Pro forma consolidating balance sheet, December 31, 1947

IN THE MATTER OF

THE PITCAIRN COMPANY

File No. 802-8. Promulgated March 2, 1949

(Investment Advisers Act of 1940-Section 202 (a) (11) (F))

MEMORANDUM OPINION AND ORDER

The Pitcairn Company has filed an application under Section 202 (a) (11) (F) of the Investment Advisers Act of 1940 for an order declaring it not to be an "investment adviser" within the intent of Section 202 (a) (11) of the Act. The application sets forth the following with respect to the business and investment advisory activities of Pitcairn.

1. Pitcairn was incorporated under the laws of Delaware on July 2, 1923. Its business consists of the holding, investing, and reinvesting of its funds, the management of such investments, and the manufacture and sale of valves and fittings. Pitcairn has outstanding three classes of securities (other than short term paper). These consist of a 5% first preferred, a 512% second preferred, and a common stock. The common stock is the only class with voting rights. All of the outstanding stock is beneficially

1 Section 202 (a) (11) reads:

"Investment adviser' means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include (A) a bank, or any holding company affiliate, as defined in the Banking Act of 1933, which is not an investment company; (B) any lawyer, accountant, engineer, or teacher whose performance of such services is solely incidental to the practice of his profession; (C) any broker or dealer whose performance of such services is solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefor; (D) the publisher of any bona fide newspaper, news magazine or business or financial publication of general and regular circulation; (E) any person whose advice, analyses, or reports relate to no securities other than securities which are direct obligations of or obligations guaranteed as to principal or interest by the United States, or securities issued or guaranteed by corporations in which the United States has a direct or indirect interest which shall have been designated by the Secretary of the Treasury, pursuant to section 3 (a) (12) of the Securities Exchange Act of 1934, as exempted securities for the purposes of that Act; or (F) such other persons not within the intent of this paragraph, as the Commission may designate by rules and regulations or order."

29 S. E. C.-I. A.-52

owned by not more than 100 persons.2 The company is not making and does not presently propose to make a public offering of its securities. Raymond, Theodore and Harold F. Pitcairn, the principal stockholders of the company, own beneficially and of record an aggregate of 19,094 of 32,317 shares of its common stock outstanding. All of the stockholders (except for four churches holding a total of 947 shares of common stock), all of the living beneficiaries of trusts holding any class of Pitcairn's stock, and all of the trustees thereof (except for three individuals, of whom two are officers of Pitcairn and the third of counsel for the company), are spouses, descendants, or spouses of descendants of Raymond, Theodore or Harold F. Pitcairn.

2. As an incident to the management of its own investments and the preparation of its own records and tax returns the company renders certain services to most of its stockholders. These services include the safekeeping and physical handling of securities, the collection of income from such securities, the keeping of books of account and records, the preparation and filing of income and gift tax returns, the payment in some cases of certain family, household, and personal expenses, and the rendering of investment advice. In this connection, three individuals in the employ of the firm devote a substantial portion of their time to investment advisory services. These various services are performed substantially at cost. From 1942 to 1947 inclusive the yearly cost to the company of rendering these services to its stockholders ranged from approximately $46,000 to $96,000, with the total charges to stockholders each year being approximately within 5% of the yearly cost to the company. The total amount charged is computed annually by calculating the amount of payroll and overhead expense of the company attributable to the work done for its stockholders during the previous year and the total charge is then apportioned according to formulas that result in total payments by the stockholders approximating the cost of the services.

3. Of the company's gross income (apart from the payments for services to stockholders) for the year ending December 31, 1947, 96.23% was derived from interest and dividends on its investments, 3.72% from the manufacture and sale of valves and fittings, and .05% from miscellaneous sources. If sums received

* Pitcairn is not registered under the Investment Company Act of 1940, presumably in reliance on Section 3 (c) (1) of that Act, which excludes from the definition of investment company any issuer of whose outstanding securities (other than short-term paper) are beneficially owned by not more than 100 persons and which is not making and does not presently propose to make a public offering of its securities.

from stockholders for services had been considered part of gross income for 1947 they would have amounted to less than 2% thereof, and the portion attributable to investment advisory services would have amounted to 12 of 1% of gross income. Of the total payroll of the company in 1947, the portion attributable to investment advisory services was approximately 1.5%.

4. The company never has solicited and has no intention of soliciting anyone to use its investment advisory service, nor would it render any such service for a fee to anyone other than an officer or stockholder of the company nor has it ever done so. The company has no present intention of enlarging the group to which it gives investment advice.

The Commission on the basis of the facts stated in this application finds that The Pitcairn Company is not an investment adviser within the intent of Section 202 (a) (11) of the Act.

Accordingly, IT IS ORDERED that the application of The Pitcairn Company under Section 202 (a) (11) (F) of the Investment Advisers Act of 1940 for an order declaring it to be a person not within the intent of Section 202 (a) (11) of the Act be and it hereby is granted; provided that this order will not relieve the applicant from the operation of the Act if at any time the facts upon which this order is based should become materially changed.

By the Commission (Chairman Hanrahan and Commissioners McConnaughey, McEntire, Donald, and Rowen).