[Federal Register Volume 64, Number 31 (Wednesday, February 17, 1999)]
[Notices]
[Pages 7928-7930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3830]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23690; 812-11504]
Sweig/Glaser Advisers, et al.; Notice of Application
February 11, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') from section 15(a) of the
Act.
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SUMMARY OF APPLICATION: Applicants seek an order to permit the
implementation, without prior shareholder approval, of certain sub-
advisory agreements in connection with the acquisition
(``Acquisition'') of Zweig/Glaser Advisers (``Zweig/Glaser'') and Zweig
Advisors Inc. (``Zweig,'' collectively with Zweig/Glaser, the ``Sub-
advisers'') by Phoenix Investment Partners, Ltd. (``Phoenix''). The
order would cover a period of up to 150 days following the later of:
(i) the date on which the Acquisition is consummated (the ``Acquisition
Date''), or (ii) the date on which the requested order is issued (but
in no event later than July 23, 1999) (``Interim Period''). The order
also would permit the Sub-advisers to receive all fees earned under the
New Sub-advisory Agreements during the Interim Period following
shareholder approval.
Applicants: The Sub-Advisers.
Filing Dates: The application was filed on February 9, 1999.
Applicants have agreed to file an amendment to the application, the
substance of which is reflected in this notice, during the notice
period.
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 March 4,
1999, 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
SEC's Secretary.
Addresses: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, 900 Third Avenue, New York, NY 10022.
FOR FURTHER INFORMATION CONTACT: Janet M. Grossnickle, Attorney-
Adviser, at (202) 942-0526, or Nadya B. Roytblat, Assistant Director,
at (202) 942-0564 (Office of Investment Company Regulation, Division of
Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. (202-942-8090).
Applicants' Representations
1. Zweig/Glaser, a New York general partnership, is an investment
adviser registered under the Investment Advisers Act of 1940
(``Adivsers Act''). Zweig, a Delaware corporation, is an investment
adviser registered under the Advisers Act.
2. Zweig/Glaser serves as the sub-adviser for the Zweig Asset
Allocation Fund and the Sweig Equity (Small Cap) Fund (the ``Funds''),
each a series of Legends Funds, Inc., an open-end management investment
company registered under the Act.
3. Zweig serves as the sub-adviser for the Strategic Equity Series
and the Multiple Allocation Series (the ``Portfolios''), each a series
of the GCG Trust, an open-end management investment company registered
under the Act. The Funds and the Portfolios are each referred to as an
``Investment Company'' and collectively, as the ``Investment
Companies.'' The sub-advisory agreements currently in effect between
the Sub-advisers and the Investment Companies are each referred to as
an ``Existing Sub-advisory Agreement'' and collectively, as the
``Existing Sub-advisory Agreements.''
4. On December 15, 1998, the Sub-advisers entered into an
acquisition
[[Page 7929]]
agreement with Phoenix, under which the Sub-advisers will be acquired
by Phoenix. Phoenix, a Delaware corporation, is a diversified financial
services company, and is an investment adviser registered under the
Advisers Act. Applicants expect the Acquisition to be consummated on or
about March 1, 1999.
5. Applicants state that the Acquisition will result in an
assignment and thus the automatic termination of the Existing Sub-
advisory Agreements. Applicants request an exemption to permit the
implementation, without prior shareholder approval, of new sub-advisory
agreements with respect to the Investment Companies (``New Sub-advisory
Agreements''). The requested exemption will cover the Interim Period of
not more than 150 days beginning on the later of the Acquisition Date
or the date of the issuance of the requested order and continuing with
respect to each Investment Company through the date on which each New
Sub-advisory Agreement is approved or disapproved by the Investment
Company's shareholders, but in no event after July 23, 1999. Applicants
represent that the New Sub-advisory Agreements will contain
substantially identical terms and conditions as the Existing Sub-
advisory Agreements, except in each case for the effective dates, the
termination dates, the escrow provisions discussed below and terms
relating to a servicing agreement between the Sub-advisers and Zweig
Consulting LLC (``Servicing Agreement''), a company formed by Dr.
Martin E. Zweig.\1\ Applicants further represent that each Investment
Company will receive, during the Interim Period, the same investment
sub-advisory services, provided in the same manner by substantially the
same personnel, at the same fee levels as it received prior to the
Acquisition.
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\1\ Applicant state that as of the Acquisition date, Dr. Zweig,
an officer of each of the Sub-advisers, and certain of his
associates will not continue their positions with the Sub-advisers.
Applicants further state that Dr. Zweig and his associates have been
involved in the Sub-adviser's provision of services to the
Investment Companies. Applicants represent that the Sub-Advisers
will enter into the Servicing Agreement with a company formed by Dr.
Zweig, Zweig Consulting LLC, in order for the Investment Companies
to continue to receive the services of Dr. Zweig and his associates.
Applicants state that Zweig/Glaser is controlled by Eugene J. Glaser
and Zweig Management Corp. Applicants further state that Zweig
Management Corp., Zweig, and Zweig Consulting LLC are controlled by
Dr. Zweig Management Corp., Zweig, and Zweig Consulting LLC are
controlled by Dr. Zweig. Applicants represent that all fees that
will be payable to Zweig Consulting LLC in connection with the
services provided to the Investment Companies will be paid by the
Sub-advisers. Zweig Consulting LLC, a New York limited liability
company, is an investment adviser registered under the Advisers Act.
All references to New-Sub-advisory Agreements in this notice include
the Service Agreement.
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6. Applicants state that the board of directors of each Investment
Company (the ``Board'') will meet prior to the Applicant Date to
consider approval of the New Sub-advisory Agreements and submission of
the New Sub-advisory Agreements to the shareholders for their approval,
in accordance with section 15(c) of the Act.\2\ Applicants state that
the Board will evaluate whether the terms of the New Sub-advisory
Agreements, including the escrow provisions described below, are in the
best interests of the Investment Companies and their shareholders.
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\2\ Applicants acknowledge that, to the extent that the Board of
any Investment Company cannot meet to approve a New Sub-advisory
Agreement prior to the Acquisition Date, such Investment Company may
not rely on the exemptive relief requested in this application.
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7. Applicants submit that it will not be possible to obtain
shareholder approval of the New Sub-advisory Agreements in accordance
with section 15(a) of the Act prior to the Acquisition Date. Applicants
state that each Investment Company will promptly schedule a meeting of
shareholders to vote on the approval of the New Sub-advisory Agreements
to be held within 150 days after the commencement of the Interim
Period, but in of event later than July 23, 1999.
8. Applicants also request an exemption to permit the Sub-advisers
to receive from each Investment Company all fees earned under the New
Sub-advisory Agreements during the Interim Period, if and to the extent
the New Sub-advisory Agreements are approved by the shareholders of
each Investment Company.\3\ Applicants propose to enter into an escrow
arrangement with an unaffiliated financial institution (the ``Escrow
Agent''). Advisory fees payable by the Investment Companies to the Sub-
advisers under the New Sub-advisory Agreements during the Interim
Period will be paid into an interest-bearing escrow account maintained
by the Escrow Agent. The amounts in the escrow account (including
interest earned on such paid fees) will be paid to the Sub-advisers
only after the New Sub-advisory Agreements are approved by the
shareholders of the relevant Investment Company in accordance with
section 15(a) of the Act. If shareholder approval is not obtained and
the Interim Period has ended, the Escrow Agent will return the escrow
amounts to the appropriate Investment Company. Before the release of
any such escrow amounts, the Boards will be notified.
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\3\ Applicants state that if the Acquisition Date precedes
issuance of the requested order, the Sub-advisers will continue to
serve as sub-advisers after the Acquisition Date (and prior to the
issuance of the order) in a manner consistent with their fiduciary
duty to continue to provide advisory services to the Investment
Companies even though approval of the New Sub-advisory Agreements
has not yet been secured from the Investment Companies'
shareholders. Applicants also state that the Investment Companies
may be required to pay, with respect to the period until receipt of
the order, no more than the actual out-of-pocket costs to the Sub-
advisers for providing advisory services.
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Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in pertinent part, that it
shall be unlawful for any person to serve or act as an investment
adviser of a registered investment company, except pursuant to a
written contract that has been approved by the vote of a majority of
the outstanding voting securities of such registered investment
company. Section 15(a) of the Act further requires that such written
contract provide for its 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 an investment advisory or
investment sub-advisory contract by the assignor or of a controlling
block of the assignor's outstanding voting securities by a security
holder of the assignor.
2. Applicants state that the Acquisition will result in a transfer
of a controlling block of outstanding voting securities or ownership of
each of the Sub-advisers. Accordingly, applicants state that an
assignment of the Existing Sub-advisory Agreements will occur and the
Existing Sub-advisory Agreements will terminate by their own terms.
3. Rule 15a-4 under the Act provides, in pertinent part, that if an
investment advisory contract with a registered investment company is
terminated by an assignment, the adviser may continue to serve for 120
days under a written contract that has not been approved by the
company's shareholders, provided that: (a) the new contract is approved
by that company's board of directors (including a majority of the non-
interested directors); (b) the compensation to be paid under the new
contract does not exceed the compensation that would have been paid
under the contract most recently approved by the company's
shareholders; and (c) neither the adviser nor any controlling person of
the adviser ``directly or indirectly receives money or other benefit''
in connection with the assignment. Applicants state that they cannot
rely on rule 15a-4 because of the benefits to the Sub-advisers and
their shareholders arising from the Acquisition.
[[Page 7930]]
4. 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.
5. Applicants note that the form and timing of the Acquisition were
determined in response to a number of factors beyond the scope of the
Act and substantially unrelated to the Investment Companies. Applicants
state that it is not possible for the Investment Companies to obtain
shareholder approval of the New Sub-advisory Agreements prior to the
Acquisition Date. Applicants submit that the Boards will meet to
approve the New Sub-advisory Agreements prior to the Acquisition Date,
in accordance with section 15(c) under the Act, and the shareholders of
the Investment Companies will be further protected by the establishment
of the escrow account described in the application.
6. Applicants submit that the Sub-advisers will take all
appropriate steps to ensure that the scope and quality of advisory and
other services provided to the Investment Companies during the Interim
Period will be at least equivalent to the scope and quality of services
previously provided. During the Interim Period, the Sub-advisers will
operate under the New Sub-advisory Agreements, which will have
substantially the same terms and conditions as the respective Existing
Sub-advisory Agreements, except for the effective dates, the escrow
provisions and terms relating to the Servicing Agreement. Applicants
state that the fees to be paid during the Interim Period will not be
greater than the fees currently paid by the Investment Companies.
Applicants also assert that allowing the implementation of the New Sub-
advisory Agreements will ensure that there will be no disruption to the
investment program and the delivery of related services to the
Investment Companies because the personnel that provide such services
to the Investment Companies will remain substantially the same as
before the Acquisition Date.
Applicant's Conditions
Applicants agree as conditions to the issuance of the exemptive
order requested by the application that:
1. The New Sub-advisory Agreements to be implemented following the
commencement of the Interim Period will be substantially the same as
the respective Existing Sub-advisory Agreements, except for the
effective dates, the termination dates, the escrow provisions and terms
relating to the Servicing Agreement.
2. Fees payable to a Sub-adviser by an Investment Company for the
period covered by the order will be maintained during the Interim
Period in an interest-bearing escrow account (including interest earned
on such amounts), and will be paid: (a) to the Sub-adviser after the
requisite approval by shareholders is obtained; or (b) in the absence
of such approval by the end of the Interim Period, to the relevant
Investment Company.
3. Each Investment Company will promptly schedule a meeting of
shareholders to vote on approval of the New Sub-advisory Agreements to
be held within 150 days after the commencement of the Interim Period,
but in no event later than July 23, 1999.
4. The Sub-advisers, not the Investment Companies, will pay the
costs of preparing and filing the application and the costs relating to
the solicitation of approval of the Investment Companies' shareholders
of the New Sub-advisory Agreements.
5. The Sub-advisers will take all appropriate steps to ensure that
the scope and quality of advisory and other services provided to the
Investment Companies during the Interim Period will be at least
equivalent, in the judgment of the respective Boards, including a
majority of the directors who are not ``interested persons'' of the
Investment Companies, as defined in section 2(a)(19) of the Act
(``Disinterested Directors''), to the scope and quality of services
they previously provided. In the event of any material change in the
personnel providing services pursuant to the New Sub-advisory
Agreements, the Sub-advisers will apprise and consult with the Boards
of the affected Investment Companies in order to assure that the
Boards, including a majority of the Disinterested Directors, are
satisfied that the services provided will not be diminished in scope or
quality.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-3830 Filed 2-16-99; 8:45 am]
BILLING CODE 8010-01-M
