[Federal Register Volume 68, Number 221 (Monday, November 17, 2003)]
[Notices]
[Pages 64919-64922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28595]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26250; 812-12956]


Alpine Equity Trust, et al.; Notice of Application

November 7, 2003.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under sections 6(c), 
12(d)(1)(J), and 17(b) of the Investment Company Act of 1940 (the 
``Act'') for an exemption from sections 12(d)(1)(A) and (B) and 17(a) 
of the Act, and under section 17(d) of the Act and rule 17d-1 under the 
Act to permit certain joint transactions.

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    Summary of Application: The requested order would permit certain 
registered management investment companies and certain entities that 
are excluded from the definition of investment company under section 
3(c)(1) or 3(c)(7) of the Act to invest uninvested cash in affiliated 
money market funds in excess of the limits in sections 12(d)(1)(A) and 
(B) of the Act.
    Applicants: Alpine Equity Trust, Alpine Series Trust, Alpine Income 
Trust (collectively, the ``Investment Companies''); Alpine Woods Growth 
Values, L.P., Alpine Woods Growth Values Financial Equities, L.P. 
(collectively, the ``Private Funds''); Alpine Management & Research, 
LLC (``Alpine Management''); and Saxon Woods Advisors, LLC (``Saxon 
Woods'').
    Filing Dates: The application was filed on April 9, 2003, and 
amended on November 7, 2003.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request

[[Page 64920]]

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 
2, 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, 2500 Westchester Avenue, Suite 109, Purchase, 
NY 10577.

FOR FURTHER INFORMATION CONTACT: John Yoder, Attorney-Adviser, at (202) 
942-0544 or Mary Kay Frech, 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 Investment Company is organized as a Delaware business 
trust and is registered under the Act as an open-end management 
investment company. The Investment Companies have one or more series, 
each with separate investment objectives and policies. Alpine Woods 
Growth Values, L.P. and Alpine Woods Growth Values Financial Equities, 
L.P. are Delaware limited partnerships excluded from the definition of 
investment company under the Act pursuant to section 3(c)(1) or 3(c)(7) 
of the Act. Alpine Management is a Delaware limited liability company 
registered under the Investment Advisers Act of 1940 (``Advisers Act'') 
and serves as investment adviser to each series of the Investment 
Companies. Saxon Woods is a Delaware limited liability company 
registered under the Advisers Act and serves as sub-adviser to a series 
of Alpine Series Trust and as investment manager for Alpine Woods 
Growth Values, L.P. and Alpine Woods Growth Values Financial Equities, 
L.P. (Alpine Management and Saxon Woods or any entity controlling, 
controlled by, or under common control with Alpine Management or Saxon 
Woods, collectively, the ``Advisers'').\1\
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    \1\ Applicants request that any relief granted also apply to (a) 
any other registered management investment company and series 
thereof for which an Adviser currently or in the future serves as 
investment adviser (``Funds,'' and together with all existing or 
future series of the Investment Companies, the ``Funds'') and (b) 
any private investment company excluded from the definition of 
investment company under section 3(c)(1) or 3(c)(7) of the Act for 
which an Adviser currently or in the future may serve as investment 
adviser or general partner exercising investment discretion 
(included in the term ``Private Funds.''). All Funds and Private 
Funds that currently intend to rely on the requested order are named 
as applicants. Any other entity that may rely on the order in the 
future will do so only in accordance with the terms and conditions 
of the application.
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    2. Applicants state that certain Funds and Private Funds (the 
``Investing Funds'') have, or may be expected to have, uninvested cash 
(``Uninvested Cash'') in an account held by a custodian. Uninvested 
Cash may result from a variety of sources, including dividends or 
interest received on portfolio securities, unsettled securities 
transactions, reserves held for investment strategy purposes, scheduled 
maturity of investments, liquidation of investment securities to meet 
anticipated redemptions, dividend payments, or new monies received from 
investors.
    3. Applicants request an order to permit each of the Investing 
Funds to invest its Uninvested Cash in shares of one or more Funds that 
are money market funds and comply with rule 2a-7 under the Act (``Money 
Market Funds''), and to permit the Money Market Funds to sell shares 
to, and redeem such shares from, the Investing Funds, and the Advisers 
to effect such purchases and sales. All existing and future Funds that 
invest their Uninvested Cash in the Money Market Funds are referred to 
as ``Registered Investing Funds,'' and the Private Funds that invest in 
the Money Market Funds are referred to as the ``Non-Registered 
Investing Funds.'' Investment of Uninvested Cash in shares of the Money 
Market Funds will be made only to the extent that such investments are 
consistent with each Registered Investing Fund's investment objectives, 
restrictions, and policies as set forth in its prospectus and statement 
of additional information. Applicants believe that the proposed 
transactions may reduce transaction costs, create more liquidity, 
increase returns, and diversify holdings.

Applicants' Legal Analysis

    1. Section 12(d)(1)(A) of the Act provides that no investment 
company may acquire securities of a registered investment company if 
such securities represent more than 3% of the acquired company's 
outstanding voting stock, more than 5% of the acquiring company's total 
assets, or if such securities, together with the securities of other 
acquired investment companies, represent more than 10% of the acquiring 
company's assets. Section 12(d)(1)(B) of the Act provides that no 
registered open-end investment company may sell its securities to 
another investment company if the sale will cause the acquiring company 
to own more than 3% of the acquired company's voting stock, or if the 
sale will cause more than 10% of the acquired company's voting stock to 
be owned by investment companies. Any entity that is excluded from the 
definition of investment company under section 3(c)(1) or 3(c)(7) of 
the Act is deemed to be an investment company for the purposes of the 
3% limitation specified in sections 12(d)(1)(A) and (B) with respect to 
purchases by and sales to such company.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction from any provision of 
section 12(d)(1) if and to the extent that such exemption is consistent 
with the public interest and the protection of investors. Applicants 
request relief under section 12(d)(1)(J) to permit the Investing Funds 
to use their Uninvested Cash to acquire shares of the Money Market 
Funds in excess of the percentage limitations in section 12(d)(1)(A), 
provided, however, that in all cases a Registered Investing Fund's 
aggregate investment of Uninvested Cash in shares of the Money Market 
Funds will not exceed 25% of the Registered Investing Fund's total 
assets at any time. Applicants also request relief to permit the Money 
Market Funds to sell their securities to the Investing Funds in excess 
of the percentage limitations in section 12(d)(1)(B).
    3. Applicants state that the proposed arrangement will not result 
in the abuses that sections 12(d)(1)(A) and (B) were intended to 
prevent. Applicants state that there is no threat of redemption to gain 
undue influence over the Money Market Funds due to the highly liquid 
nature of each Money Market Fund's portfolio. Applicants state that the 
proposed arrangement will not result in inappropriate layering of fees. 
Shares of the Money Market Funds sold to the Investing Funds will not 
be subject to a sales load, redemption fee, distribution fee under a 
plan adopted in accordance with rule 12b-1 under the Act or service fee 
(as defined in NASD

[[Page 64921]]

Conduct Rule 2830(b)(9)). If a Money Market Fund offers more than one 
class of shares, each Investing Fund will invest its Uninvested Cash 
only in the class with the lowest expense ratio at the time of 
investment. In connection with approving any advisory contract for a 
Registered Investing Fund, the board of trustees of each Registered 
Investing Fund (``Board''), including a majority of the trustees who 
are not ``interested persons,'' as defined in section 2(a)(19) of the 
Act (``Disinterested Trustees''), will consider to what extent, if any, 
the advisory fees charged to the Registered Investing Fund by the 
Adviser should be reduced to account for reduced services provided to 
the Registered Investing Fund by the Adviser as a result of the 
investment of Uninvested Cash in a Money Market Fund. In this regard, 
the Adviser will provide the Board with specific information regarding 
the approximate cost to the Adviser of, or portion of the advisory fee 
under the existing advisory contract attributable to, managing the 
Uninvested Cash of the Registered Investing Fund that can be expected 
to be invested in the Money Market Funds. Applicants represent that so 
long as its shares are held by an Investing Fund, no Money Market Fund 
will acquire securities of any other investment company in excess of 
the limitations contained in section 12(d)(1)(A) of the Act.
    4. Section 17(a) of the Act makes it unlawful for any affiliated 
person of a registered investment company, acting as principal, to sell 
or purchase any security to or from the investment company. Section 
2(a)(3) of the Act defines an affiliated person of an investment 
company to include 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, any person 5% or 
more of whose outstanding securities are directly or indirectly owned, 
controlled, or held with power to vote by the other person, any person 
directly or indirectly controlling, controlled by, or under common 
control with the other person, and any investment adviser to the 
investment company. Because each Fund shares a common investment 
adviser, they may be deemed to be under common control and thus 
affiliated persons of each other. In addition, if a Registered 
Investing Fund purchases more than 5% of the voting securities of a 
Money Market Fund, the Money Market Fund and the Registered Investing 
Fund may be affiliated persons of each other. As a result, section 
17(a) would prohibit the sale of the shares of Money Market Funds to 
the Investing Funds, and the redemption of the shares by the Investing 
Funds.
    5. Section 17(b) of the Act authorizes the Commission to exempt a 
transaction from section 17(a) of the Act if the terms of the proposed 
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 proposed transaction is consistent with the 
policy of each registered investment company concerned and with the 
general purposes of the Act. Section 6(c) of the Act permits the 
Commission to exempt persons or transactions from any provision of the 
Act, if the 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.
    6. Applicants submit that their request for relief to permit the 
purchase and redemption of shares of the Money Market Funds by the 
Investing Funds satisfies the standards in sections 6(c) and 17(b) of 
the Act. Applicants note that shares of the Money Market Funds will be 
purchased and redeemed at their net asset value, the same consideration 
paid and received for these shares by any other shareholder. Applicants 
state that the Registered Investing Funds will retain their ability to 
invest Uninvested Cash directly in money market instruments as 
authorized by their respective investment objectives and policies. 
Applicants state that a Money Market Fund has the right to discontinue 
selling shares to any of the Investing Funds if the Money Market Fund's 
Board determines that such sale would adversely affect the Money Market 
Fund's portfolio management and operations.
    7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, acting as 
principal, from participating in or effecting any transaction in 
connection with any joint enterprise or joint arrangement in which the 
investment company participates, unless the Commission has approved the 
joint arrangement. Applicants state that the Investing Funds and the 
Money Market Funds, by participating in the proposed transactions, and 
the Advisers, by managing the proposed transactions, could be deemed to 
be participating in a joint arrangement within the meaning of section 
17(d) and rule 17d-1.
    8. In considering whether to approve a joint transaction under rule 
17d-1, the Commission considers whether the investment company's 
participation in the joint transaction is consistent with the 
provisions, policies and purposes of the Act, and the extent to which 
the participation is on a basis different from or less advantageous 
than that of other participants. Applicants state that the investment 
by the Investing Funds in shares of the Money Market Funds would be on 
the same basis and no different from or less advantageous than that of 
other participants. Applicants submit that the proposed transactions 
meet the standards for an order under rule 17d-1.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Shares of the Money Market Funds sold to and redeemed from the 
Investing Funds will not be subject to a sales load, redemption fee, 
distribution fee under a plan adopted in accordance with rule 12b-1, or 
service fee (as defined in rule 2830(b)(9) of the Rules of Conduct of 
the NASD) or, if such shares are subject to any such sales load, 
redemption fee, distribution fee or service fee, an Adviser will waive 
its advisory fee for each Investing Fund in an amount that offsets the 
amount of such fees incurred by the Investing Fund.
    2. Before the next meeting of the Board of a Registered Investing 
Fund is held for purposes of voting on an advisory contract under 
section 15 of the Act, the Adviser to the Registered Investing Fund 
will provide the Board with specific information regarding the 
approximate cost to the Adviser of, or portion of the advisory fee 
under the existing advisory contract attributable to, managing the 
Uninvested Cash of the Registered Investing Fund that can be expected 
to be invested in the Money Market Funds. Before approving any advisory 
contract for a Registered Investing Fund, the Board of the Registered 
Investing Fund, including a majority of the Disinterested Trustees, 
shall consider to what extent, if any, the advisory fees charged to the 
Registered Investing Fund by the Adviser should be reduced to account 
for reduced services provided to the Registered Investing Fund by the 
Adviser as a result of Uninvested Cash being invested in the Money 
Market Funds. The minute books of the Registered Investing Fund will 
record fully the Board's considerations in approving the advisory 
contract, including the considerations relating to fees referred to 
above.
    3. Each of the Registered Investing Funds will invest Uninvested 
Cash in,

[[Page 64922]]

and hold shares of, the Money Market Funds only to the extent that the 
Registered Investing Fund's aggregate investment of Uninvested Cash in 
the Money Market Funds does not exceed 25 percent of the Registered 
Investing Fund's total assets. For purposes of this limitation, each 
Registered Investing Fund and series thereof will be treated as a 
separate investment company.
    4. Investment by a Registered Investing Fund in shares of the Money 
Market Funds will be in accordance with each Registered Investing 
Fund's respective investment restrictions and will be consistent with 
each Registered Investing Fund's policies as set forth in its 
prospectus and statement of additional information.
    5. Each Registered Investing Fund and each Money Market Fund 
relying on the order will be advised by an Adviser. A Registered 
Investing Fund that is subadvised, but not advised, by an Adviser may 
rely on the order provided that the Adviser manages the Uninvested Cash 
and the Registered Investing Fund is in the same group of investment 
companies (as defined in 12(d)(1)(G) of the Act) as the Money Market 
Fund in which the Registered Investing Fund invests its Uninvested 
Cash. Each Non-Registered Investing Fund will be advised by an Adviser 
or have an Adviser as its general partner exercising investment 
discretion.
    6. So long as its shares are held by an Investing Fund no Money 
Market Fund shall acquire securities of any other investment company in 
excess of the limits contained in section 12(d)(1)(A) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-28595 Filed 11-14-03; 8:45 am]
BILLING CODE 8010-01-P