Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 63987

1For purposes of the application, ‘‘successors in

interest’’ is limited to entities that result from a

reorganization due to change of legal domicile or a

change in form of business organization, e.g.,

partnership to corporation.

2The Plan may be amended in the future to

permit an Eligible Trustee to have the return on the

compensation measured by the return on shares of

an investment company other than one of the Acorn

Funds or an unaffiliated money market fund.

3Acorn’s purchase of Shares will be made for the

benefit of Acorn and not for the benefit of

participating Eligible Trustees.

unless it displays a currently valid

control number.

Written comments regarding the

above information should be directed to

the following persons: (i) Desk Officer

for the Securities and Exchange

Commission, Office of Information and

Regulatory Affairs, Office of

Management and Budget, Room 3208,

New Executive Office Building,

Washington, D.C. 20503; and (ii)

Michael E. Bartell, Associate Executive

Director, Office of Information

Technology, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Comments

must be submitted to OMB within 30

days of this notice.

Dated: November 25, 1997.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31616 Filed 12–2–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22904/812–10608]

Acorn Investment Trust; Notice of

Application

November 24, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for an

order (i) under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) for an exemption from sections

13(a)(2), 18(f)(1), 22(f), and 22(g) of the

Act; (ii) under sections 6(c) and 17(b) of

the Act for an exemption from section

17(a)(1); and (iii) under section 17(d) of

the Act and rule 17d–1 to permit certain

joint transactions.

SUMMARY OF APPLICATION: Applicant

requests an order to permit Acorn

Investment Trust (‘‘Acorn’’) to enter into

deferred compensation arrangements

with its trustees who are not interested

persons of Acorn.

Filing Dates: The application was

filed on April 7, 1997 and amended on

August 22, 1997. Applicant has agreed

to file an additional amendment, the

substance of which is incorporated

herein, during the notice period.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the SEC 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 SEC by 5:30 p.m. on

December 22, 1997, and should be

accompanied by proof of service on

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 who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Acorn Investment Trust, 227 West

Monroe Street, Suite 3000, Chicago,

Illinois 60606.

FOR FURTHER INFORMATION CONTACT:

Deepak T. Pai, Staff Attorney, at (202)

942–0574, 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 SEC’s

Public Reference Branch, 450 Fifth

Street, N.W., Washington, D.C. 20549

(tel. 202–942–8090).

Applicant’s Representations

1. Acorn is a registered open-end

management investment company

organized as a Massachusetts business

trust. Acorn currently offers three series:

Acorn Fund, Acorn International, and

Acorn USA (the ‘‘Acorn Funds,’’

together with any additional series

offered by Acorn in the future, the

‘‘Funds’’). Wagner Asset Management,

L.P. serves as investment adviser to the

Funds. Acorn requests that the relief

apply to the Funds and any successors

in interest to Acorn or any existing or

future series thereof.1

2. Acorn’s board of trustees

(‘‘Trustees’’) currently consists of nine

persons, seven of whom are not

‘‘interested persons’’ of Acorn within

the meaning of Section 2(a)(19) of the

Act (‘‘Eligible Trustees’’). Each Eligible

Trustee receives an annual retainer plus

an additional fee for each board meeting

and each pricing committee meeting

attended. Acorn’s Trustees have

approved a deferred compensation plan

for the Eligible Trustees (the ‘‘Plan’’).

The purposes of the Plan is to permit

the Eligible Trustees to defer any or all

of their compensation from Acorn for

federal income tax purposes. An Eligible

Trustee’s election to defer any or all of

such compensation will continue in

effect for each calendar year unless the

Eligible Trustee delivers to the

administrator of the Plan a written

revocation or modification of the

election.

3. If an Eligible Trustee elects to defer

compensation pursuant to the Plan,

compensation will be credited to a book

reserve account established by Acorn

(the ‘‘Deferral Account’’), as of the date

the compensation otherwise would have

been payable to the Eligible Trustee.

Each Eligible Trustee may elect to have

his or her compensation treated as if it

had been invested and reinvested in

shares of one or more of the Funds or

of any unaffiliated money market fund

with which the Funds enjoy exchange

privileges (‘‘Shares’’), and may from

time to time change his or her

designation of Shares.2

4. The compensation credited to a

Deferral Account for each Eligible

Trustee will be treated as if it had been

invested in the Shares at the current net

asset value (‘‘NAV’’) of the Shares on

the date the compensation is credited to

the Deferral Account. Thereafter, the

value of the Deferral Account will

fluctuate as the NAV of the Shares

fluctuates, and will also reflect the value

of the assumed reinvested dividends or

capital gains distributions in additional

Shares. It is intended that each Fund

may purchase Shares in amounts equal

to the deemed investment of the

Deferral Accounts of the Eligible

Trustees.3 If a Fund purchases Shares,

the Shares will be held solely in the

name of that Fund. When a Fund

purchases Shares, liabilities created by

the credits to the Deferral Accounts

under the Plan are expected to be

matched by an equal amount of assets

(i.e., a direct investment in the Shares).

5. The Plan provides that each Fund’s

respective obligation to make payments

of amounts accrued in each of the

Deferral Accounts will be a general

obligation of that Fund, and payments

made pursuant to the Plan will be made

from that Fund’s general assets and

property. No Fund will be liable for any

other Fund’s respective obligation to

make payments under the Plan. Each

Eligible Trustee will be a general

unsecured creditor of a Fund. The Plan

also provides that a Fund will not be

under an obligation to purchase, hold,

or dispose of any investments under the

Plan. If a Fund chooses to purchase

investments to cover its obligations

under the Plan, such investments will
63988 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

continue to be a part of the general

assets and property of that Fund.

Applicants state that the number of

Shares purchased under the Plan will be

de minimis in relation to the size of

each Fund.

6. Under the Plan, amounts credited

to an Eligible Trustee’s Deferral Account

generally will become payable in cash

when an Eligible Trustee retires from

the board. An Eligible Trustee may elect

to receive payment in a lump sum or in

equal annual installments over a period

of five years. If an Eligible Trustee dies

prior to the commencement of the

distribution from the Deferral Account,

the balance of the Deferral Account will

be distributed to the Eligible Trustee’s

designated beneficiary in a lump sum as

soon as practicable. If an Eligible

Trustee dies after the commencement of

such distribution, but prior to the

complete distribution of the Deferral

Account, the balance will be distributed

to the beneficiary over the remaining

distribution period. The Trustees, in

their sole discretion, may accelerate the

distribution of the Deferral Account. In

all other events, the Eligible Trustee’s

right to receive distributions from the

Deferral Account will be nontransferable.

7. The Plan also permits an Eligible

Trustee to apply to the Plan

administrator at any time for a full or

partial withdrawal on the basis of

‘‘hardship or unforeseen emergency’’ as

defined in the Plan. The Plan has

reserved the right to accelerate or extend

payment of amounts in the Deferral

Account at any time after the

termination of the Eligible Trustee’s

service as a trustee or in the event of a

change in control of Acorn’s investment

adviser. In addition, in the event of

liquidation, dissolution, or winding up

of Acorn or the distribution of all or

substantially all of Acorn’s assets and

property to its shareholders, or in the

event of a merger or reorganization of

Acorn (unless prior to such merger or

reorganization, the Trustees determine

that the Plan shall survive the merger or

reorganization), all unpaid amounts in

the Deferral Accounts will be paid in a

lump sum to the Eligible Trustees on the

effective date of such liquidation,

dissolution, winding up, distribution,

merger, or reorganization.

Applicant’s Legal Analysis

1. Applicant requests an order under

(i) section 6(c) of the Act to exempt

Acorn from the provisions of sections

13(a)(2), 18(f)(1), 22(f), and 22(g) to the

extent necessary to permit Acorn to

implement the Plan; (ii) sections 6(c)

and 17(b) of the Act to exempt Acorn

from the provisions of section 17(a) to

permit each Fund to sell securities of

which it is the issuer to other Funds in

connection with the Plan; and (iii)

section 17(d) of the Act and rule 17d–

1 to permit Acorn and the Eligible

Trustees to effect certain transactions

incident to the Plan.

2. Section 6(c) of the Act provides that

the SEC may exempt any person,

security, or transaction from any

provision of the Act, 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. Section 18(f)(1) of the Act generally

prohibits a registered open-end

investment company from issuing

senior securities. In addition, section

13(a)(2) of the Act requires that a

registered investment company obtain

shareholder authorization before issuing

any senior security not contemplated by

the recitals of policy in its registration

statement. Section 18(g) of the Act

defines ‘‘senior security’’ to include

‘‘any bond, debenture, note or similar

obligation or instrument constituting a

security and evidencing indebtedness.’’

Applicant states that the plan does not

possess any of the characteristics of

senior securities that led to the

enactment of sections 13(a)(2) and

18(f)(1). Applicant states that Acorn will

not be ‘‘borrowing’’ from its Eligible

Trustees, and liabilities created by

credits to the Deferral Accounts under

the Plan are expected to be offset by

equal amounts of assets of Acorn that

would not otherwise exist if the

compensation was paid on a current

basis. Applicant asserts that the Plan

will not induce speculative investments

by Acorn or provide opportunity for

manipulative allocation of the expenses

and profits of Acorn. Applicant also

asserts that the control of Acorn will not

be affected, and the Plan will not

confuse investors.

4. Section 22(f) prohibits restrictions

on the transferability of negotiability of

redeemable securities issued by an

open-end investment company unless

the restrictions are disclosed in its

registration statement and do not

contravene SEC rules and regulations.

Applicant asserts that the restriction on

the transferability of benefits under the

Plan is clearly described in the Plan, is

included in the Plan primarily to benefit

the Eligible Trustees, and would not

advserely affect the interests of Acorn’s

shareholders.

5. Section 22(g) generally prohibits

registered open-end investment

companies from issuing any of their

securities for services or for property

other than cash or securities. Applicant

believes that section 22(g) is primarily

concerned with the dilutive effect on

the equity and voting power of the

common stock of an investment

company if securities are issued for

consideration not readily valued.

Applicant asserts that interests under

the Plan will not entitle the Eligible

Trustees to vote as shareholders or

participate in the profit and gain of

Acorn. In addition, applicant asserts

that the Eligible Trustees’ interests in

the Plan are non-transferable, and an

Eligible Trustee’s right to receive

payments under the Plan is not granted

in return for services. Thus, applicant

contends that the Plan merely provides

for the deferral of compensation and any

rights under the Plan should be viewed

as being ‘‘issued’’ in return for Acorn

not being required to pay the

compensation on a current basis.

6. Section 17(a)(1) of the Act generally

prohibits an affiliated person of a

registered investment company, or any

affiliated person of such person, from

selling any security to such registered

investment company. Applicant submits

that the Funds and other investment

companies that have the same

investment adviser may be ‘‘affiliated

persons’’ within the meaning of section

2(a)(3) of the Act. Applicant states that

section 17(a)(1) was designed to prevent

sponsors of investment companies from

using investment company assets as

capital for enterprises with which they

are associated or to acquire controlling

interests in such enterprises. Applicant

believes that an exemption from this

provision would facilitate the matching

of its liability for deferred compensation

with the value of the Shares chosen by

the Eligible Trustees.

7. Section 17(b) authorizes the SEC to

exempt a proposed transaction from

section 17(a) if evidence establishes

that: (a) the terms of the transaction,

including the consideration to be paid

or received, are reasonable and fair and

do not involve overreaching, (b) the

transaction is consistent with the policy

of each registered investment company

concerned, and (c) the transaction is

consistent with the general purposes of

the Act. Applicant submits that the

terms of the proposed transactions

under the Plan that involve the

acquisition of Shares by Funds are fair

and reasonable to all parties, are

consistent with the Act and the Funds’

policies, and meet all the standards of

section 17(b) of the Act. Applicant

further submits that the requested relief

from various provisions of the Act meets

the standards for an exemption set forth

in section 6(c) of the Act.
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 63989

1Applicant represents that AFC does not

constitute a ‘‘partnership’’ or ‘‘joint venture’’ within

the meaning of rule 3a–5(a)(4) under the Act and

is substantially equivalent to a U.S. corporation for

the purposes of rule 3a–5(b)(2) under the Act.

8. Section 17(d) and rule 17d–1

prohibit affiliated persons from

participating in joint arrangements with

a registered investment company unless

authorized by the SEC. In passing on

applications for such orders, rule 17–d

provides that the SEC will consider

whether the participation of such

investment company is consistent with

the provisions, policies, and purposes of

the Act and the extent to which such

participation is on a basis different from

or less advantageous than that of other

participants. Applicant asserts that the

Eligible Trustees will neither directly

nor indirectly receive benefits that

would otherwise inure to Acorn or its

shareholders because (a) a Fund may

choose to invest in Shares, (b) amounts

credited to the Deferral Account will be

adjusted to reflect income, gains, and

losses relating to the investment of the

assets of such Fund, and (c) such

income, gains, or losses will be identical

to what any shareholder in that Fund

would receive whose shares were not

subject to the Plan. Applicants contend

that deferral of an Eligible Trustee’s

compensation in accordance with the

Plan would essentially maintain the

parties, viewed both separately and in

their relationship to one another, in the

same position as if the compensation

were paid on a current basis and then

invested in the Shares.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31620 Filed 12–2–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

22912; 812–10348]

AFC (USA) I, Inc.; Notice of Application

November 26, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) from all provisions of the Act.

SUMMARY OF THE APPLICATION: Applicant,

AFC (USA) I, Inc., requests an order that

would permit it to sell certain debt

securities and use the proceeds to

finance the business activities of its

parent company, Airbus Finance

Company Limited.

FILING DATES: The application was filed

on November 13, 1996, and amended on

July 17, 1997 and November 24, 1997.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC 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 SEC by 5:30 p.m. on

December 22, 1997, 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 SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicant, c/o Catharine Ennis, George’s

Dock House, 2nd Floor, International

Financial Services Center, Dublin 1,

Ireland.

FOR FURTHER INFORMATION CONTACT:

Kathleen L. Knisely, Staff Attorney, at

(202) 942–0517, 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 SEC’s

Public Reference Branch, 450 Fifth

Street, N.W., Washington, DC 20549,

(tel. 202–942–8090).

Applicant’s Representations

1. Applicant is a Delaware

corporation formed in July, 1996. All of

applicant’s outstanding voting securities

are owned by Airbus Finance Company

Limited (‘‘AFC’’). AFC, a limited

liability company incorporated under

the laws of Ireland, provides sales

financing support to the customers of

Airbus Industrie G.I.E. (‘‘Airbus

Industrie’’).1 AFC and Airbus Industrie

are each owned indirectly by

Aerospatiale S.N.I., Daimler-Benz A.G.

(‘‘Daimler-Benz’’), British Aerospace plc

(‘‘BAe’’), and Construcciones

Aeronauticas S.A. (‘‘CASA’’).

2. Applicant was organized to engage

in financing activities to provide funds

for use in the operations of AFC.

Applicant proposes to obtain funds

through the offer and sale of its debt

securities in the United States and

European or other overseas markets, and

to lend the proceeds to AFC.

3. Due to the nature of capital

markets, applicant may, from time to

time, issue securities in amounts in

excess of the amounts required by AFC

at any given time. However, at least

85% of the cash or cash equivalents

raised by applicant will be loaned to

AFC as soon as practicable, but in no

event later than six months after

applicant’s receipt of the cash or cash

equivalents. Amounts that are not

loaned to AFC will be invested in

government securities, securities of AFC

or a company controlled by AFC (or, in

the case of a partnership or joint

venture, the securities of the partners or

participants in the joint venture), or

debt securities which are exempted

from the provisions of the Securities Act

of 1933 by section 3(a)(3) of that Act.

4. Any issuance of debt securities by

applicant to the public in the United

States will be unconditionally

guaranteed by AFC as to the timely

payment of principal, interest, and

premium, if any (a ‘‘Guarantee’’).

Guarantee will provide each holder of

debt securities issued by applicant a

direct right of action against AFC to

enforce AFC’s obligations under the

Guarantee without first proceeding

against applicant.

5. Until AFC has achieved a specified

long-term debt rating at or above

investment grade (the ‘‘AFC Rating’’),

any debt securities issued by applicant

to the public in the United States also

will be unconditionally guaranteed on a

separate basis by each of Aerospatiale

S.N.I., Daimler-Benz, BAe, and CASA,

or any additional or substitute indirect

owner of AFC as to the timely payment

of principal of, interest, and premium,

if any, on the debt securities.

6. In the future applicant may obtain

funds through the offer and sale of nonvoting preferred stock. Applicant will

guarantee such stock with a guarantee

complying with rule 3a–5(a)(2) under

the Act.

Applicant’s Legal Analysis

1. Rule 3a–5 under the Act provides

an Exemption from the definition of

investment company for certain

companies organized primarily to

finance the business operations of their

parent companies or companies

controlled by their parent companies.

Rule 3a–5 is premised on the notion that

it is appropriate to exempt a finance

subsidiary from all provisions of the Act

when the primary purpose of the

finance subsidiary is to finance the

business operations of its parent