Securities and Exchange Commission (“Commission”).
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.
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.
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.Start Further Info
FOR FURTHER INFORMATION CONTACT:
David B. Smith, Jr., Associate Director, at (202) 942-0525 (Division of Investment Management, Public Utility and Investment Company Regulation).End Further Info End Preamble Start Supplemental 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).
1. The Fund, a Maryland corporation, is registered under the Act as a closed-Start Printed Page 31390end 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”). 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.
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 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.Start Signature
For the Commission, by the Division of Investment Management, under delegated authority.
J. Lynn Taylor,
1. Applicants state that as of January 31, 2002, 93% of the Fund's assets were invested in equity securities.Back to Citation
[FR Doc. 02-11541 Filed 5-8-02; 8:45 am]
BILLING CODE 8010-01-P