[Federal Register Volume 60, Number 143 (Wednesday, July 26, 1995)]
[Notices]
[Pages 38382-38384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18287]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 21219; 812-9638]
Pioneer Winthrop Real Estate Investment Fund, et al.; Notice of
Application
July 19, 1995.
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: Pioneer Winthrop Real Estate Investment Fund (``Pioneer
Winthrop Fund''); Pioneer Variable Contracts Trust (``Variable Trust'')
on behalf of its Real Estate Growth Portfolio series (together with
Pioneer Winthrop Fund, the ``Funds''); and Pioneering Management
Corporation (``PMC'').
relevant act SectionS: Order requested under section 6(c) for an
exemption from section 15(a).
suMMary of aPPlication: Apollo Real Estate Advisors, L.P. (``Apollo'')
has agreed to acquire W.L. Realty, L.P. (``Realty LP''), including the
investment advisory business of its indirect subsidiary Winthrop
Advisors Limited Partnership (``WALP''), from The Nomura Securities Co.
(``Nomura'') and certain principals of Realty L.P. The reorganization
will result in the assignment, and thus the termination, of existing
investment advisory contracts of the applicant investment companies.
Applicants seek an order to permit the implementation, without
shareholder approval, of interim investment advisory contracts during a
period of up to 120 days following July 3, 1995. The order also will
permit the applicant investment adviser to receive from the applicant
investment companies fees earned under the interim investment advisory
contracts following approval by the investment companies' shareholders.
filing dates: The application was filed on June 20, 1995 and amended on
July 19, 1995.
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 August 14, 1995,
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 such notification by writing to the
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth St. NW., Washington, DC 20549.
Applicants, 60 State St., Boston, MA 02109.
FOR FURTHER INFORMATION CONTACT:Marianne H. Khawly, Staff Attorney, at
(202) 942-0562, or C. David Messman, 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 may be obtained for a fee from
the SEC's Public Reference Branch.
Applicants' Representations
1. The Funds, each a Delaware business trust, are registered open-
end management investment companies. Pioneer Winthrop Fund continuously
offers its shares for sale to the general investing public. Real Estate
Growth Portfolio continually offers its shares for sale primarily to
insurance company segregated accounts that fund variable annuity and
life insurance contracts.
2. The Funds each have entered into an investment advisory
agreement with Pioneer Winthrop Associates (``PWA''), a general
partnership and registered investment adviser under the Investment
Advisers Act of 1940 (the ``Advisers Act''), under which PWA provides
advisory and management services to the Funds (the ``Advisory
Agreements''). Also, the Funds each have entered into subadvisory
agreements with PMC and WALP, (the ``Subadvisory Agreements,'' and
together with the Advisory Agreements, the ``Prior Agreements''), each
a registered investment adviser under the Advisers Act.
3. PMC currently serves as investment adviser to each of the mutual
funds, other than the Funds, in the Pioneer complex of mutual funds.
PMC is a wholly-owned subsidiary of The Pioneer Group, Inc. (``PGI'').
WALP is a wholly-owned subsidiary of Winthrop Financial Associates
(``WFA''). PGI and WFA each own 50% of the partnership interests of
PWA.
4. WFA's indirect parent company, Realty LP, is a majority owned
subsidiary of Nomura, an international brokerage and financial services
firm. The remaining minority interests in Realty LP are owned by Arthur
J. Halleran and Stephen G. Kasnet, (collectively, the ``Management
Investors''), principals of WFA. The Management Investors serve as
trustees
[[Page 38383]]
and officers of Pioneer Winthrop Fund and officers of Variable Trust.
5. On May 11, 1995, Apollo and Nomura announced that they had
entered into negotiations pursuant to which Apollo intended to acquire
from Nomura its controlling interest, and from the Management Investors
their remaining minority interest, in Realty LP (the
``Reorganization''). On July 17, 1995, the Reorganization was
consummated. PMC agreed to provide the investment advisory services now
provided to the Funds by PWA and WALP.
6. PMC has entered into an employment agreement with the key
employee of WALP, pursuant to which such employee has agreed to provide
to PMC real estate securities advice equivalent to that which he
currently provides to the Funds through WALP. In addition, PMC is in
the process of entering into a consulting agreement with Winthrop
Commercial Partnership (``WCP''), a subsidiary of WFA, under which WCP
will continue to provide information regarding real estate properties
and markets that it currently provides to the Funds through WALP. WCP
will provide this information to PMC under the consulting agreement at
cost, which will be borne by PMC.
7. Immediately upon being notified of the agreements in principal,
the respective Boards of Trustees of the Funds (the ``Boards'') held
special meetings on June 6, 1995 to discuss the Reorganization. During
those meetings, the Boards, including a majority of the Board members
who are not ``interested persons,'' as that term is defined in the Act
(the ``Independent Trustees''), of the respective Funds, with the
advice and assistance of counsel to the Independent Trustees, made a
full evaluation of the interim investment advisory agreements between
the Funds and PMC (the ``Interim Agreements''). In accordance with
section 15(c) of the Act, the Boards voted to approve the Interim
Agreements. The Boards concluded that payment of the advisory and
subadvisory fees during the Interim Period would be appropriate and
fair because there will be no diminution in the scope and quality of
services provided to the Funds, the fees to be paid are unchanged from
the fees paid under the Prior Agreements,the fees would be maintained
in an interest-bearing escrow account until payment is approved or
disapproved by shareholders, and the nonpayment of fees would be
inequitable to PMC in view of the substantial services to be provided
by PMC to the Funds, and the expenses incurred by PMC. The Boards of
each Fund also voted to recommend that shareholders of each Fund
approve the Interim Agreements, as well as the new advisory agreements
with PMC.
8. Applicants seek an exemption from section 15(a) of the Act to
permit the implementation, without shareholder approval, of the Interim
Agreements. On June 20, 1995, the date of the filing of the original
application, applicant anticipated that the Reorganization would be
consummated on July 3, 1995. Accordingly, the exemption would cover the
period commencing on July 3, 1995 and continuing through the date the
Interim Agreements are approved or disapproved by shareholders of the
respective Funds, which period shall be no longer than 120 days (the
``Interim Period'').
Applicants' Legal Conclusions
1. 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 such investment company. Section 15(a) further requires
that such written contract provide for its automatic termination in the
event of an assignment. Section 2(a)(4) 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.
2. Section 2(a)(9) defines ``control'' as the power to exercise a
controlling influence over the management or policies of a company.
Beneficial ownership of more than 25% of the voting securities of a
company is presumed under section 2(a)(9) to constitute control.
3. Upon consummation of the Reorganization, Apollo will acquire all
of Realty LP's outstanding voting securities and thus an indirect,
controlling interest in each of WFA and WALP, Including WFA's 50%
general partnership interest in PWA. Thus, the Reorganization will
result in an ``assignment,'' within the meaning of section 2(a)(4), of
the Advisory Agreements and WALP Subadvisory Agreements. Therefore,
each such agreement will terminate by its terms.\1\
\1\ The PMC Subadvisory Agreements terminate by their terms upon
the termination of the Advisory Agreements.
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4. Rule 15a-4 provides, among other things, that if an advisory
contract is terminated by assignment, the investment 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 the investment adviser or a controlling
person of the investment adviser does not directly or indirectly
receive money or other benefit in connection with the assignment.
Because Nomura and the Management Investors will receive a benefit in
connection with the assignment of the contracts, applicants may not
rely on rule 15a-4.
5. Applicants assert that because the Funds did not have sufficient
advance notice of the Reorganization, it was not possible for the Funds
to obtain shareholder approval of the new advisory agreements in
accordance with section 15(a) prior to the closing of the
Reorganization. Applicants believe that the requested relief will
enable the Funds to receive the same scope and quality of advisory
services after the Reorganization as they received prior to the
Reorganization, and that the engagement of PMC as the Funds' sole
investment adviser is in the best interests of the Funds and their
shareholders.
6. Applicants believe that the requested relief will allow the
Funds to continue to operate on an orderly basis until the shareholders
have the opportunity to consider new investment advisory agreements.
The 120 day Interim Period will facilitate the orderly and reasonable
consideration of the new agreements.
7. Section 6(c) of the Act 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.
Applicants' Conditions
Applicants agree as conditions to the requested exemptive relief
that:
1. The Interim Agreements will have the same terms and conditions
as the Advisory Agreements, except in each case for the names and
identities of the parties, the dates of execution and termination, and
the inclusion of escrow arrangements.
2. Fees earned by PMC during the Interim Period in accordance with
the Interim Agreements will be maintained in an interest-bearing escrow
account, and amounts in such account (including interests earned on
such paid fees) will be paid to PMC only upon approval of the Funds'
respective shareholders or, in the absence of such approval, to the
respective Funds.
[[Page 38384]]
3. The Funds will hold meetings of shareholders to vote on approval
of the Interim Agreements and new investment advisory agreements, on or
before the 120th day following July 3, 1995.
4. PMC will bear the cost of preparing and filing this application
and the costs relating to the solicitation of the approvals of the
Funds' shareholders of the Interim Agreements necessitated by the
Reorganization.
5. PMC will take all appropriate actions to ensure that the scope
and quality of advisory and other services provided to the Funds under
the Interim Agreements will be at least equivalent, in the judgment of
the respective Boards, including a majority of the Independent
Directors, to the scope and quality of services previously provided. In
the event of any material change in personnel providing services under
the Interim Agreements, PMC will apprise and consult the Boards of the
affected Funds to assure that such Boards, including a majority of the
Independent Directors, are satisfied that the services provided by PMC
will not be diminished in scope or quality.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-18287 Filed 7-25-95; 8:45 am]
BILLING CODE 8010-01-M
