[Federal Register Volume 64, Number 204 (Friday, October 22, 1999)]
[Notices]
[Pages 57161-57162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27597]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 24086; 812-11812]
Equity Managers Trust and Neuberger Berman Equity Trust; Notice
of Application
October 15, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 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: Applicants, Equity Managers Trust (``Managers
Trust'') and Neuberger Berman Equity Trust (``Berman Trust''), seek an
order to permit an in-kind redemption of shares of a series of the
Berman Trust (``Feeder Fund'') by an affiliated person of the Feeder
Fund.
FILING DATES: The application was filed on October 13, 1999. Applicants
have agreed to file an amendment, the substance of which is reflected
in this notice, during the notice period.
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 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 November 9, 1999, 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, 605 Third Avenue, 2nd Floor, New York, New York
10158-0180.
FOR FURTHER INFORMATION CONTACT: Elaine M. Boggs, Senior Counsel, at
(202) 942-0572 or Christine Y. Greenlees, 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. The Managers Trust, a New York common law trust, and the Berman
Trust, a Delaware business trust, are registered under the Act as open-
end management investment companies. The Managers Trust offers shares
in nine separate series, including the Neuberger Berman Socially
Responsive Portfolio (the ``Master fund''). The Feeder Fund is one of
ten series of the Berman Trust. The Feeder Fund and the Master Fund are
organized in a ``master-feeder'' structure under which the Feeder Fund
invests all of its net assets in the Master Fund. Neuberger Berman
Management Inc. and Neuberger Berman, LLC (collectively, the
``Advisers'') serve as investment adviser and sub-adviser,
respectively, to the Master Fund. The Advisers are registered under the
Investment Advisers Act of 1940.
2. As of August 31, 1999, the Feeder Fund owned 63.74% of the
Master Fund. The Feeder Fund's sole shareholder is the Deferred
Compensation Plan of the City of New York and Related Agencies and
Instrumentalities (the ``Plan''), a tax-exempt qualified employee
benefit plan for employees of the City of New York and its related
agencies and instrumentalities.
3. The Plan has advised the Feeder Fund that it intends to redeem
all of it shares of the Feeder Fund and that it would like to be paid
in-kind. To effect the in-kind redemption, the Master Fund would
transfer portfolio securities to the Feeder Fund, which would then
transfer the securities to the Plan. The Plan will then transfer its
assets to an account managed by Citizens Advisors, which is not
affiliated with applicants, the Advisers, or any other entity in the
Neuberger Berman complex.
4. The Master Fund's and the Feeder Fund's registration statements
provide that, under certain circumstances, each Fund may satisfy a
request for redemption in-kind with portfolio securities. The boards of
trustees of the Managers Trust and the Berman Trust, including in each
case a majority of the trustees who are not ``interested persons,'' as
that term is defined in section 2(a)(19) of the Act, have determined
that it would be in the best interests of the shareholders of the
Managers Trust and the Berman Trust to redeem the shares of the Plan
in-kind.
Applicants' Legal Analysis
1. Section 17(a)(2) of the Act generally prohibits an affiliated
person of a registered investment company or an affiliated person of
such person, acting as principal, from knowingly purchasing any
security or other property (except securities of which the seller is
the issuer) from the company. Section 2(a)(3) of the Act defines
``affiliated person'' of another person to include, among others, any
person owning 5% or more of the outstanding voting securities of the
other person and any person controlling, controlled by or under common
control with the other person. Under section 2(a)(9) of the Act, a
person that owns beneficially more than 25% of the voting securities of
a company is presumed to control the company.
2. Applicants state that the Feeder Fund, as the holder of 63.74%
of the outstanding voting securities of the Master Fund, would be an
affiliated person of the Master Fund and would be presumed to control
the Master Fund. In addition, as the sole shareholder of the Feeder
Fund, the Plan is an affiliated person of the Feeder Fund and is
presumed to control the Feeder Fund.
[[Page 57162]]
Applicants state that to the extent that an in-kind redemption could be
viewed as involving the ``purchase'' of portfolio securities by the
Feeder Fund from the Master Fund, and by the Plan from the Feeder Fund,
section 17(a)(2) may prohibit the transaction.
3. Section 17(b) of the Act provides that, notwithstanding section
17(a) of the Act, the Commission will exempt a proposed transaction
from section 17(a) of the Act if evidence establishes that: (a) the
terms of the proposed transaction are reasonable and fair and do not
involve overreaching; (b) the proposed transaction is consistent with
the policy of each registered investment company involved; and (c) the
proposed transaction is consistent with the general purposes of the
Act.
4. Applicants submit that the terms of the transaction meet the
standards set forth in section 17(b) of the Act. Applicants state that
neither the Advisers nor the Plan will have any opportunity to select
the specific portfolio securities to be distributed. Rather, the Plan
will receive a pro rata share of each portfolio security held by the
Master Fund, except for odd lot securities, fractional shares, and
accruals on such securities, certificates of deposit, and proceeds from
the liquidation of S&P 500 Index futures contracts held by the Master
Fund. Applicants further state that the portfolio securities to be
distributed to the Plan will be valued according to an objective,
verifiable standard and that the in-kind redemption is consistent with
the investment policies of the Feeder Fund and the Master Fund.
Applicants also state that the proposed in-kind redemption is
consistent with the general purposes of the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The securities distributed pursuant to the redemption in-kind
(the ``In-Kind Securities'') will be distributed on a pro rata basis,
provided that cash will be distributed: (a) For certificates of
deposit; (b) in lieu of shares not amounting to round lots, fractional
shares, and accruals on such securities; and (c) as proceeds from the
liquidation of S&P 500 Index future contracts held by the Master Fund.
2. The In-Kind Securities distributed to the Plan will be valued in
the same manner as they would be valued for purposes of computing each
of the Feeder Fund's and the Master Fund's net asset value.
3. The Feeder Fund and the Master Fund will maintain and preserve
for a period of not less than six years from the end of the fiscal year
in which the in-kind redemption occurs, the first two years in an
easily accessible place, a written record of the redemption setting
forth a description of each security distributed in-kind, the terms of
the in-kind distribution and the information or materials upon which
the valuation was made.
For the Commission, by the Division of Investment Management,
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 99-27597 Filed 10-21-99; 8:45 am]
BILLING CODE 8010-01-M