[Federal Register Volume 65, Number 240 (Wednesday, December 13, 2000)]
[Notices]
[Pages 77939-77940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31716]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24786; International Series Release 
No. 1239/812-12334]


Telco Finance N.V.

December 7, 2000.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for exemption under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') from all provisions of the 
Act.

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SUMMARY: Applicant requests an order under section 6(c) of the Act 
exempting applicant from all provisions of the Act. The order would 
permit applicant to sell certain debt securities and use the proceeds 
to finance the business activities of Telsim Mobile Telekomunikayson 
Hizmetleri A.S. (``Telsim'').
    Filing Date: The application was filed on November 29, 2000.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the SEC orders a hearing. Interested 
persons may request a hearing by writing to the SEC's Secretary and 
serving applicant with a copy of the request, personally or by mail. 
Hearing requests should be received by the SEC by 5:30 p.m. on January 
2, 2001, 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 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicant, c/o Intertrust Management (Antilles) N.V., Attn: Robert R. 
Stroeve, Curacao, Netherlands Antilles.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 942-0634, or Nadya B. Roytblat, Assistant Director, at (202) 942-
5064 (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 
SEC's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 
20549 (tel. 202-942-8090).

Applicant's Representations

    1. Applicant is a Netherlands Antilles limited liability 
corporation. Applicant was organized specifically to raise funds for 
the operations of Telsim by issuing debt securities (``Notes'') and 
lending the proceeds to Telsim. Telsim is a joint stock company 
organized under the laws of the Republic of Turkey and is a cellular 
telecommunications company in Turkey.
    2. Telsim has determined to raise capital through applicant because 
the

[[Page 77940]]

direct issuance of the Notes by Telsim would not be feasible under 
Turkish tax and corporate law. In addition, under Turkish law, 
significant tax disadvantages may be borne by Telsim were it to own or 
control applicant and/or directly guarantee the Notes. For these 
reasons, all of applicant's common shares will be held by a Netherlands 
Antilles stichting (the ``Foundation'') for the benefit of an existing 
charity named in the Foundation's articles of organization 
(``Charity''). The Foundation will be prohibited by its articles of 
organization from transferring the shares of applicant to any other 
party. The Foundation will have no answers or shareholders, but will be 
managed by a Netherlands Antilles trust company. The Charity will have 
no ownership or other rights with regard to the Foundation. Neither the 
Foundation nor the Charity will pay any consideration in connection 
with its involvement in the activities described in the application.
    3. Applicant intends to issue the Notes in reliance on rule 144A 
under the Securities Act of 1933 (``1933 Act'') and shortly thereafter 
file a registration statement under the 1933 Act. Applicant will loan 
the proceeds of the Notes to Telsim and assign applicant's right to 
receive interest and principal payments on the loan to an indenture 
trustee for the noteholders (the ``Trustee''). The Trustee, which will 
be a major U.S. commercial bank, will have the right to proceed 
directly against Telsim in the event of default on the loan payments. 
the loan agreement will provide that a default under the Notes and the 
trust indenture agreement constitutes a default under the loan 
agreement. In the event of a default under the Notes, the Trustee may 
declare the outstanding amount of the loan and any accrued but unpaid 
interest with respect to the loan to be immediately due and payable. 
Under the trust indenture agreement, if the Trustee does not exercise 
its rights following a default, holders of at least 25% in aggregate 
principal amount of the Notes outstanding may direct the Trustee to 
exercise the rights, or may themselves accelerate the Notes.
    4. Telsim and applicant, in connection with the offering of the 
Notes, will submit to the jurisdiction of any state or federal court in 
the Borough of Manhattan in the City of New York, and will appoint an 
agent to accept any process which may be served, in any suit, action, 
or proceedings brought against Telsim or applicant based upon their 
obligation to the Trustee as described in the application. The consent 
to jurisdiction and appointment of an authorized agent to accept 
service of process will be irrevocable until all amounts due and to 
become due with respect to all outstanding obligations of Telsim to the 
Trustee as described in the application have been paid.
    5. Applicant will loan at least 85% of any cash or cash equivalents 
raised by applicant to Telsim as soon as practicable, but in no event 
later than six months after applicant's receipt of the cash or cash 
equivalents. In the event that applicant borrows amounts in excess of 
the amounts to be loaned to Telsim at any given time, applicant will 
invest the excess in temporary investments pending lending the money to 
Telsim. All investments by Telsim, including all temporary investments, 
will be made in government securities, securities of Telsim or a 
company controlled by Telsim, or debt securities which are exempted 
from the provisions of the 1933 Act by section 3(a)(3) of that Act. 
Applicant's articles of incorporation and the trust indenture relating 
to the Notes will limit applicant's activities to issuing the Notes or 
other debt securities, loaning the proceeds to Telsim and assigning all 
of applicant's rights to repayment from Telsim to the Trustee.

Applicant's Legal Analysis

    1. Applicant states that it may be viewed as falling technically 
within the definition of an investment company under section 3(a)(1) of 
the Act. Applicant requests an exemption under section 6(c) of the Act 
from all provisions of the Act. Section 6(c) of the Act permits the SEC 
to grant an exemption from the provisions of the Act if, and to the 
extent that, such exemption is necessary and appropriate in the public 
interest, consistent with the protection of investors, and consistent 
with the purposes fairly intended by the policy and provisions of the 
Act.
    2. Applicant states that rule 3a-5 under the Act provides an 
exemption from the definition of investment company for certain 
companies organized primarily to finance the business operations of 
their parent companies or companies controlled by their parent 
companies. Applicant states that it meets all of the requirements of 
rule 3a-5 except for two, which it cannot meet for Turkish tax reasons.
    3. Rule 3a-5(b)(1)(i) under the Act requires that all of 
applicant's common stock be owned by Telsim or a company controlled by 
Telsim. Applicant argues that, even though for Turkish tax reasons 
applicant's common stock will be held by the Foundation, applicant was 
organized to serve solely as a conduit for Telsim's capital raising 
activities. Applicant further states that its functions will be limited 
by its articles of incorporation and the trust indenture agreement to 
those of a traditional finance subsidiary.
    4. Rule 3a-5(a)(1) under the Act requires that applicant's debt 
securities be directly guaranteed by Telsim. Applicant states that 
under the arrangement described in the application, the Trustee will 
have the right to proceed directly against Telsim. Applicant argues 
that this arrangement is necessitated by Turkish tax law and that the 
arrangement will provide the noteholders with the functional equivalent 
of a guarantee by Telsim. For the above stated reasons applicant argues 
that it is not the type of entity intended to be regulated under the 
Act.

Applicant's Condition

    Applicant agrees that any order granting the requested relief will 
be subject to the following condition:
    Applicant will comply with all provisions of rule 3a-5 under the 
Act except (i) with respect to rule 3a-5(b)(1)(i), applicant's common 
shares will be owned by the Foundation for the benefit of the Charity, 
and (ii) with regard to rule 3a-5(a)(1), the noteholders will have 
recourse to Telsim for payment of principal and interest on the Notes 
as described in the application. Applicant's articles of incorporation 
and the trust indenture agreement will: (i) limit applicant's 
activities to issuing Notes or other debt securities; loaning the 
proceeds to Telsim, and assigning all of its rights to repayment from 
Telsim to the Trustee; (ii) prohibit the sale of applicant's common 
shares held by the Foundation; and (iii) enable the Trustee in the 
event of a payment default to proceed directly against Telsim, as 
assignee of the loan agreement between applicant and Telsim.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31716 Filed 12-12-00; 8:45 am]
BILLING CODE 8010-01-M