[Federal Register Volume 64, Number 89 (Monday, May 10, 1999)]
[Notices]
[Pages 25089-25091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11691]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23824; 812-11566]
Warburg Pincus Asset Management, Inc., et al.; Notice of
Application
May 5, 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 advisory
and sub-advisory agreements in connection with the acquisition
(``Acquisition'') of Warburg Pincus Asset Management Holdings, Inc.
(``Warburg Holdings'') by Credit Suisse Group (``Credit Suisse''). 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 December 31, 1999). The order also would permit
the payment of all fees earned under the new advisory agreements during
this period following shareholder approval.
APPLICANTS: Warburg Pincus Asset Management, Inc. (``Warburg''), Credit
Suisse Asset Management (``CSAM-U.S.''), Abbott Capital Management, LLC
(``Abbott'') and Blackrock Institutional Management Corporation
(``Blackrock'') (collectively, the ``Advisers'').
FILING DATES: The application was filed on April 7, 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 May 27, 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, NW., Washington, DC 20549-
0609. Warburg, 466 Lexington Avenue, New York, NY 10017. CSAM-U.S., One
Citicorp Center, 153 East 53rd Street, New York, NY 10022. Abbott, 50
Rowes Wharf, Suite 240, Boston, MA 02110-3328. Blackrock, 345 Park
Avenue, New York, NY 10154.
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, NW., Washington, DC
20549-0102 (tel. 202-942-8090).
Applicants' Representations
1. Warburg, a Delaware corporation, is an investment adviser
registered under the Investment Advisers Act of 1940 (``Advisers
Act''). Abbott, a Delaware limited liability company, is an investment
adviser registered under the Advisers Act. Blackrock, a Delaware
corporation, is an investment adviser registered under the Advisers
Act. Warburg is a wholly-owned subsidiary of Warburg Holdings.
2. Warburg serves as the adviser or sub-adviser to various
management investment companies registered under the Act
(``Funds'').\1\ Abbott serves as sub-adviser to four of the Funds,
Warburg, Pincus Global Post-Venture Capital Fund, Inc., Warburg, Pincus
Post-Venture Capital Fund, Inc., and the Post-Venture Capital
Portfolios of Warburg, Pincus Institutional Fund, Inc., and Warburg,
Pincus Trust. Blackrock serves as a sub-adviser to four of the Funds,
but is seeking relief only with respect to two Funds, Warburg, Pincus
WorldPerks Money Market Fund, Inc. and Warburg, Pincus WorldPerks Tax
Free Money Market Fund, Inc. The advisory and sub-advisory agreements
currently in effect between the Advisers and the Funds are each
referred to as an ``Existing Advisory Agreement'' and collectively, as
the ``Existing Advisory Agreements.''
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\1\ Warburg serves as the adviser to the following funds:
Warburg, Pincus Balanced Fund, Inc., Warburg, Pincus Capital
Appreciation Fund, Warburg, Pincus Cash Reserve Fund, Inc., Warburg,
Pincus Emerging Growth Fund, Inc., Warburg, Pincus Emerging Markets
Fund, Inc., Warburg, Pincus Fixed Income Fund, Warburg, Pincus
Global Fixed Income Fund, Inc., Warburg, Pincus Global Post-Venture
Capital Fund, Inc., Warburg, Pincus Growth & Income Fund, Inc.,
Warburg, Pincus Health Sciences Fund, Inc., Warburg, Pincus
Institutional Fund, Inc., Warburg, Pincus Intermediate Maturity
Government Fund, Inc., Warburg, Pincus International Equity Fund,
Inc., Warburg, Pincus International Small Company Fund, Inc.,
Warburg, Pincus Japan Growth Fund, Inc., Warburg, Pincus Japan Small
Company Fund, Inc. Warburg, Pincus Major Foreign Markets Fund, Inc.,
Warburg, Pincus New York Intermediate Municipal Bond Fund, Inc.,
Warburg, Pincus New York Tax Exempt Fund, Inc., Warburg, Pincus
Post-Venture Capital Funds, Inc., Warburg, Pincus Small Company
Growth Fund, Inc., Warburg, Pincus Small Company Value Fund, Inc.,
Warburg, Pincus Trust, Warburg, Pincus Trust II, Warburg, Pincus
WorldPerks Money Market Fund, Inc., and Warburg, Pincus WorldPerks
Tax Free Money Market Fund, Inc. Warburg serves as a sub-adviser to
the Growth and Income Portfolio of the Variable Investors Series
Trust, the International Growth Fund of WM Trust II, and the
International Growth Fund of the WM Variable Trust.
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3. On February 15, 1999, Warburg Holdings entered into an
acquisition agreement with Credit Suisse, under which Warburg Holdings
will be acquired by Credit Suisse. Credit Suisse, a Switzerland
corporation, is a global financial services company. Applicants expect
the Acquisition to be consummated in June 1999. Upon consummation of
the Acquisition, Credit Suisse intends to combine Warburg with CSAM-
U.S. (the ``Reorganization''). Such combined businesses are expected to
be conducted by CSAM-U.S. as a wholly-owned U.S. subsidiary of Credit
Suisse (the ``New Adviser''). The Reorganization is expected to occur
simultaneously with the Acquisition. CSAM-U.S. is registered as an
investment adviser under the Advisers Act. New Adviser will succeed to
CSAM-U.S.'s registration under the Advisers Act after the
Reeorganization.
4. Applicants state that the Acquisition will result in an
assignment and thus the automatic termination of the Existing Advisory
Agreements. Applicants also state that the Reorganization may be deemed
an assignment of each Fund's Existing Advisory Agreements if it does
not occur simultaneously with the Acquisition. Applicants requests an
exemption to permit the implementation, without prior shareholder
approval, of new advisory and sub-advisory agreements with respect to
the Funds (``New Advisory Agreements''). The requested exemption will
cover the 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 Fund through the date on which each
New Advisory Agreement is approved or disapproved by the Fund's
shareholders, but in no event later than December 31, 1999 (``Interim
Period''). Applicants represent that the New Advisory Agreements will
contain
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substantially the same terms and conditions as the Existing Advisory
Agreements, except in each case for the effective and the termination
dates. Applicants further represent that each Fund will receive, during
the Interim Period, the same scope and quality of investment advisory
services, provided in the same manner by substantially the same
personnel, at the same fee levels as it received prior to the
Acquisition.
5. Applicants state that the board of directors of each Fund (the
``Board'') will meet prior to the Acquisition Date to consider approval
of the New Advisory Agreements and submission of the New 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 Advisory Agreements are in the
best interests of the Funds and their shareholders.
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\2\ Applicants acknowledge that, to the extent that the Board of
any Fund cannot meet to approve a New Advisory Agreement prior to
the Acquisition Date, such Fund may not rely on the exemptive relief
requested in this application.
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6. Applicants submit that it will not be possible to obtain
shareholder approval of the New Advisory Agreements in accordance with
section 15(a) of the Act prior to the Acquisition Date. Applicants
state that each Fund will promptly schedule a meeting of shareholders
to vote on the approval of the New Advisory Agreements to be held
during the Interim Period.
7. Applicants also request an exemption to permit the Advisers to
receive from each Fund all fees earned under the New Advisory
Agreements during the Interim Period, if and to the extent the New
Advisory Agreements are approved by the shareholders of each Fund.\3\
Applicants propose to enter into an escrow arrangement with an
unaffiliated financial institution (the ``Escrow Agent''). Advisory
fees payable by the Funds to the Advisers under the New 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 Advisers only after the New Advisory Agreements are
approved by the shareholders of the relevant Fund 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 Fund. 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 Advisers will continue to serve
as 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 Funds even though
approval of the New Advisory Agreements has not yet been secured
from the Funds' shareholders. Applicants also state that the Funds
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
Advisers for providing advisory services.
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Applicant's 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 an
assignment of the Existing Advisory Agreements and the Existing
Advisory Agreements will terminate by their own terms. Applicants
further state that if the Reorganization occurs after the Acquisition,
the then-existing advisory agreements will be transferred to the New
Adviser, which could be deemed to constitute an assignment of those
agreements.
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 Warburg arising from the
Acquisition.
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 terms 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 Funds. Applicants state that
it may not be possible for the Funds to obtain shareholder approval of
the New Advisory Agreements prior to the Acquisition Date. Applicants
submit that the Boards will meet to approve the New Advisory Agreements
prior to the Acquisition Date, in accordance with section 15(c) under
the Act.
6. Applicants submit that the Advisers will take all appropriate
actions to ensure that the scope and quality of advisory and other
services provided to the Funds during the Interim Period will be at
least equivalent to the scope and quality of services previously
provided. During the Interim Period, the Advisers will operated under
the New Advisory Agreements, which will be substantially the same as
the respective Existing Advisory Agreements, except for the effective
and the termination dates. Applicants state that the fees to be paid
during the Interim Period will not be greater than the fees currently
paid by the Funds. Applicants also assert that allowing the
implementation of the New Advisory Agreements will ensure that there
will be no disruption to the investment program and the delivery of
related services to the Funds.
Applicant's Conditions
Applicants agree as conditions to the issuance of the exemptive
order requested by the application that:
1. The New Advisory Agreements will contain substantially the same
terms and conditions as the Existing Advisory Agreements, except for
the dates of execution and termination.
2. The portion of the advisory fees earned by the Advisers during
the Interim Period will be maintained in an interest-bearing escrow
account (including interest earned on such amounts), and amounts in the
account will be paid: (a) To the applicable Adviser after the requisite
approval of each New Advisory Agreement by the relevant Fund's
shareholders is obtained; or (b) in the absence of such
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approval by the end of the Interim Period, to the Fund.
3. Each Fund will promptly schedule a meeting of shareholders to
vote on the approval of the New Advisory Agreements to be held during
the Interim Period.
4. Warburg will pay the costs of preparing and filing the
application, and Warburg and Credit Suisse will pay the costs relating
to the solicitation and approval of the Funds' shareholders of the New
Advisory Agreements.
5. The Advisers will take all appropriate actions to ensure that
the scope and quality of advisory and other services provided to the
Funds by the Advisers 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
Funds, as defined in section 2(a)(19) of the Act (``Disinterested
Directors''), to the scope and quality of services currently provided
under the Existing Advisory Agreements. In the event of any material
change in the personnel providing services pursuant to the New Advisory
Agreements, the Advisers will apprise and consult with the relevant
Fund's Board to ensure 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. 99-11691 Filed 5-7-99; 8:45 am]
BILLING CODE 8010-01-M
