63748 Federal Register / Vol. 60, No. 238 / Tuesday, December 12, 1995 / Notices

10 17 CFR 200.30-3(a)(12) (1994).

1See Latham & Watkins (pub. avail. Dec. 28,

1994).

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.10

Jonathan G. Katz,

Secretary.

[FR Doc. 95–30222 Filed 12–11–95; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

21570; 812–9820]

EAI Select Managers Equity Fund, et

al.; Notice of Application

December 6, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

Order under the Investment Company

Act of 1940 (the ‘‘Act’’).

APPLICANTS: EAI Select Managers Equity

Fund (‘‘Fund’’), Evaluation Associates

Capital Markets, Incorporated

(‘‘Manager’’), EAI Partners, L.P. (‘‘EAI’’),

Evaluation Associates, Incorporated

401(K) Plan and Trust (‘‘EAI Plan’’),

Harding Service Corporation, et al.

Profit Sharing Plan and Trust (‘‘Harding

Plan’’), and Stockwood VII, Inc. 401K

Plan (‘‘Stockwood Plan’’, and, together

with the EAI Plan and the Harding Plan,

the ‘‘Affiliated Plans’’).

RELEVANT ACT SECTIONS: Order requested

under section 17(b) of the Act

exempting applicants from section 17(a)

of the Act and pursuant to section 17(d)

of the Act and rule 17d–1 thereunder.

SUMMARY OF APPLICATION: The requested

order would permit a collective

investment account sponsored by EAI to

transfer its securities to the Fund.

FILING DATES: The application was filed

on October 16, 1995 and amended on

December 1, 1995. Applicants agree 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 applicants 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 28, 1995 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 may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

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

Applicants: EAI, 200 Connecticut

Avenue, Suite 700, Norwalk,

Connecticut 06854–1958; Harding Plan

and Stockwood Plan, 300 South Street,

P.O. Box 1975, Morriston, New Jersey

07962–1975.

FOR FURTHER INFORMATION CONTACT:

Sarah A. Buescher, Staff Attorney, at

(202) 942–0573, or Alison E. Baur,

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 from the SEC’s

Public Reference Branch.

Applicants’ Representations

1. The Fund is an open-end

management investment company

organized as a Massachusetts business

trust. The Fund has filed a registration

statement under the Securities Act of

1933 which will become effective prior

to the consummation of the transactions

described in this application. The

Manager is the investment adviser of the

Fund and presently owns all of the

Fund’s outstanding shares. EAI is the

parent of the Manager and is the

sponsor of the EAI Plan, an in-house

employee benefit plan for employees of

EAI, the Manager, and their affiliates.

2. The Harding Plan is an employee

benefit plan for employees of Harding

Service Corporation (‘‘Harding’’). The

Stockwood Plan is an employee benefit

plan for employees of Stockwood VII,

Inc. (‘‘Stockwood’’). Certain trustees of

the Harding Plan and the Stockwood

Plan have a greater than five percent

direct or indirect equity interest in EAI.

In addition, certain officers, employees

and/or affiliates of Harding and

Stockwood have a greater than five

percent direct or indirect equity interest

in EAI.

3. The Affiliated Plans and certain

other participant-directed employee

benefit plans (collectively, the ‘‘Plans’’)

currently invest in The EAI Small

Managers Equity Fund Trust, a

collective investment account

(‘‘Account’’). EAI is the investment

adviser of the Account. The Account

has not registered under the Act in

reliance on the exception from the

definition of ‘‘investment company’’

under section 3(c)(1) of the Act. Section

3(c)(1) provides that an issuer whose

outstanding securities are beneficially

owned by not more than one hundred

persons and which is not making and

does not propose to make a public

offering of its securities is not an

investment company. In The PanAgora

Group Trust (pub. avail. April 29, 1994),

the staff stated that, for purposes of

section 3(c)(1), the staff would consider

a defined contribution plan participant

who decides whether or how much to

invest in a private investment company

to be a beneficial owner of the

company’s securities. Participants in the

Plans have discretion to direct

investment of their assets, and there are

more than 100 such participants.

Therefore, the Account may no longer

rely on the exception in section 3(c)(1)

unless the Plans’ investment in the

Account is terminated by December 31,

1995.1

4. EAI believes that the Fund is a

suitable alternative investment vehicle

for the Plans. Applicants contemplate

that the Account would make an in-kind

distribution of securities held in the

Account’s portfolio to the Plans and that

those Plans choosing to invest in the

Fund would purchase shares of the

Fund by contributing the distributed

securities to the Fund in exchange for

Fund shares. The Account would

remain available to employee benefit

plans whose participants cannot direct

asset investment.

5. Upon its withdrawal from the

Account, each Plan would receive

securities equal in value to its pro rata

beneficial interest in the Account. Each

Plan purchasing shares of the Fund by

contribution of the securities distributed

to it would receive shares of the Fund

having a net asset value equal to the

value of the securities contributed.

Assets of the Plans used to purchase

Fund shares would be valued at

‘‘current market value’’ as defined in

rule 17a–7(b). The assets of the Fund

would be invested with the same

objectives and in the same manner as

the assets of the Account are presently

invested.

6. Each Plan choosing to purchase

Fund shares by an in-kind contribution

of securities would do so only upon

written direction of the Plan fiduciaries.

A party independent of EAI would

provide such direction for the Affiliated

Plans. EAI and/or the Manager would

provide each Plan fiduciary with the

Fund’s current prospectus and a written

statement disclosing the fee structure

under which the Manager would be

paid. Because the total expenses to be

paid by the Fund will be higher than

those paid by the Account, a Plan

purchasing shares of the Fund would
Federal Register / Vol. 60, No. 238 / Tuesday, December 12, 1995 / Notices 63749

1 ‘‘Successors in interest’’ is herein limited to

entities that result from a reorganization into

another jurisdiction or a change in the type of

business organization.

incur greater total expenses, and this

would be disclosed in a written

statement to the Funds.

7. Applicants represent that

investments in the Fund by the Plans

would provide the plans with several

benefits that are not presently available

with the Account. The Plan participants

would enjoy the protections of the

Securities Act and the Act. In addition,

investment of Plan assets in the Fund

allows the Plan’s participants and

sponsors to monitor more easily the

performance of their investments, as

information concerning the investment

performance of the Fund generally

would be available in daily newspapers.

Applicants’ Legal Analysis

1. Section 17(a) of the Act, in relevant

part, prohibits an affiliated person of a

registered investment company, or an

affiliated person of such person, acting

as principal, from selling to or

purchasing from such investment

company any security or other property.

Section 2(a)(3) of the Act, in relevant

part, defines ‘‘affiliated person’’ to

include: (a) Any person directly or

indirectly owning, controlling, or

holding with the power to vote, 5% or

more of the outstanding voting

securities of such other person; (b) any

person directly or indirectly controlling,

controlled by, or under common control

with, such other person; and (c) if such

other person is an investment company,

any investment adviser thereof.

2. Although the SEC has taken a noaction position with respect to certain

collective investment fund conversions,

that position is conditioned on affiliated

persons, or second-tier affiliates, of the

Fund having no beneficial interest in

the proposed transactions. Federated

Investors (pub. avail. April 21, 1994). In

the case of the EAI Plan, the transaction

involves assets belonging to an

employee benefit plan established for

employees of EAI or other affiliated

persons that could be considered

second-tier affiliates of the Fund. In the

case of the Harding Plan and Stockwood

Plan, the transactions involve assets

belonging to employee benefit plans

with trustees, officers, employees, and/

or affiliates of the sponsoring entities

having a greater than five percent

ownership interest in EAI. Applicants

request an exemptive order to permit

the Fund to accept in-kind transfers of

the assets of the Affiliated Plans.

3. Section 17(b) provides that the SEC

shall exempt a proposed transaction

from section 17(a) 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 policies of the registered

investment company involved; and (c)

the proposed transaction is consistent

with the general provisions of the Act.

4. Applicants represent that the

proposed transactions meet the

requirements of section 17(b). Because

the value of the shares each Plan

receives in the Fund would be equal to

fair market value of that Plan’s pro rata

share of assets in the Account,

applicants represent that the

transactions are fair to all involved and

do not involve overreaching on the part

of any person. In addition, applicants

represent that because the investment

policies and objectives of the Fund are

identical to those of the Account, the

transactions would be consistent with

the portfolio objectives and policy of the

Fund. Because the transactions would

bring the Plans’ investments under the

supervision of the SEC, applicants

represent that the transactions would be

consistent with the provisions of the

Act.

5. Applicants represent that the

proposed transactions would comply

with rule 17a–7 under the Act in most

respects. Rule 17a–7 exempts certain

purchase and sale transactions

otherwise prohibited by section 17(a) if,

among other requirements, the

transactions are affected at an

‘‘independent market price’’ and the

investment company’s board of

directors reviews the transactions for

fairness. Applicants would comply with

rule 17a–7 to the extent possible, as

stated in the conditions to the requested

order.

6. Section 17(d) prohibits an affiliated

person of a registered investment

company, or an affiliated person of such

person, acting as principal, from

effecting any transaction in which such

investment company is a joint, or joint

and several, participant with such

person in contravention of SEC rules

and regulations. Rule 17d–1 under the

Act provides that no joint transaction

covered by the rule may be

consummated unless the SEC issues an

order upon application. In passing upon

such applications, the SEC considers

whether participation by a registered

investment company is consistent with

the provisions, policies, and purposes of

the Act, and is not on a basis less

advantageous than that of other

participants.

7. Because EAI, as sponsor of the EAI

Plan, may have legal title to the EAI

Plan’s assets invested in the Account,

EAI may be viewed as acting as a

principal in the proposed transactions.

Applicants represent that, since the

fiduciaries of each Plan would make an

independent determination as to

whether to invest in the Fund and assets

used to purchase shares of the Fund

would be valued at current market

prices, the terms received by the

Affiliated Plans would not be more or

less advantageous than those available

to other investors. In addition, as

discussed previously, applicants

represent that the transactions would be

consistent with the Act and the rules

thereunder.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief shall be

subject to the following conditions:

1. The purchase transactions will

comply with the provisions of rule 17a–

7(b)–(f).

2. The purchase transactions will not

occur unless and until the Board of

Trustees of the Fund (including a

majority of Trustees that are not

interested persons of the Fund) and the

Plans’ fiduciaries (or, in the case of the

Affiliated Plans, parties independent of

EAI) find that the transactions are in the

best interest of the Fund and the Plans,

respectively. In the case of the Fund,

this determination and the basis on

which it is made will be recorded fully

in the records of the Fund.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–30223 Filed 12–11–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21569; 812–9842]

PCS Cash Fund, Inc., et al.; Notice of

Application December 5, 1995

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: PCS Cash Fund, Inc.,

Morgan Stanley Fund, Inc., and Morgan

Stanley Institutional Fund, Inc. (with

their successors in interest,1 the

‘‘Funds’’).

RELEVANT ACT SECTIONS: Order request

under section 6(c) of the Act for an

exemption from sections 13(a)(2),

13(a)(3), 18(f)(1), 22(f), and 22(g) and

rule 2a–7 thereunder, under sections

6(c) and 17(b) of the Act for an

exemption from section 17(a)(1), and

under section 17(d) of the Act and rule