September 10, 2002
Ignacio Alvarez, Esq.
Pietrantoni, Mendez & Alvarez,
Banco Popular Center, Suite 1901
Hato Rey, PR 00918
Re: Popular High Grade Fixed-Income Fund
TP No.: 02-114
Dear Mr. Alvarez,
In regard to your letter
dated September 09, 2002, as supplemented by conversations with the
staff, this response is attached to the enclosed photocopy of your letter.
By doing so, we avoid having to recite or summarize the facts set forth in
your letter. Each defined term in our response has the same meaning as
defined in your letter, unless otherwise noted.
As a consequence of the continuous offering of the Popular High Grade
Fixed-Income Fund (the "Fund"), the Fund will be engaged in a distribution
subject to Rule 102 of Regulation M. As a result, bids for or purchases of
Fund shares by the Fund or an "affiliated purchaser" are prohibited during
the "restricted period" specified in Rule 102.1 The Fund is not eligible for the exceptions
contained in paragraphs (b)(2)(i), (b)(2)(ii) or (b)(3) or (d)(4) of Rule
102 referenced in your letter.2
In considering your exemptive request from Rule 102 of Regulation M, we
note especially the following facts:
- The Fund is a non-diversified, open-end investment company under the
Investment Companies Act of Puerto Rico and is registered with the
Securities Division of the Office of the Commissioner of Financial
Institutions of the Commonwealth of Puerto Rico. Operation of the Fund
is subject to the regulation of the Puerto Rico Commissioner.
- The Fund will be offered and sold exclusively to individuals who
have their principal residence in Puerto Rico and entities with their
principal office and principal place of business in Puerto Rico and the
Fund's Prospectus will so state.
- The Fund's shares are not transferable, except in special
circumstances by operation of law, and may not be generally disposed of,
except through weekly redemptions by the Fund.
- Once the Fund is in operation and the initial subscription period
has terminated, all subsequent offers to sell the Fund's shares will be
made at a price equal to the next determined net asset value per share
(determined as described in your letter), plus a sales charge to be
disclosed in the Prospectus and any supplement thereto.
- All Fund shareholders will receive a Prospectus detailing the
procedures associated with the Fund's Redemptions.
- All redemptions of Fund shares by the Fund will be at a price equal
to the net asset value per unit (determined weekly as described in your
letter) less a fee to be disclosed in the Prospectus and any supplement
- Information about net asset value of the Fund will be available
daily from the Fund, the Distributor, and selected dealers. The Fund
will publish net asset value per Fund share in a newspaper of general
circulation in Puerto Rico at least weekly.
Based upon your representations and the facts presented, but without
necessarily concurring in your analysis, the Commission hereby grants the
Fund an exemption from Rule 102 of Regulation M to permit the Fund to
conduct the daily Redemptions during periodic offerings or a continuous
offering of Fund shares as described in your letter subject to the
condition that no secondary market for the Fund develops.
The foregoing exemption is based solely on your representations and the
facts presented to the staff, and is strictly limited to the application
of Rule 102 to the Redemptions. In the event that any material change
occurs with respect to any of those facts or representations, the
Redemptions should be discontinued, pending presentation of the facts for
In addition, your attention is directed to the anti-fraud and
anti-manipulation provisions of the federal securities laws, including
Sections 9(a)(2) and 10(b) of the Exchange Act and Rule 10b-5 thereunder.
Responsibility for compliance with these and any other applicable
provisions of the federal securities laws must rest with the Fund. The
Division does not express any view with respect to any other questions
that the Redemptions may raise, including but not limited to the adequacy
of disclosures concerning, and the applicability of any other federal or
state laws to, the Redemptions.
For the Commission, by the
Division of Market
pursuant to delegated authority,
James A. Brigagaliano
1 The terms "affiliated purchaser" and "restricted
period" are defined in Rule 100 of Regulation M.
2 See Rule 102(b)(2)(i) (exempting closed-end
investment companies making periodic repurchases of their shares pursuant
to Rule 23c-3 of the Investment Company Act of 1940), (b)(2)(ii)
(exempting periodic tender offers of securities by registered closed-end
investment companies that engage in a continuous offering of their
securities pursuant to Rule 415 under the Securities Act of 1933, (b)(3)
(exempting redemptions by commodity pools or limited partnerships, at a
price based on net asset value, which are effected in accordance with the
terms and conditions of the instruments governing the securities; provide
however, that such securities are not traded on a securities exchange, or
through an inter-dealer quotation system or electronic communications
network, and (d)(4) (exempting open-end management investment companies).
Incoming LetterThe incoming
letter is attached in PDF format.