[Federal Register Volume 70, Number 112 (Monday, June 13, 2005)]
[Notices]
[Pages 34167-34169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3056]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26906; 812-13197]


The Brazil Fund; Notice of Application

June 7, 2005.
AGENCY: Securities and Exchange Commission (``Commission'').

Applicant: The Brazil Fund, Inc. (the ``Fund'').

Action: Notice of application for an order 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 Application: Applicant seeks an order that would permit in-
kind repurchases of shares of the Fund held by certain affiliated 
shareholders of the Fund.

Filing Dates: The application was filed on June 7, 2005.
    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 June 28, 2005, 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, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC, 20549-0609. Applicant, Bruce Rosenblum, Esq., c/o 
Deutsche Investment Management Americas, Inc., 345 Park Avenue, New 
York, NY 10154.

FOR FURTHER INFORMATION CONTACT: Julia Kim Gilmer, Senior Counsel, at 
(202) 551-6871, or Janet M. Grossnickle, Branch Chief, at (202) 551-
6821 (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 Desk, 100 F Street, NE., Washington, DC, 
20549-0102 (tel. 202-551-5850).

Applicant's Representations

    1. The Fund, a Maryland corporation, is registered under the Act as 
a closed-end management investment company. The Fund's investment 
objective is to provide long-term capital appreciation through 
investment in securities, primarily equity securities, of Brazilian 
companies. Applicant states that under normal circumstances it invests 
at least 70% of its net assets in Brazilian companies listed on one or 
more Brazilian stock exchanges or traded in over-the-counter markets 
organized by entities accredited by the Brazilian Securities 
Commission.\1\ Shares of the Fund are listed and trade on the New York 
Stock Exchange. Deutsche Investment Management Americas Inc. (the 
``Investment Manager'') is registered

[[Page 34168]]

under the Investment Advisers Act of 1940 and serves as the investment 
manager to the Fund.
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    \1\ Applicant states that as of March 31, 2005, approximately 
97.5% of its assets were invested in equity securities of Brazilian 
issuers, all of which were listed on Bolsa de Valores de Sao Paolo.
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    2. The Fund proposes to repurchase up to 50% of its outstanding 
shares at 98% of net asset value (``NAV'') 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 ``Initial Repurchase Offer''). The Fund also proposes to conduct 
six subsequent semi-annual repurchase offers, also on an in-kind basis, 
each for 10% of the Fund's then outstanding shares at 98% of NAV 
(``Subsequent Repurchase Offers'' together with the Initial Repurchase 
Offer, the ``In-Kind Repurchase Offers'').\2\ The In-Kind Repurchase 
Offers will be conducted in accordance with section 23(c)(2) of the Act 
and rule 13e-4 under the Securities Exchange Act of 1934.
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    \2\ Each Subsequent Repurchase Offer would be conducted only if 
the Fund's shares trade on the New York Stock Exchange at an average 
weekly discount from NAV greater than 5% during a 13-week measuring 
period ending the last day of the preceding half-year.
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    3. Applicant states that the In-Kind Repurchase Offers are designed 
to accommodate the needs of shareholders who wish to participate in the 
In-Kind Repurchase Offers and long-term shareholders who would prefer 
to remain invested in a closed-end investment vehicle. Under the In-
Kind Repurchase Offers, only participating shareholders will pay taxes 
on the gain on appreciated securities distributed in the In-Kind 
Repurchase Offers. Non-participating shareholders would avoid the 
imposition of a significant tax liability, which would occur if the 
Fund sold the appreciated securities to make payments in cash. 
Applicant further states that the In-Kind Repurchase Offers' in-kind 
payments will minimize market disruption, while allowing the Fund to 
avoid a cascade of distributions, required to preserve its tax status, 
that would reduce the size of the Fund drastically. Applicant requests 
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'') to participate in the proposed In-Kind 
Repurchase Offers.

Applicant's 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. Applicant states that to the extent that the In-Kind Repurchase 
Offers would constitute the purchase or sale of securities by an 
Affiliated Shareholder, the transactions would be prohibited by section 
17(a). Accordingly, applicant requests an exemption from section 17(a) 
of the Act to the extent necessary to permit the participation of 
Affiliated Shareholders in the In-Kind Repurchase Offers.
    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. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions, from any provision of the Act or 
rule thereunder, if and 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.
    3. Applicant asserts that the terms of the In-Kind Repurchase 
Offers meet the requirements of sections 17(b) and 6(c) of the Act. 
Applicant asserts that neither the Fund nor an Affiliated Shareholder 
has any choice as to the portfolio securities to be received as 
proceeds from the In-Kind Repurchase Offers. 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-residents other than through 
qualified investment vehicles, or whose distributions would otherwise 
be contrary to applicable local laws, rules or regulations, 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, applicant states 
that the portfolio securities to be distributed in the In-Kind 
Repurchase Offer will be valued according to an objective, verifiable 
standard, and the In-Kind Repurchase Offers are consistent with the 
investment policies of the Fund. Applicant also believes that the In-
Kind Repurchase Offers are consistent with the general purposes of the 
Act because the interests of all shareholders are equally protected and 
no Affiliated Shareholder would receive an advantage or special benefit 
not available to any other shareholder participating in the In-Kind 
Repurchase Offers.

Applicant's Conditions

    Applicant agrees that any order granting the requested relief will 
be subject to the following conditions:
    1. Applicant will distribute to shareholders participating in the 
In-Kind Repurchase Offers an in-kind pro rata distribution of portfolio 
securities of applicant. The pro rata distribution will not include: 
(a) Securities that, if distributed, would be required to be registered 
under the Securities Act; (b) securities issued by entities in 
countries that restrict or prohibit the holdings of securities by non-
residents other than through qualified investment vehicles, or whose 
distribution would otherwise be contrary to applicable local laws, 
rules or regulations; and (c) certain portfolio assets, such as 
derivative instruments or repurchase agreements, that involve the 
assumption of contractual obligations, require special trading 
facilities, or can only be traded with the counterparty to the 
transaction. Cash will be paid for that portion of applicant's assets 
represented by cash and cash equivalents (such as certificates of 
deposit, commercial paper and repurchase agreements) and other assets 
which are not readily distributable (including receivables and prepaid 
expenses), net of all liabilities (including accounts payable). In 
addition, applicant will distribute cash in lieu of fractional shares 
and accruals on such securities. Applicant may round down the 
proportionate distribution of each portfolio security to the nearest 
round lot amount and will distribute the remaining odd lot in cash. 
Applicant may also distribute a higher pro rata percentage of other 
portfolio securities to represent such items.
    2. The securities distributed to shareholders pursuant to the In-
Kind Repurchase Offers will be limited to securities that are traded on 
a public securities market or for which quoted bid and asked prices are 
available.
    3. The securities distributed to shareholders pursuant to the In-
Kind Repurchase Offers will be valued in the same manner as they would 
be valued for purposes of computing applicant's

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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).
    4. Applicant will maintain and preserve for a period of not less 
than six years from the end of the fiscal year in which any In-Kind 
Repurchase Offer occurs, the first two years in an easily accessible 
place, a written record of such In-Kind Repurchase Offer that includes 
the identity of each shareholder of record that participated in such 
In-Kind 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.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3056 Filed 6-10-05; 8:45 am]
BILLING CODE 8010-01-P