[Federal Register Volume 63, Number 173 (Tuesday, September 8, 1998)]
[Notices]
[Pages 47540-47541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23972]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23420; 812-11286]
DG Investor Series, et al.; Notice of Application
August 31, 1998.
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: The requested order would amend a prior order
(the ``Prior Order'') \1\ permitting the implementation, without prior
shareholder approval, of new advisory (``New Management Agreement'')
and sub-advisory agreements (``New Sub-Advisory Agreements'')
(collectively, the ``New Agreements'').
\1\ DG Investor Series, et al., Investment Company Act Release
Nos. 23107 (April 9, 1998) (notice) and 23163 (April 30, 1998)
(order).
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APPLICANTS: Parksouth Corporation (``Adviser''), Womack Asset
Management (``Womack''), Bennett Lawrence Management, LLC
(``Bennett''), Lazard Asset Management, a division of Lazard Freres &
Co. LLC (``Lazard''), and DG Investor Series (the ``Trust'').
FILING DATE: The application was filed on August 31, 1998. Applicants
have agreed to file an amendment during the notice period, the
substance of which is described in this notice period, the substance of
which is described in this notice. 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 5:00 p.m. on September 21, 1998, 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.
Trust, Adviser, Womack, Bennett, and Lazard, c/o Timothy S. Johnson,
Esq., Federated Investors, 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237-7010.
FOR FURTHER INFORMATION CONTACT:
John K. Forst, Attorney Advisor, at (202) 942-0569, or Mary Kay Frech,
Branch Chief, 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 (tel. 202-942-8090).
Applicants' Representations
1. The Trust is a Massachusetts business trust registered under the
Act as an open-end management investment company. The Trust currently
offers nine series: DG Equity Fund, DG Opportunity Fund (``Opportunity
Fund''), DG Mid Cap Fund (``Mid Cap Fund''), DG International Equity
Fund (``International Equity Fund''), DG Limited Term Government Income
Fund, DG Government Income Fund,
[[Page 47541]]
DG Municipal Income Fund, DG Prime Money Market Fund, and DG Treasury
Money Market Fund (each a ``Portfolio''). The assets of the Trust are
managed by the Adviser pursuant to an investment management contract
between the Adviser and the Trust on behalf of each Portfolio (the
``Existing Management Agreement''). Womack provides investment advisory
services to the Opportunity Fund pursuant to a separate agreement with
the Adviser. Bennett provides investment advisory services to the Mid
Cap Fund pursuant to a separate agreement with the Adviser. Lazard
provides investment advisory services to the International Equity Fund
pursuant to a separate agreement with the Adviser (collectively the
existing Womack, Bennett and Lazard sub-advisory agreements are the
``Existing Sub-Advisory Agreements''). The Adviser, Womack, Bennett,
and Lazard are investment advisers registered under the Investment
Advisers Act of 1940.
2. On May 1, 1998, Deposit Guaranty Corporation (``DGC''),
corporate parent of the Advisor merged with First American Corporation
(``First American''), a bank holding company (the ``Transaction''). As
a result of the Transaction, the Adviser became a wholly-owned
subsidiary of First American.
3. The Transaction resulted in an assignment and thus the automatic
termination of the Existing Management Agreement and Existing Sub-
Advisory Agreements (together, the Existing Management Agreement and
Existing Sub-Advisory Agreements are the ``Existing Agreements''). On
April 30, 1998, the SEC issued the Prior Order permitting (i) the
implementation, during the Interim Period (as defined below), prior to
obtaining shareholder approval, of the applicable New Agreements, and
(ii) the Adviser and Subadvisers to receive from each Portfolio all
fees earned under the New Agreements during the Interim Period, as
applicable, if, and to the extent, the New Management Agreement and
applicable New Sub-Advisory Agreement are approved by the shareholders
of each Portfolio. The Prior Order covered the Interim Period beginning
on the date the Transaction was consummated and continued through the
date on which the applicable New Agreements are approved or disapproved
by the shareholders of each relevant Portfolio, but in no event later
than September 30, 1998. Applicants seek to amend the Prior Order to
extend the Interim Period until the date on which the applicable New
Agreements are approved or disapproved by the shareholders of each
relevant Portfolio, but in no event later than December 31, 1998.
4. Applicants state that the officers of the Trust and of the
Adviser have been diligently exploring different scenarios under which
the shareholders of the Trust can benefit from economies of scale and/
or reduced fees and expenses. Applicants have recently concluded that
these benefits could best be achieved by merging or otherwise combining
the Portfolios with other registered investment companies advised by
other subsidiaries of First American (the ``Fund Mergers''). Applicants
anticipate the Fund Mergers will be considered by the Trust's board of
directors at a special meeting on or about the week of September 7,
1998.
5. Applicants seek to avoid the potential shareholder confusion
caused by soliciting approval of the New Agreements and then shortly
thereafter soliciting approval for the Fund Mergers. Applicants propose
to delay approval of the New Agreements and seek approval of the New
Agreements and Fund Mergers simultaneously during 1998. Applicants
state that the Adviser and Sub-Advisers will bear the costs of
preparing and filing this application and the costs relating to the
solicitation of shareholder approval of the New Agreements and the Fund
Mergers.
6. Applicants state that they will comply with all of the terms and
conditions of the Prior Order.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in pertinent part, that it is
unlawful for any person to serve as an investment adviser to 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 the investment company. Section 15(a) further
requires the written contract to 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 a contract
by the assignor, or of a controlling block of the assignor's
outstanding voting securities by a security holder of the assignor.
Applicants state that the Transaction resulted in an assignment of the
Existing Management Agreement and the Existing Sub-Advisory Agreements
and that the Existing Agreements terminated according to the Act and
their terms.
2. 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.
3. Applicants believe that allowing the Adviser and Subadvisers to
continue to provide investment advisory services to the Portfolios
during the Interim Period as extended by the requested order, thereby
avoiding any interruption in services to the Portfolios, is in the best
interests of the Portfolios and their shareholders. Applicants state
that officers of First American and of the Trust have recently
formulated definitive plans for a combination of the Portfolios with
another registered investment company advised by a subsidiary of First
American. Applicants note that if First American had decided to allow
the proxy solicitation to occur with respect to the New Agreements and
subsequently determined to solicit shareholders regarding a Fund
Merger, the inconvenience and possible confusion and disruption to
shareholders of the Portfolios could have been quite significant.
Applicants state that they will comply with all terms and conditions of
the Prior Order except that the shareholders meeting under condition 3
of the Prior Order must take place prior to December 31, 1998.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-23972 Filed 9-4-98; 8:45 am]
BILLING CODE 8010-01-M
