[Federal Register Volume 66, Number 3 (Thursday, January 4, 2001)]
[Notices]
[Pages 816-817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-150]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 24805; 812-12310]


Scudder Weisel Capital Entrepreneurs Fund and Scudder Weisel 
Capital LLC; Notice of Application

December 27, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 6(c) of the 
Investment Company Act of 1940 (``Act'') for an exemption from sections 
18(c) and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act 
for an exemption from rule 23c-3 under the Act, and pursuant to section 
17(d) of the Act and rule 17d-1 under the Act.

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SUMMARY OF APPLICATION: Applicants request an order to permit certain 
registered closed-end management investment companies to issue multiple 
classes of shares and to impose asset-based distribution fees and early 
withdrawal charges.

APPLICANTS: Scudder Weisel Capital Entrepreneurs Fund (the ``Fund'') 
and Scudder Weisel Capital LLC (``Scudder Weisel'').

FILING DATES: The application was filed on October 24, 2000 and amended 
on December 26, 2000.

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 January 18, 2001, 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, 88 Kearny Street, San Francisco, California, 
94108.

FOR FURTHER INFORMATION CONTACT: Sara P. Crovitz, Senior Counsel, at 
(202) 942-0667, or Michael W. Mundt, 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 20549-0101, (202) 942-8090.

Applicants' Representations

    1. The Fund is a closed-end management investment company 
registered under the Act and organized as a Delaware business trust. 
Scudder Weisel is registered as an investment adviser under the 
Investment Advisers Act of 1940 and will serve as investment adviser to 
the Fund. Scudder Weisel also is registered as a broker-dealer under 
the Securities Exchange Act of 1934 and will distribute the Fund's 
shares. Applicants request that the order also apply to any other 
registered closed-end management investment company established in the 
future for which Scudder Weisel, or any entity controlling, controlled 
by, or under common control with Scudder Weisel acts as principal 
underwriter or investment adviser.\1\
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    \1\ Any registered closed-end investment company relying on this 
relief in the future will do so in a manner consistent with the 
terms and conditions of the application. Applicants represent that 
each investment company presently intending to rely on the requested 
relief is listed as an applicant.
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    2. The Fund's investment objective is to provide investors with 
long-term capital appreciation. The Fund seeks its objective by 
investing primarily in public and private equity securities of U.S. and 
non-U.S. companies.
    3. The Fund intends to continuously offer its shares to the public 
at net asset value, plus any applicable sales charges. The Fund's 
shares will not be offered or traded in the secondary market and will 
not be listed on any exchange or quoted on any quotation medium. The 
Fund intends to operate as an ``interval fund'' pursuant to rule 23c-3 
under the Act and to make quarterly repurchase offers to its 
shareholders.
    4. The Fund currently intends to offer one class of shares, Class A 
shares, that will be sold with a front-end sales charge and will be 
subject to a shareholder services fee. Class A shares will not be 
subject to an early withdrawal charge (``EWC''). The Fund seeks the 
flexibility to be structured as a multiple-class fund and may in the 
future offer other classes of shares with different distribution 
structures, including shares with no front-end sales charge but with an 
EWC. Future classes of shares of the Fund may also be subject to an 
asset-based distribution fee. Applicants represent that shareholder 
services fees and asset-based distribution fees will comply with the 
provisions of rule 2830(d) of the Conduct Rules of the National 
Association of Securities Dealers, Inc. (``NASD Sales Charge Rule''). 
Applicants also represent that the Fund will disclose in its 
prospectus, the fees, expenses and other characteristics of each class 
of shares offered for sale by the prospectus, as is required for open-
end multi-class funds under Form N-1A.
    5. All expenses incurred by the Fund will be allocated among the 
various classes of shares based on the net assets of the Fund 
attributable to each class, except that the net asset value and 
expenses of each class will reflect distribution fees, service fees, 
and any other incremental expenses of that class. Expenses of the Fund 
allocated to a particular class of shares will be borne on a pro rata 
basis by each outstanding share of that class. The Fund may create 
additional classes of shares in the future that may have different 
terms from Class A shares. Applicants state that the Fund will comply 
with the provisions of rule 18f-3 under the Act as if it were an open-
end investment company.
    6. The Fund may waive the EWC for certain categories of 
shareholders or transactions to be established from time to time. With 
respect to any waiver of, scheduled variation in, or elimination of the 
EWC, the Fund will comply with rule 22d-1 under the Act as if the Fund 
were an open-end investment company.
    7. The Fund may offer its shareholders an exchange feature under 
which shareholders of the Fund may, during the Fund's quarterly 
repurchase periods, exchange their shares for shares of the same class 
of other registered open-end investment companies or registered closed-
end investment companies that comply with rule 23c-3 under the Act and 
continuously offer their shares at net asset value, and that are in the 
Scudder Weisel group of investment companies. Fund shares so exchanged 
will be counted as part of the

[[Page 817]]

repurchase offer amount as specified in rule 23c-3 under the Act. Any 
exchange option will comply with rule 11a-3 under the Act as if the 
Fund were an open-end investment company subject to that rule. In 
complying with rule 11a-3, the Fund will treat the EWC as if it were a 
contingent deferred sales charge (``CDSC'').

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of shares of the Fund may be prohibited by section 
18(c).
    2. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that multiple classes of shares of the Fund may 
violate section 18(i) of the Act because each class would be entitled 
to exclusive voting rights with respect to matters solely related to 
that class.
    3. Section 6(c) of the Act provides that the Commission 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. 
Applicants request an exemption under section 6(c) from sections 18(c) 
and 18(i) to permit the Fund to issue multiple classes of shares.
    4. Applicants submit that the proposed allocation of expenses and 
voting rights among multiple classes is equitable and will not 
discriminate against any group or class of shareholders. Applicants 
submit that the proposed arrangements would permit the Fund to 
facilitate the distribution of its securities and provide investors 
with a broader choice of shareholder services. Applicants assert that 
their proposal does not raise the concerns underlying section 18 of the 
Act to any greater degree than open-end investment companies' multiple 
class structures that are permitted by rule 18f-3 under the Act. 
Applicants state that the Fund will comply with the provisions of rule 
18f-3 as if it were an open-end investment company.

Early Withdrawal Charges

    5. Section 23(c) of the Act provides, in relevant part, that no 
registered closed-end investment company will purchase securities of 
which it is the issuer, except: (i) on a securities exchange or other 
open market; (ii) pursuant to tenders, after reasonable opportunity to 
submit tenders given to all holders of securities of the class to be 
purchased; or (iii) under other circumstances as the Commission may 
permit by rules and regulations or orders for the protection of 
investors.
    6. Rule 23c-3 under the Act permits a registered closed-end 
investment company (an ``interval fund'') to make repurchase offers of 
between five and twenty-five percent of its outstanding shared at net 
asset value at periodic intervals pursuant to a fundamental policy of 
the interval fund. Rule 23c-3(b)(1) under the Act provides that an 
interval fund may deduct from repurchase proceeds only a repurchase 
fee, not to exceed two percent of the proceeds, that is reasonably 
intended to compensate the fund for expenses directly related to the 
repurchase.
    7. Section 23(c)(3) provides that the Commission may issue an order 
that would permit a closed-end investment company to repurchase its 
shares in circumstances in which the repurchase is made in a manner or 
on a basis that does not unfairly discriminate against any holders of 
the class or classes of securities to be purchased. As noted above, 
section 6(c) provides that the Commission may exempt any person, 
security or transaction from any provision of the Act, if and to the 
extent that 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. 
Applicants request relief under sections 6(c) and 23(c) from rule 23c-3 
to permit them to impose EWCs on shares submitted for repurchase that 
have been held for less than a specified period.
    8. Applicants believe that the requested relief meets the standards 
of sections 6(c) and 23(c)(3). Rule 6c-10 under the Act permits open-
end investment companies to impose CDSCs, subject to certain 
conditions. Applicants state that EWCs are functionally similar to 
CDSCs imposed by open-end investment companies under rule 6c-10. 
Applicants state that EWCs may be necessary for Scudder Weisel to 
recover distribution costs. Applicants will comply with rule 6c-10 as 
if that rule applied to closed-end investment companies. The Fund also 
will disclose EWCs in accordance with the requirements of Form N-1A 
concerning CDSCs. Applicants further state that the Fund will apply the 
EWC (and any waivers or scheduled variations of the EWC) uniformly to 
all shareholders in a given class and consistent with the requirements 
of rule 22d-1 under the Act.

Asset-based Distribution Fees

    9. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company or an 
affiliated person of such person, 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 issues an order permitting the 
transaction. In reviewing applications submitting under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement 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.
    10. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to permit the Fund to impose asset-based distribution fees. 
Applicants have agreed to comply with rules 12b-1 and 17d-3 as if those 
rules applied to closed-end investment companies.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Applicants will comply with the provisions of rules 6c-10, 11a-3, 
12b-1, 17d-3, 18f-3, and 22d-1 under the Act, as amended from time to 
time, as if those rules applied to closed-end management investment 
companies, and will comply with the NASD Sales Charge Rule, as amended 
from time to time.

For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 01-150 Filed 1-3-01; 8:45 am]
BILLING CODE 8010-01-M