[Federal Register Volume 61, Number 236 (Friday, December 6, 1996)]
[Notices]
[Pages 64771-64773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31083]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 22360; International Series Release
No. 1034; 812-10418]
The Lipper Funds, Inc., et al.; Notice of Application
December 2, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption Under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: The Lipper Funds, Inc. (the ``Company''), on behalf of its
portfolio
[[Page 64772]]
series, Prime Lipper Europe Equity Fund (the ``Fund''), and Prime
Lipper Asset Management (``PLAM'').
RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act
for an exemption from section 15(a) of the Act.
SUMMARY OF APPLICATION: Assicurazioni Generali S.p.A. (``Generali'')
has agreed to acquire a controlling interest in Prime S.p.A., the
parent of Prime U.S.A. Inc. (``Prime U.S.A.''), which owns 50% of PLAM,
the investment adviser to the Fund. The indirect change of control in
Prime U.S.A. will result in the assignment, and thus the termination,
of the existing advisory contract between the Fund and PLAM. The order
would permit the implementation, without shareholder approval, of a new
advisory contract for a period of up to 120 days following the date of
the change in control of Prime S.p.A. (but in no event later than May
31, 1997). The order also would permit PLAM to receive from the Fund
fees earned under the new advisory contract following approval by the
Fund's shareholders.
FILING DATE: The application was filed on November 8, 1996 and amended
on November 25, 1996.
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 27,
1996 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 of a hearing by
writing to the SEC's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th
Street, N.W., Washington, D.C. 20549. Applicants, 101 Park Avenue, New
York, New York 10178.
FOR FURTHER INFORMATION CONTACT: Sarah A. Buescher, Staff Attorney, at
(202) 942-0573, or May Kay Frech, 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 is available for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. The Company has three investment portfolios, one of which is the
Fund. PLAM serves as investment adviser to the Fund and Lipper &
Company, L.L.C. serves as investment adviser to the other two
portfolios.
2. PLAM is a joint venture structured as an equally-owned New York
general partnership between Lipper Europe L.P., a Delaware limited
partnership controlled by Lipper & Company, and Prime U.S.A., a
Delaware corporation and a wholly-owned subsidiary of Prime S.p.A., an
Italian company that is currently controlled by Fiat S.p.A.
3. On October 22, 1996, Generali and Fiat S.p.A. entered into an
agreement pursuant to which Generali agreed to acquire 95.1% of the
outstanding stock of Prime S.p.A. from Fiat S.p.A. (the ``Purchase'').
Consummation of the Purchase is subject to the satisfaction or waiver
of certain conditions, including regulatory approvals in Italy. Prime
S.p.A. has informed applicants that the only significant condition to
closing is the receipt of regulatory approval that is currently pending
and that could be received at any time. While regulatory approvals
could be delayed or denied, applicants believe that a change in control
of PLAM could occur soon. Applicants represent that Fiat S.p.A. and
Generali determined the terms and timing of the Purchase in response to
factors beyond the scope of the Act and unrelated to the Fund and
Lipper Europe L.P.
4. The consummation of the Purchase will directly result in a
change in control of Prime U.S.A. from Fiat S.p.A. to Generali. Because
Prime U.S.A. is an equal partner of PLAM with Lipper Europe L.P., the
indirect change of control of Prime U.S.A. will constitute an
assignment of the existing investment advisory agreement between the
Fund and PLAM within the meaning of section 2(a)(4) of the Act.
5. Applicants request an exemption to permit the implementation,
without formal shareholder approval, of a new investment advisory
agreement between the Fund and PLAM. The requested exemption would
cover an interim period (the ``Interim Period'') of not more than 120
days beginning on the day the Purchase is consummated and continuing
through the date the new investment advisory agreement is approved or
disapproved by the Fund's shareholders (but in no event later than May
31, 1997). During the Interim Period, PLAM's advisory fees would be
paid into escrow.
6. The investment advisory agreement between PLAM and the Fund to
be entered into upon consummation of the Purchase is identical to the
existing investment advisory agreement, except for its effective date
and escrow provisions. The aggregate contractual rate chargeable for
advisory services will remain the same as in the existing agreement.
The Fund proposes to implement the new investment advisory agreement
during the Interim Period, subject to the conditions contained in the
application.
7. In accordance with section 15(c) of the Act,\1\ the Company's
board of directors will meet on a date prior to the assignment of the
existing investment advisory agreement and they will receive all
information that in their view is reasonably necessary to evaluate
whether the new investment advisory agreement would be in the best
interest of the Fund and its shareholders. The board also will consider
whether to vote to recommend that the Fund's shareholders approve the
new investment advisory agreement.
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\1\ Section 15(c) provides, in relevant part, that it shall be
unlawful for any registered investment company to enter into an
investment advisory contract unless the terms of such contract have
been approved by the vote of a majority of directors, who are not
parties to such contract or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval.
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8. The Fund expects to prepare the required proxy materials and
schedule a shareholder meeting as soon as practicable. Applicants
believe that a 120 day period will allow for reasonable adjournments of
a shareholder meeting if necessary to obtain sufficient shareholder
response in order to obtain the required approval.
9. Applicants propose to enter into an escrow arrangement with an
unaffiliated financial institution, such as the Fund's custodian, as
escrow agent. The arrangement would provide that: (a) The investment
advisory fees payable to PLAM during the Interim Period under the new
investment advisory agreement would be paid into an interest-bearing
escrow account maintained by the interest earned on such paid fees)
would be paid to PLAM only upon approval of Fund shareholders of the
new investment advisory agreement or, in the absence of such approval,
to the Fund; and (c) the escrow agent would release the moneys only
upon receipt of a certificate from an officer of the Company who is not
an interested person of PLAM stating that the moneys are to be
delivered to PLAM and that the new investment advisory agreement has
received the requisite Fund shareholder vote or, if the moneys are to
be delivered to the Fund, that the Interim
[[Page 64773]]
Period has ended, and the new investment advisory agreement has not
received the requisite Fund shareholder vote. Before any certificate is
sent, the boards of directors of the Company would be notified.
Applicants' Legal Analysis
1. Applicants request an order pursuant to section 6(c) of the Act
exempting them from section 15(a) of the Act to the extent necessary
(a) to permit the implementation during the Interim Period of the new
investment advisory agreement prior to receiving shareholder approval
and (b) to permit PLAM to receive from the Fund all fees earned under
the new investment advisory agreement (which would be the same as all
fees that would have been earned under the existing investment advisory
agreement) implemented during the Interim Period if and to the extent
the new investment advisory agreement is approved by the shareholders
of the Fund. Because the Fund has not had sufficient advance notice of
the Purchase, it will not be possible for the Fund to obtain prior
approval of the new investment advisory agreement by Fund shareholders.
2. Section 15(a) prohibits an investment adviser from providing
investment advisory services to an investment company except under a
written contract that has been approved by a majority of the voting
securities of the investment company. Section 15(a) further requires
that the written contract provide for automatic termination in the
event of its assignment. Section 2(a)(4) of the Act defines
``assignment'' to include any direct or indirect transfer of a contract
by the assignor or of a controlling block of the assignor's outstanding
voting securities by a security holder of the assignor.
3. Upon consummation of the Purchase, Fiat S.p.A. will transfer
ownership of its interest in Prime S.p.A., the parent of Prime U.S.A.,
to Generali. The Purchase will result in an ``assignment'' within the
meaning of section 2(a)(4) of the existing investment advisory
agreement, terminating the agreement according to its terms.
4. Rule 15a-4 provides, in relevant part, that if an investment
adviser's contract with an investment company is terminated by
assignment, the adviser may continue to act as such for 120 days at the
previous compensation rate if a new contract is approved by the board
of directors of the investment company and if neither the investment
adviser nor a controlling person thereof directly or indirectly
receives money or other benefit in connection with the assignment.
Applicants cannot relay on rule 15a-4 because of the benefits which
will accrue to Fiat S.p.A. due to the Purchase.
5. Section 6(c) provides that the SEC may exempt any person,
security, or transaction from any provision of the Act, if and to the
extent that such exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
Applicants believe that the requested relief meets this standard.
6. Applicants believe that the requested relief is necessary, as it
would permit continuity of investment management to the Fund during the
period following the consummation of the Purchase so that services to
the Fund would not be disrupted. Applicants also believe that the
Interim Period would facilitate the orderly and reasonable
consideration of the new advisory agreement by the Fund's shareholders.
7. Applicants represent that the best interests of the Fund's
shareholders would be served if PLAM receives fees for services during
the Interim Period as provided herein. In addition, applicants believe
that it would be unjust to deprive Lipper Europe L.P. of fees due to a
change in control of the parent of Prime U.S.A. Finally, the fees to be
paid during the Interim Period are at the same rate as the fees
currently payable by the Fund under the existing investment advisory
agreement.
Applicants' Conditions
Applicants agree as conditions to the issuance of the exemptive
order requested by the application that:
1. The new investment advisory agreement will have the identical
terms and conditions as the existing investment advisory agreement,
except for its effective date and escrow provisions.
2. The investment advisory fees paid to PLAM during the Interim
Period will be maintained in an interest-bearing escrow account, and
amounts in the account (including interest earned on such paid fees)
will be paid (a) to PLAM in accordance with the new investment advisory
agreement, after the requisite approval is obtained, or (b) to the
Fund, in the absence of such approval.
3. The Fund will hold a meeting of shareholders to vote on approval
of the new investment advisory agreement on or before the 120th day
following the termination of the existing advisory agreement (but in no
event later than May 31, 1997).
4. PLAM will bear the costs of preparing and filing the
application. The Fund will not bear any costs relating to the
solicitation of shareholder approval of the Fund's shareholders
necessitated by the consummation of the Purchase.
5. PLAM will take all appropriate steps so that the scope and
quality of investment advisory services provided to the Fund during the
Interim Period will be at least equivalent, in the judgment of the
Company's board of directors, including a majority of the non-
interested directors, to the scope and quality of services previously
provided. If personnel providing material services during the Interim
Period change materially, PLAM will apprise and consult with the board
of directors of the Company to assure that they, including a majority
of the non-interested board members, are satisfied that the services
provided will not be diminished in scope or quality.
6. The board of directors of the Company, including a majority of
non-interested directors, will have approved the new investment
advisory agreement in accordance with the requirements of section 15(c)
of the Act prior to termination of the existing investment advisory
agreement.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-31083 Filed 12-5-96; 8:45 am]
BILLING CODE 8010-01-M
