17838 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

1There are 576,124 units of general and limited

partnership interests of Pitcairn issued and

outstanding, approximately 70% of which are held

in irrevocable trusts for members of the Pitcairn

family, and approximately 30% of which are owned

directly by family members and their churches. The

units are registered under section 12 of the

Securities Exchange Act of 1934, but there is no

market for the units, and there are generally fewer

than ten transfers per year. These transfers typically

arise from terminating trusts or estates, interfamily

gifts, or similar transactions involving one or more

members of the Pitcairn family or trusts for their

benefit.

2Pitcairn was the sole initial limited partner of

Moreland and One Place; it spun off its interests in

the partnerships to the owners of its Units in 1992.

As a result, ownership of Pitcairn, Moreland, and

One Place is nearly identical.

3The only connection of the Separating Members

with the remaining unitholders after consummation

of the transactions described herein will be that two

of the Separating Members will serve as trustees of

trusts holding Units. These two Separating

Members will continue to serve as trustees at the

request of the beneficiaries of those trusts,

notwithstanding their status as Separating

Members.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8545 Filed 4–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Rel. No. 20982;

812–9166]

Pitcairn Group L.P., et al.; Notice of

Application

March 31, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (‘‘Act’’).

APPLICANTS: Pitcairn Group L.P.

(‘‘Pitcairn’’), and Johnstone L.P.

(‘‘Johnstone’’).

RELEVANT ACT SECTIONS: Exemption

requested under section 23(c)(3) from

the provisions of section 23(c), and

under section 57(c) from the provisions

of section 57(a)(2).

SUMMARY OF APPLICATION: Applicants

seek an order permitting Pitcairn to

acquire 221,954 (approximately 39%) of

its limited partnership units (the

‘‘Units’’) from Johnstone, a limited

partnership formed by former Pitcairn

unitholders to liquidate their ownership

interests in Pitcairn, in exchange for a

pro rata portion of the total assets of

Pitcairn (the ‘‘Redemption’’). The order

also would permit Johnstone to acquire

assets from Pitcairn in the Redemption

and to acquire a pro rata portion of the

total assets of Moreland L.P.

(‘‘Moreland’’), a limited partnership

controlled by Pitcairn, in exchange for

the 222,553 Moreland limited

partnership units owned by Johnstone

(the ‘‘Related Transaction’’).

FILING DATES: The application was filed

on August 15, 1994, and amended on

December 9, 1994, and March 29, 1995.

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

April 25, 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 who wish to be notified of a

hearing may request such notification

by writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

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

Applicants: Pitcairn, One Pitcairn Place,

Suite 3000, 165 Township Line Road,

Jenkintown, Pennsylvania 19046;

Johnstone, 75 James Way, Southampton,

Pennsylvania 18966.

FOR FURTHER INFORMATION CONTACT:

Courtney S. Thornton, Senior Attorney,

at (202) 942–0583, or Barry D. Miller,

Senior Special Counsel, 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. Pitcairn, a Delaware limited

partnership that has elected to be

regulated as a business development

company (‘‘BDC’’) under section 54 of

the Act, was organized in 1986 as a

vehicle for private investments for the

Pitcairn family. It was capitalized with

assets derived from the liquidation of

The Pitcairn Company, a Delaware

corporation formed in 1923 by members

of the Pitcairn family to hold and

manage the estate of John Pitcairn, one

of the founders of Pittsburgh Plate Glass

Company. Units in Pitcairn were

distributed to the former shareholders of

The Pitcairn Company.1

2. Pitcairn is the sole shareholder of

Pitcairn Company (‘‘Pitco’’), an

investment adviser formed in 1986 and

registered under the Investment

Advisers Act of 1940. Pitco serves as the

managing general partner of Pitcairn.

Pitcairn also has four individual general

partners, each of whom is a member of

the Pitcairn family. In addition, Pitco

serves as the general partner of

Moreland, a Pennsylvania limited

partnership that owns undeveloped

land in and near the Borough of Bryn

Athyn, Pennsylvania (where a large

number of Pitcairn family members

reside), and One Place L. P. (‘‘One

Place’’), a Pennsylvania limited

partnership that owns the land and

building in which the offices of Pitcairn,

Pitco, and Pitcairn Trust Company

(‘‘PTC’’) (a Pennsylvania chartered trust

company formed as a subsidiary of Pitco

in 1987 to provide trust and related

services to the Pitcairn family and other

high net worth individuals) are

situated.2

3. As a result of general change in the

Pitcairn family and divergence of points

of view as to investment philosophy,

among other things, it became apparent

in the early 1990s that a separation of

family members from the family

partnerships would occur.

Consequently, in February 1993, the

board of directors of Pitco asked its

management to recommend a plan for a

buy-out of the interests of certain

Pitcairn family members in certain

family assets. This recommendation,

through arms’ length negotiations,

resulted in the proposed Redemption

and Related Transaction.

4. The series of transactions

contemplated by the Redemption and

the Related Transaction are as follows:

a. Four individuals formed Johnstone,

a Pennsylvania limited partnership, for

the purpose of receiving, with the intent

to liquidate, their and other Pitcairn

family members’ (collectively, the

‘‘Separating Members’’) limited

partnership interests in Pitcairn,

Moreland, and One Place. The

Separating Members, together with their

spouses and related trusts, are no longer

clients of PTC and have contributed

their limited partnership interests in

Pitcairn, Moreland, and One Place to

Johnstone in exchange for limited

partnership interests in Johnstone.3

Accordingly, Johnstone has become a

substitute limited partner in Pitcairn,

Moreland, and One Place, owning

approximately 39%, 38.6%, and 39%,

respectively, of the limited partnership

units. Assets received by Johnstone in

the Redemption and the Related

Transaction are intended to be held by

Johnstone only until they can be

liquidated and the proceeds distributed

to the Separating Members.

b. In the Redemption, Johnstone will

transfer to Pitcairn all of the Units
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17839

4Prior to the redemption of the Moreland units

owned by Johnstone, Pitcairn will lend to Moreland

a total of $3,450,000 in exchange for two nonrecourse notes. The first note, in the amount of

$2,250,000, will be secured by the portion of

Moreland’s real estate that ultimately will be

transferred to Johnstone in the Related Transaction.

The second note, in the amount of $1,200,000, will

be secured by a different parcel of real estate, which

will remain the property of Moreland. Using a

portion of the proceeds of the first note, Moreland

will buy newly issued limited partnership interests

in One Place for cash, enabling One Place to redeem

its units owned by Johnstone for cash. In redeeming

its units from Johnstone, Moreland will transfer the

mortgage liability on the first parcel of real estate

to Johnstone along with the real estate itself. When

Pitcairn redeems its Units from Johnstone, Pitcairn

will transfer to Johnstone the note secured by the

mortgage on the real estate Johnstone received from

Moreland, and Johnstone will be able to extinguish

the mortgage and cancel the note.

5Lists of all assets held by Pitcairn and Moreland

and information as to their allocation are contained

in the application.

6Of these ‘‘persons’’ 61 are individuals owning

approximately 10% of the Units; 4 are revocable

trusts owning approximately 4% of the Units; 20

are irrevocable trusts (out of a total of 295 trusts that

are Remaindermen) owning approximately .2%; one

is a guardian account owning approximately .05%

of the Units; and 8 are charitable organizations

owning approximately 3% of the Units.

owned by Johnstone, and Pitcairn will

transfer to Johnstone approximately

39% of its total assets (consisting of

certain limited partnership interests, a

non-recourse note of Moreland and a

related mortgage, and cash) in

redemption of the Units.

c. In the Related Transaction,

Johnstone will transfer to Moreland all

the limited partnership interests in

Moreland owned by Johnstone, and

Moreland will transfer to Johnstone

approximately 38.6% of its total assets

(consisting of certain real estate, a

mortgage, and cash) in redemption of

these limited partnership interests.4

d. Johnstone will transfer to One Place

all the limited partnership interests in

One Place owned by Johnstone, and One

Place will transfer cash in an amount

equal to approximately 39% of the value

of its total assets to Johnstone in

redemption of these limited partnership

interests.

e. Pitcairn has completed, in escrow,

a private offering, in reliance on section

4(2) of the Securities Act of 1993 (the

‘‘Securities Act’’) and rules 502 and 506

of Regulation D under the Securities

Act, and has received binding

subscription agreements for $5,337,000

from a small group of qualified investors

for additional Units. The proceeds of

this offering will be used to replace

capital used in the Redemption and to

provide for additional working capital.

5. The redemptions of the Johnstoneowned limited partnership interests of

Pitcairn, Moreland, and One Place will

be effected at values that have been

agreed upon by representatives of those

Pitcairn family members who, with their

spouses and related trusts, wish to

continue to be clients of PTC and

owners of Pitcairn (the

‘‘Remaindermen’’) and by

representatives of the separating

Members in arms’ length negotiations

conducted during 1993. A committee

(the ‘‘Sellers’ Committee’’) was formed

to negotiate the value of the Separating

Members’ interests; the potential group

of family members willing to buy the

interests of the Separating Members also

formed a committee (the ‘‘Buyers’

Committee). All family members were

informed about the committees and

were urged to contact them about

buying or selling their interests.

6. Various methods were used to

determine the value of the underlying

assets held by Pitcairn, Moreland, and

One Place.5

a. The assets of Pitcairn were valued

on the basis of the methodologies

utilized by its general partners in

arriving at fair values for purposes of

periodically computing the net asset

value of the partnership. These

methodologies included (i) valuation of

limited partnership interests by the

general partners of such partnerships;

(ii) valuation of the stock of Pitco by an

independent appraiser, adjusted to

reflect subsequent business changes;

(iii) valuation of land based upon values

in a joint development agreement and

the best judgment of the Pitcairn general

partners, taking all relevant factors into

consideration; (iv) valuation of a limited

partnership interest in a tree nursery

based upon the catalogue price of the

tree stock less harvest and distribution

costs; and (v) valuation of a limited

partnership interest in an office building

based upon discontinued cash flows

from the rental stream generated by the

property.

b. The land owned by Moreland was

valued by Pitco as the general partner of

Moreland on the basis of values

assigned in a 1993 market research

study by an independent firm familiar

with the land and transactions in the

vicinity of the Moreland land. This

study was commissioned by the Real

Estate Advisory Committee of the Pitco

board, a committee comprised of both

Remaindermen and Separating

Members. The recommended values

assigned in the study, together with data

from an appraisal conducted in 1989

and from comparable sales (where

appropriate), formed the basis of the

values assigned by the parties.

c. With respect to One Place, Pitco

obtained an independent appraisal of

the land and office building (the

primary asset of One Place), and the

Sellers’ Committee obtained its own

independent appraisal. The board of

directors of Pitco subsequently engaged

an outside real estate consultant who, in

June, 1993, reviewed the independent

appraisal obtained by Pitco and

validated the assumptions used by the

appraiser.

7. On the evening of December 13,

1993, representatives from the Buyers’

Committee, the Sellers’ Committee, and

Pitco (as managing general partner of

Pitcairn and sole general partner of

Moreland and One Place) met to allocate

the assets between the Remaindermen

and the Separating Members equitably.

These negotiations, which were

conducted by persons who were fully

aware of the attributes, both positive

and negative, of each of the assets of

Pitcairn, Moreland, and One Place,

culminated in the Agreement in

Principle (the ‘‘Agreement’’). The

Agreement provides for the allocation of

assets and further provides that the

costs of forming Johnstone will be borne

by Johnstone and that all other

transaction costs will be shared by

Pitcairn (including certain affiliated

entities) and Johnstone on a pro rata

basis. Since it is anticipated that

Johnstone will sell Pitcairn

approximately 39% of the Units and

buy approximately 39% of Pitcairn’s

assets, it would bear that percentage of

the transaction costs (exclusive of any

income taxes that each party will bear

separately and of any additional legal

expenses incurred by Johnstone)

through the reduction in cash to be paid

by Pitcairn to Johnstone at the closing

of the Redemption. The Agreement was

approved by Pitco (as managing general

partner of Pitcairn and sole general

partner of Moreland and One Place) and

by individual representatives of the

Remaindermen and Separating Members

who, together, represented over 86% of

the outstanding Units. The

Remaindermen who did not sign the

Agreement consisted of 94 ‘‘persons’’

who own approximately 13.9% of the

Units.6 These unitholders were

informed, however, of the transactions

contemplated by the Agreement

(including the proposed allocation of

assets), and have not objected.

8. There has been no vote of

unitholders with respect to the

Redemption and the Related

Transaction inasmuch as such a vote is

not required under the Pitcairn

partnership agreement. However, a

majority of the respective general

partners of Pitcairn and Johnstone have

approved the Redemption and the

Related Transaction as being reasonable
17840 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

and fair to the unitholders, as not

involving any overreaching of Pitcairn

or its unitholders, and as serving the

broader family purpose by permitting a

complete separation of the Separating

Members. Applicants state that, with

one exception, no person who

participated in the negotiations on

behalf of Pitco or the Remaindermen

have interests on both sides of the

Redemption and the Related

Transaction. One individual partner of

Pitcairn, who has agreed to resign as

such, has been aligned with the

Separating Members and is a general

and limited partner of Johnstone.

Applicants represent that his alignment

with the Separating Members was

recognized, and he was not a member of

the Sellers’ Committee, nor did he

participate in the negotiations except as

a facilitator for the December 1993

meetings. He officially abstained from

voting either on behalf of Pitcairn or

Johnstone with respect to the

Redemption and the Related

Transaction, but has expressed his

support for the transactions.

Applicants’ Legal Conclusions

1. Section 23(c), made applicable to

Pitcairn as a BDC by section 63 of the

Act, generally prohibits BDCs from

purchasing their securities except in the

open market or pursuant to a tender

offer. Absent such circumstances,

section 23(c)(3) allows the SEC to issue

an order for the protection of investors

to ensure that such purchases are made

in a way that does not unfairly

discriminate against any holders of the

class of securities to be purchased.

2. Applicants concede that the

Redemption does not fall within the

exceptions specified in section 23(c);

consequently, Pitcairn must seek

exemptive relief under section 23(c)(3).

Applicants submit that the Redemption

does not unfairly discriminate against

either the Remaindermen or the

Separating Members, and that the

liquidity provided to Johnstone in the

Redemption and the Related

Transaction is not inappropriate under

the circumstances, given the fairness of

the values and the objectives of the

Remaindermen to use the services of

Pitco and PTC as a family office.

3. Section 57(a)(2), in conjunction

with section 57(b), prohibits certain

persons related to a BDC from

purchasing any security or other

property (with the exception of

securities of which the seller is the

issuer) from the BDC or a company

controlled by the BDC. Section 57(b)

provides, in part, that the persons

affected by section 57(a) include any

person that directly or indirectly

controls the BDC. Section 2(a)(9) defines

control as the power to exercise a

controlling influence over the

management or policies of a company,

and establishes a rebuttable

presumption that a person owning more

than 25% of the voting securities of a

company controls that company. Since

Johnstone, which owns approximately

39% of the Units, could be deemed to

control Pitcairn, section 57(a)(2) would

prohibit the Redemption absent an

exemption. As Moreland may be

deemed to be controlled by Pitcairn by

virtue of the fact that Pitco (a whollyowned subsidiary of Pitcairn) is its sole

general partner, section 57(a)(2) also

would prohibit Johnstone from buying

assets from Moreland in the Related

Transaction.

4. Section 57(c) provides that a person

may file an application for an

exemption from the provisions of

section 57(a) (1) through (3), and that

the SEC shall exempt a proposed

transaction from the prohibitions of

section 57(a)(2) if: (a) The terms of the

proposed transaction, including the

consideration to be paid or received, are

reasonable and fair and do not involve

overreaching on the part of anyone

involved; (b) the proposed transaction is

consistent with the policy of the BDC as

set forth in its filings with the SEC

under the Securities Act and the

Securities Exchange Act of 1934 (the

‘‘Exchange Act’’), and its reports to

shareholders or partners; and (c) the

proposed transaction is consistent with

the general purpose of the Act.

5. Applicants submit that the

Redemption and the Related

Transaction meet the standards set forth

in section 57(c) of the Act because: (a)

The terms of the proposed purchase of

assets by Johnstone in the Redemption

and Related Transaction, including the

consideration to be paid, will be

reasonable and fair, and no individual

will derive any personal financial gain

from the proposed transaction other

than benefits that will be realized by all

unitholders of Pitcairn on a pro rata

basis; (b) the proposed Redemption is

consistent with Pitcairn’s policy as set

forth in section 4.13 of the partnership

agreement, which specifically

contemplates the withdrawal of limited

partners on terms approved by the

general partners of Pitcairn (which

approval has been obtained), and also is

consistent with Pitcairn’s policy as

recited in its filings with the SEC under

the Exchange Act and its reports to

unitholders; (c) the Redemption and the

Related Transaction are both consistent

with the general purposes of the Act;

and (d) given the objective of the

Remaindermen to continue to use Pitco

and PTC as a family office for the

management of their financial affairs

and the concomitant desire of the

Separating Members to terminate that

association, it would be impossible to

effect the Redemption by exchanging a

portion of each of Pitcairn’s assets for

the Units held by Johnstone on a pro

rata basis or by selling the Units held by

Johnstone to a third party because no

such market exists.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8543 Filed 4–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 35–26264]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

March 31, 1995.

Notice is hereby given that the

following filing(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated thereunder. All interested

persons are referred to the application(s)

and/or declaration(s) for complete

statements of the proposed

transaction(s) summarized below. The

application(s) and/or declaration(s) and

any amendments thereto is/are available

for public inspection through the

Commission’s Office of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by

April 24, 1995, to the Secretary,

Securities and Exchange Commission,

Washington, D.C. 20549, and serve a

copy on the relevant applicant(s) and/or

declarant(s) at the address(es) specified

below. Proof of service (by affidavit or,

in case of an attorney at law, by

certificate) should be filed with the

request. Any request for hearing shall

identify specifically the issues of fact or

law that are disputed. A person who so

requests will be notified of any hearing,

if ordered, and will receive a copy of

any notice or order issued in the matter.

After said date, the application(s) and/

or declaration(s), as filed or as amended,

may be granted and/or permitted to

become effective.

Indiana Michigan Power Company (70–

6458)

Indiana Michigan Power Company

(‘‘I&M’’), One Summit Square, P.O. Box

60, Fort Wayne, Indiana 46801, an

electric utility subsidiary of American