[Federal Register Volume 68, Number 17 (Monday, January 27, 2003)]
[Notices]
[Pages 3905-3906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1757]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25907; 812-12730]


System Capital Corporation and Golden Funding Corporation; Notice 
of Application

January 21, 2003.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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    Summary of Application: Applicants request an order that would 
permit Golden Funding Corporation (``Golden Funding'') to sell 
securities and use the proceeds to finance the business activities of 
its parent company, System Capital Corporation (``SCC''), and certain 
companies controlled by SCC (``Controlled Companies'').
    Applicants: SCC and Golden Funding.
    Filing Dates: The application was filed on December 18, 2001, and 
amended on January 16, 2003.
    Hearing or Notification of Hearing: An order granting the requested 
relief 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 February 18, 2003, 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, 676 N. Michigan Avenue, Suite 3650, Chicago, 
Illinois 60611.

FOR FURTHER INFORMATION CONTACT: Karen L. Goldstein, Senior Counsel 
(202) 942-0646, or Janet M. Grossnickle, Branch Chief (202) 942-0564 
(Office of Investment Company Regulation, Division of Investment 
Management).

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 (tel. 202-942-8090).

Applicants' Representations

    1. SCC, a Delaware corporation, is a holding company for 
subsidiaries that provide financing to the restaurant system operated 
by McDonald's Corporation (``McDonald's'') and its owner/operators and 
suppliers (the ``McDonald's Restaurant System''). SCC currently 
conducts its activities through three types of wholly-owned 
subsidiaries: (i) The Controlled Companies which provide financing for 
specific operations of the McDonald's Restaurant System, (ii) Golden 
Funding, which provides financing to the Controlled Companies, and 
(iii) System Capital Credit Corporation (``Credit''), which provides 
various credit support and financial services to Golden Funding, the 
Controlled Companies and other lenders to the McDonald's Restaurant 
System. Applicants state that SCC is not an investment company as 
defined in section 3(a) of the Act.
    2. Golden Funding, a Delaware corporation, is a wholly-owned 
subsidiary of SCC whose primary purpose is to finance the activities of 
the Controlled Companies by issuing securities and by obtaining secured 
and unsecured loans pursuant to various credit and liquidity 
facilities. The debt

[[Page 3906]]

securities issued by Golden Funding include commercial paper, medium-
term notes, and may include extendible maturity commercial paper 
(collectively, the ``Securities''). The Securities are offered and sold 
under an exemption from registration provided by section 4(2) of the 
Securities Act of 1933 (``Securities Act'') and are eligible for resale 
only to ``qualified institutional buyers'' under rule 144A of the 
Securities Act that are also ``qualified purchasers'' under the Act. 
Golden Funding also may borrow from banks and issue other debt 
securities or preferred stock in the United States pursuant to a 
registration statement or an applicable exemption from registration 
under the Securities Act. Golden Funding will comply with the 
applicable requirements in rule 3a-5(a)(1) through (4) and with rule 
3a-5(b)(1)(i).
    3. Golden Funding uses the proceeds from the Securities and loans 
to make loans to the Controlled Companies.\1\ Each Controlled Company 
uses the proceeds of the loans to provide financing for a distinct 
segment of the McDonald's Restaurant System, either by purchasing 
accounts receivable or originating loans or leases to McDonald's or 
McDonald's Restaurant System participants. Applicants state that each 
of the Controlled Companies relies, or upon its formation will rely, on 
section 3(c)(5) of the Act for exclusion from regulation as an 
investment company under the Act.
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    \1\ Golden Funding also may from time to time make advances to 
Credit, which is a ``company controlled by the parent company,'' as 
that term is defined in rule 3a-5(b)(3).
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    4. Applicants state that in compliance with rule 3a-5(a)(5) under 
the Act, Golden Funding uses at least 85% of any cash or cash 
equivalents it raises to make loans to the Controlled Companies as soon 
as practicable, but in no event later than six months after Golden 
Funding's receipt of the cash or cash equivalents. In accordance with 
rule 3a-5(a)(6), all investments by Golden Funding, including temporary 
investments, will be made in Government securities (as defined in the 
Act), securities of Controlled Companies or debt securities that are 
exempted from the provisions of section 3(a)(3) of the Securities Act.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act 
exempting Golden Funding from all provisions of the Act. Rule 3a-5 
under the Act provides an exemption from the Act for certain companies 
organized primarily to finance the business operations of their parent 
companies or companies controlled by their parent companies.
    2. Rule 3a-5(b)(3)(i) under the Act, in relevant part, defines a 
``company controlled by the parent company'' to mean any corporation, 
partnership, or joint venture that is not considered an investment 
company under section 3(a) of the Act, or that is excepted or exempted 
by order from the definition of investment company by section 3(b) or 
by the rules and regulations under section 3(a) of the Act. Applicants 
state that the Controlled Companies do not fit within the definition of 
``company controlled by the parent company'' because they derive their 
non-investment company status from section 3(c)(5) of the Act. 
Accordingly, Applicants request exemptive relief to permit Golden 
Funding to issue and sell Securities to finance the operations of SCC 
and the Controlled Companies. Applicants state that neither SCC, Golden 
Funding nor the Controlled Companies engage primarily in investment 
company activities.
    3. Section 6(c) of the Act, in pertinent part, provides that the 
Commission, by order upon application, may conditionally or 
unconditionally exempt any person, security or transaction, or any 
class or classes of persons, securities or transactions, from any 
provision or provisions of the Act 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. Applicants submit that its exemptive request 
meets the standards set out in section 6(c) of the Act.

Applicants' Condition

    Applicants agree that the order granting the requested relief will 
be subject to the following condition:
    Golden Funding will comply with all of the provisions of rule 3a-5 
under the Act, except Golden Funding will be permitted to make loans to 
or make or hold investments in Controlled Companies that do not meet 
the portion of the definition of ``company controlled by a parent 
company'' in rule 3a-5(b)(3)(i) under the Act solely because they are 
excluded from the definition of investment company under section 
3(c)(5) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-1757 Filed 1-24-03; 8:45 am]
BILLING CODE 8010-01-P