the Act, in relevant part, prohibits an 
affiliated person of a registered investment company, or an affiliated 
person of such a person, acting as principal, from selling, or 
purchasing from such investment company any security or other property. 
Section 2(a)(3) of the Act, in relevant part, defines an ``affiliated 
person'' of another person to include (a) any person directly or 
indirectly owning, controlling, or holding with power to vote 5% or 
more of the outstanding voting securities of the other person; (b) any 
person directly or indirectly controlling, controlled by, or under 
common control with, the other person; and (c) if the other person is 
an investment company, any investment adviser of that company. 
Applicants state that, because the CTFs may be viewed as acting as 
principal in the Conversions, and because the CTFs and the Funds may be 
viewed as being under the common control of PTC, within the meaning of 
section 2(a)(3)(C) of the Act, the Conversions may be subject to the 
prohibitions of section 17(a) of the Act.
    2. Rule 17a-7 under the Act exempts certain purchase and sale 
transactions otherwise prohibited by section 17(a) if an affiliation 
exists solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided, among other requirements, 
that the transaction involves a cash payment against prompt delivery of 
the securities. Applicants state that rule 17a-7 may not be available 
for the conversions because, among other affiliations, the owners of 
PTC beneficially own more than one half the interests in the Common 
Trusts Funds, and the PTC Plans own 70-85% of the assets of the 
Collective Trust Funds. Thus, Applicants may not meet the sole 
affiliation requirement of rule 17a-7. In addition, Applicants state 
that the Conversions are to be effected as in-kind transfers, rather 
than in cash.
    3. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) certain mergers, consolidations, or purchases or sales of 
substantially all of the assets of registered investment companies that 
are affiliated persons solely by reason of having a common investment 
adviser, common directors, and/or common officers, provided, among 
other requirements, that certain conditions are satisfied. Applicants 
state that rule 17a-8 may not be available for the Conversions because 
the CTFs are not registered investment companies. In addition, 
Applicants state that the CTFS, ITAs, Partnerships and the Funds may be 
deemed to be affiliated for reasons other than those covered by rule 
17a-8.
    4. Section 17(b) of the Act provides that the Commission may exempt 
a proposed transaction from the provisions of section 17(a) if evidence 
establishes that: (a) The terms of the proposed transaction, including 
the consideration to be paid, are reasonable and fair and do not 
involve overreaching on the part of any person concerned; (b) the 
proposed transaction is consistent with the policy of each registered 
investment company concerned; and (c) the proposed transaction is 
consistent with the general purposes of the Act. Section 6(c) of the 
Act provides that the Commission may exempt any person or transaction 
from any provision of the Act or any rule thereunder 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.
    5. Applicants request an order under section 17(b) of the Act to 
permit the Conversions and under sections 6(c) and 17(b) to permit the 
Future Transactions. Applicants submit that the Conversions satisfy the 
standards for relief under sections 6(c) and 17(b) of the Act. 
Applicants state that the board of trustees of the Trust (the 
``Board''), including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees''), will adopt procedures pursuant to which the 
Conversions may be effected in accordance with rule 17a-7(e), and that 
the provisions of rule 17a-7(b), (c), (d) and (f) will be satisfied. 
The Conversions will not occur unless and until the Board (including a 
majority of the Independent Trustees) finds that participation by the 
Funds in the Conversions is in the best interests of each Fund and that 
the interests of existing shareholders of each of the Funds will not be 
diluted as a result of the Conversions. These findings, and the basis 
upon which they will be made, will be fully recorded in the minute 
books of the Trust. In addition, before the Conversions are entered 
into, PTC will have determined in accordance with its fiduciary duties 
that the conversions are in the best interest of the ITAs and the 
Partnerships and the beneficial owners thereof.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The Conversions will comply with the terms of rule 17a-7(b) 
through (f).
    2. The Conversions will not occur unless and until the Board 
(including a majority of the Independent Trustees) finds that 
participation by the Funds in the Conversions is in the best interests 
of each Fund and that the interests of existing shareholders of such 
Fund will not be diluted as a result of the Conversions. These 
findings, and the basis upon which they are made, will be recorded 
fully in the minute books of the Trust.
    3. The Conversions will not occur unless and until (a) PTC, as 
trustee and fiduciary of each CTF and the Participants therein, has 
determined in accordance with its fiduciary duties that the Conversions 
are in the best interests of Participants in each of the CTFs, and (b) 
PTC, as fiduciary of each ITA and Partnership, has determined in 
accordance with its fiduciary duties that the Conversions are in the 
best interests of each ITA or Partnership and its beneficial owners.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-17594 Filed 7-11-00; 8:45 am]
BILLING CODE 8010-01-M