Document ID: SEC-2010-0377-0001
Agency: sec
Document Type: Notice
Title: Applications: Chile Fund, Inc.
Posted Date: 2010-03-11T05:00Z

[Federal Register: March 11, 2010 (Volume 75, Number 47)]
[Notices]               
[Page 11583-11584]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11mr10-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29169; 812-13749]

 
The Chile Fund, Inc.; Notice of Application

March 8, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order 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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Applicant: The Chile Fund, Inc. (the ``Fund'').
SUMMARY: Summary of Application: Applicant seeks an order that would 
permit in-kind repurchases of shares of the Fund held by certain 
affiliated shareholders of the Fund.

Dates: Filing Dates: The application was filed on January 29, 2010, and 
amended on March 5, 2010. Applicants have agreed to file an amendment 
during the notice period, the substance of which is reflected in this 
notice.

Hearing or Notification of Hearing: An order granting the requested 
relief 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 March 29, 2010, 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, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicant, c/o Aberdeen Asset 
Management Inc., 1735 Market Street, 32nd Floor, Philadelphia, PA 
19103.

For Further Information Contact: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817, or Julia Kim Gilmer, Branch Chief, at (202) 551-6821 
(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 via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicant's Representations

    1. The Fund, a Maryland corporation, is registered under the Act as 
a closed-end management investment company. The Fund's investment 
objective is to seek total return by investing primarily in Chilean 
equity and debt securities. Applicant states that under normal 
circumstances it invests at least 80% of its net assets in Chilean 
equity and debt securities.\1\ Shares of the Fund are listed and trade 
on the NYSE AMEX. Aberdeen Asset Management Investment Services Limited 
(the ``Adviser''), an investment adviser registered under the 
Investment Advisers Act of 1940, serves as the investment adviser to 
the Fund.
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    \1\ Applicant states that as of September 30, 2009, 
approximately 99.4% of its assets were invested in equity securities 
of Chilean issuers, 96.9% of which were listed on the Santiago Stock 
Exchange.
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    2. The Fund proposes to repurchase 25% of its outstanding shares at 
99% of net asset value (``NAV'') on an in-kind basis with a pro rata 
distribution of the Fund's portfolio securities (with exceptions 
generally for odd lots, fractional shares, and cash items) (the ``In-
Kind Repurchase Offer''). The In-Kind Repurchase Offer will be made 
pursuant to section 23(c)(2) of the Act and conducted in accordance 
with rule 13e-4 under the Securities Exchange Act of 1934.
    3. Applicant states that the In-Kind Repurchase Offer is designed 
to accommodate the needs of shareholders who wish to participate in the 
In-Kind Repurchase Offer and long-term shareholders who would prefer to 
remain invested in a closed-end investment vehicle. Under the In-Kind 
Repurchase Offer, only participating shareholders will pay U.S. Federal 
taxes

[[Page 11584]]

on the gain on appreciated securities distributed in the In-Kind 
Repurchase Offer. Non-participating shareholders would avoid the 
imposition of a significant Federal tax liability, which would occur if 
the Fund sold the appreciated securities to make payments in cash. 
Applicant further states that the In-Kind Repurchase Offer's in-kind 
payments will minimize market disruption, while allowing the Fund to 
avoid a cascade of distributions, required to preserve its tax status, 
that would reduce the size of the Fund drastically. Applicant requests 
relief to permit any common shareholder of the Fund who is an 
``affiliated person'' of the Fund solely by reason of owning, 
controlling, or holding with the power to vote, 5% or more of the 
Fund's shares (``Affiliated Shareholder'') to participate in the 
proposed In-Kind Repurchase Offer.

Applicant's Legal Analysis

    1. Section 17(a) of the Act prohibits an affiliated person of a 
registered investment company, or any affiliated person of the person, 
acting as principal, from knowingly purchasing or selling any security 
or other property from or to the company. Section 2(a)(3) of the Act 
defines an ``affiliated person'' of another person to include any 
person who directly or indirectly owns, controls, or holds with power 
to vote 5% or more of the outstanding voting securities of the other 
person. Applicant states that to the extent that the In-Kind Repurchase 
Offer could be deemed the purchase or sale of securities by an 
Affiliated Shareholder, the transactions would be prohibited by section 
17(a). Accordingly, applicant requests an exemption from section 17(a) 
of the Act to the extent necessary to permit the participation of 
Affiliated Shareholders in the In-Kind Repurchase Offer.
    2. Section 17(b) of the Act authorizes the Commission to exempt any 
transaction from the provisions of section 17(a) if the terms of the 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and the transaction is consistent with the policy of 
each registered investment company and with the general purposes of the 
Act.
    3. Applicant asserts that the terms of the In-Kind Repurchase Offer 
meet the requirements of sections 17(b) of the Act. Applicant asserts 
that neither the Fund nor an Affiliated Shareholder has any choice as 
to the portfolio securities to be received as proceeds from the In-Kind 
Repurchase Offer. Instead, shareholders will receive their pro rata 
portion of each of the Fund's portfolio securities, excluding (a) 
securities which, if distributed, would have to be registered under the 
Securities Act of 1933 (``Securities Act''), and (b) securities issued 
by entities in countries which restrict or prohibit the holding of 
securities by non-residents other than through qualified investment 
vehicles, or whose distributions would otherwise be contrary to 
applicable local laws, rules or regulations, and (c) certain portfolio 
assets that involve the assumption of contractual obligations, require 
special trading facilities, or may only be traded with the counterparty 
to the transaction. Moreover, applicant states that the portfolio 
securities to be distributed in the In-Kind Repurchase Offer will be 
valued according to an objective, verifiable standard, and the In-Kind 
Repurchase Offer is consistent with the investment policies of the 
Fund. Applicant also believes that the In-Kind Repurchase Offer is 
consistent with the general purposes of the Act because the interests 
of all shareholders are equally protected and no Affiliated Shareholder 
would receive an advantage or special benefit not available to any 
other shareholder participating in the In-Kind Repurchase Offer.

Applicant's Conditions

    Applicant agrees that any order granting the requested relief will 
be subject to the following conditions:
    1. Applicant will distribute to shareholders participating in the 
In-Kind Repurchase Offer an in-kind pro rata distribution of portfolio 
securities of applicant. The pro rata distribution will not include: 
(a) Securities that, if distributed, would be required to be registered 
under the Securities Act; (b) securities issued by entities in 
countries that restrict or prohibit the holdings of securities by non-
residents other than through qualified investment vehicles, or whose 
distribution would otherwise be contrary to applicable local laws, 
rules or regulations; and (c) certain portfolio assets, such as 
derivative instruments or repurchase agreements, that involve the 
assumption of contractual obligations, require special trading 
facilities, or can only be traded with the counterparty to the 
transaction. Cash will be paid for that portion of applicant's assets 
represented by cash and cash equivalents (such as certificates of 
deposit, commercial paper and repurchase agreements) and other assets 
which are not readily distributable (including receivables and prepaid 
expenses), net of all liabilities (including accounts payable). In 
addition, applicant will distribute cash in lieu of fractional shares 
and accruals on such securities. Applicant may round down or up the 
proportionate distribution of each portfolio security to the nearest 
round lot amount so as to eliminate an odd lot prior to distribution 
and will distribute the remaining value of the odd lot, if any, in 
cash. Applicant may also distribute a higher pro rata percentage of 
other portfolio securities to represent such fractional shares and odd 
lots.
    2. The securities distributed to shareholders pursuant to the In-
Kind Repurchase Offer will be limited to securities that are traded on 
a public securities market or for which quoted bid and asked prices are 
available.
    3. The securities distributed to shareholders pursuant to the In-
Kind Repurchase Offer will be valued in the same manner as they would 
be valued for purposes of computing applicant's net asset value, which, 
in the case of securities traded on a public securities market for 
which quotations are available, is their last reported sales price on 
the exchange on which the securities are primarily traded or at the 
last sales price on a public securities market, or, if the securities 
are not listed on an exchange or a public securities market or if there 
is no such reported price, the average of the most recent bid and asked 
price (or, if no such asked price is available, the last quoted bid 
price).
    4. Applicant 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 
Repurchase Offer occurs, the first two years in an easily accessible 
place, a written record of the In-Kind Repurchase Offer that includes 
the identity of each shareholder of record that participated in the In-
Kind Repurchase Offer, whether that shareholder was an Affiliated 
Shareholder, a description of each security distributed, the terms of 
the distribution, and the information or materials upon which the 
valuation was made.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5235 Filed 3-10-10; 8:45 am]
BILLING CODE 8011-01-P