[Federal Register Volume 67, Number 90 (Thursday, May 9, 2002)]
[Notices]
[Pages 31389-31391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11541]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25564; 812-12807]


The Mexico Fund, Inc. and Impulsora del Fondo Mexico, S.A. de 
C.V.; Notice of Application

May 1, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 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, The Mexico Fund, Inc. (the 
``Fund'') and Impulsora del Fondo Mexico, S.A. de C.V. (the 
``Adviser''), seek an order that would permit an in-kind repurchase of 
shares of the Fund held by affiliated persons of the Fund.

Filing Dates: The application was filed on March 22, 2002, and amended 
on April 8, 2002, and on April 29, 2002.

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 SEC's Secretary and 
serving applicant with a copy of the request, personally or by mail. 
Hearing requests should be received by the Commission by 5:30 p.m. on 
May 24, 2002, and should be accompanied by proof of service on the 
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 
may request notification of a hearing by writing to the Commission's 
Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC 
20549-0609. Applicants, c/o Sander M. Bieber, Esq., Dechert, 1775 Eye 
Street, NW, Washington, DC 20006.

FOR FURTHER INFORMATION CONTACT: David B. Smith, Jr., Associate 
Director, at (202) 942-0525 (Division of Investment Management, Public 
Utility and 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 (telephone (202) 942-8090).

Applicants' Representations

    1. The Fund, a Maryland corporation, is registered under the Act as 
a closed-

[[Page 31390]]

end management investment company. The Fund's investment objective is 
to provide long-term capital appreciation through investment primarily 
in equity securities listed on the Bolsa Mexicana de Valores, S.A. de 
C.V. (the ``Mexican Stock Exchange'').\1\ Shares of the Fund are listed 
and trade on the New York Stock Exchange. The Adviser, a Mexican 
corporation, is registered under the Investment Advisers Act of 1940 as 
an investment adviser and serves as investment adviser to the Fund.
---------------------------------------------------------------------------

    \1\ Applicants state that as of January 31, 2002, 93% of the 
Fund's assets were invested in equity securities.
---------------------------------------------------------------------------

    2. The Fund proposes to repurchase up to 100% of its issued and 
outstanding shares at no less than 98% of net asset value (the 
``Repurchase Offer''). Under the Repurchase Offer, the Fund will give 
its shareholders the right to redeem their shares on an in-kind basis 
with a pro rata distribution of the Fund's portfolio securities (with 
exceptions generally for odd lots, fractional shares, and cash items). 
The Repurchase Offer will be offered pursuant to section 23(c)(2) of 
the Act and conducted in accordance with rules 13e-3 and 13e-4 under 
the Securities Exchange Act of 1934.
    3. Applicants state that the Repurchase Offer is designed to 
accommodate the needs of shareholders who wish to participate in the 
Repurchase Offer and long-term shareholders who would prefer to remain 
invested in a closed-end vehicle. Under the Repurchase Offer, only 
participating shareholders will recognize capital gains, while non-
participating shareholders would avoid the imposition of a significant 
tax liability, which would result in a repurchase offer for cash. 
Applicants request relief to permit any shareholder of the Fund who is 
an ``affiliated person'' of the Fund solely by reason of owning, 
controlling, or holding with the power to vote, 5% or more of the 
Fund's shares (``Affiliated Shareholder'').

Applicants' Legal Analysis

    1. Section 17(a) of the Act prohibits an affiliated person of a 
registered investment company, or any affiliated person of the person, 
acting as principal, from knowingly purchasing or selling any security 
or other property from or to the company. Section 2(a)(3) of the Act 
defines an ``affiliated person'' of another person to include any 
person who directly or indirectly owns, controls, or holds with power 
to vote 5% or more of the outstanding voting securities of the other 
person. Applicants also state that to the extent that the Repurchase 
Offer would constitute the purchase or sale of securities by an 
Affiliated Shareholder, the redemption would be prohibited by section 
17(a). Accordingly, applicants request an exemption from section 17(a) 
of the Act to permit the participation of Affiliated Shareholders in 
the Repurchase Offer.
    2. Section 17(b) of the Act authorizes the Commission to exempt any 
transaction from the provisions of section 17(a) if the terms of the 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and the transaction is consistent with the policy of 
each registered investment company and with the general purposes of the 
Act.
    3. Applicants assert that the terms of the Repurchase Offer meet 
the requirements of section 17(b) of the Act. Applicants assert that 
neither the Fund nor an Affiliated Shareholder has any choice as to the 
portfolio securities to be received as proceeds from the Repurchase 
Offer. Instead, shareholders will receive their pro rata portion of 
each of the Fund's portfolio securities, excluding (a) securities 
which, if distributed, would have to be registered under the Securities 
Act of 1933 (``Securities Act''), and (b) securities issued by entities 
in countries which restrict or prohibit the holding of securities by 
non-nationals (other than qualified investment vehicles), and (c) 
certain portfolio assets that involve the assumption of contractual 
obligations, require special trading facilities, or may only be traded 
with the counterparty to the transaction. Moreover, applicants state 
that the portfolio securities to be distributed in the Repurchase Offer 
will be valued according to an objective, verifiable standard, and the 
Repurchase Offer is consistent with the investment policies of the 
Fund. Applicants also believe that the Repurchase Offer is consistent 
with the general purposes of the Act because Affiliated Shareholders 
would not receive any advantage not available to any other shareholder 
participating in the Repurchase Offer.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The Fund will distribute to shareholders redeeming shares in the 
Repurchase Offer an in-kind pro-rata distribution of equity portfolio 
securities except for (a) securities which, if distributed, would be 
required to register under the Securities Act; (b) securities issued by 
entities in countries which restrict or prohibit the holding of 
securities by non-nationals other than through qualified investment 
vehicles; and (c) certain portfolio assets (such as forward currency 
exchange contracts, futures and options contracts, and repurchase 
agreements) that, although they may be liquid and marketable, include 
the assumption of contractual obligations, require special trading 
facilities or can only be traded with the counterparty to the 
transaction in order to effect a change in beneficial ownership. As to 
fractional shares and/or odd lots of securities and/or amounts 
attributable to any cash position (including short-term non-equity 
securities), for shareholders of record of the Fund will (a) pay cash 
for fractional shares and/or odd lots of securities and/or amounts 
attributable to any cash position (including short-term non-equity 
securities); (b) round off (up or down) odd lots or fractional shares 
so as to eliminate them prior to distribution; or (c) pay a higher pro-
rata percentage of equity securities to represent such items.
    2. Securities distributed as proceeds in the Repurchase Offer will 
be valued in the same manner as they would be valued for the purposes 
of computing the 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 at the last sales price on 
a public securities market, or, if the securities are not listed on an 
exchange or a public securities market or if there is no such reported 
price, the average of the most recent bid and asked price (or, if no 
such asked price is available, the last quoted bid price).
    3. The securities distributed to shareholders pursuant to the 
Repurchase Offer will be limited to securities that are traded on a 
public securities market or for which quoted bid and asked prices are 
available.
    4. The Fund will maintain and preserve for a period of not less 
than six years from the end of the fiscal year in which the Repurchase 
Offer occurs, the first two years in an easily accessible place, a 
written record of each repurchase that includes the identity of each 
shareholder of record that participated in the Repurchase Offer, 
whether that shareholder was an Affiliated Shareholder, a description 
of each security distributed, the terms of the distribution and the 
information or materials upon which the valuation was made.


[[Page 31391]]


    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-11541 Filed 5-8-02; 8:45 am]
BILLING CODE 8010-01-P