[Federal Register Volume 60, Number 122 (Monday, June 26, 1995)]
[Notices]
[Pages 33011-33013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15500]



=======================================================================
-----------------------------------------------------------------------
[[Page 33012]]

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 21141; File No. 812-7271]


G.T. Global Growth Series, et al.; Notice of Application

June 16, 1995,
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the investment 
company act of 1940 (the ``Act'').

-----------------------------------------------------------------------

APPLICANTS: G.T. Global Growth Series, G.T. Investment Funds, Inc., 
G.T. Investment Portfolios, Inc. (collectively, the ``Investment 
Companies''), and G.T. Capital Management, Inc. (the ``Adviser'').

RELEVANT ACT SECTIONS: Applicants request an exemption under section 
6(c) of the Act from section 15(a) of the Act.

SUMMARY OF APPLICATION: Applicants request an order that would permit 
the Adviser to have served as investment adviser to the Investment 
Companies for approximately one month under interim advisory 
agreements, without a shareholder vote, following a change in its 
ownership and to receive from the Investment Companies fees earned 
under interim advisory agreements.

FILING DATE: The application was filed on March 15, 1989, and amended 
on February 17, 1995 and May 2, 1995. Applicants have agreed to file an 
additional amendment, the substance of which is incorporated herein, 
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 July 11, 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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants: 50 California Street, San Francisco, CA 94111.

FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Staff Attorney, at (202) 942-0574 or Robert A. 
Robertson, Branch Chief, at (202) 942-0564 (Division of Investment 
Management, Office of Investment Company Regulations).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application is available for a fee from the 
SEC's Public Reference Branch.

Applicants' Representations

    1. The Investment Companies are registered open-end management 
investment companies. The Adviser is registered as an investment 
adviser under the Investment Advisers Act of 1940 and provides 
investment advisory services to the Investment Companies. The Adviser 
is an indirect subsidiary of G.T. Management PLC of London, England 
(``GTM'').
    2. On January 31, 1989, GTM and the Bank of Liechtenstein 
Aktiengesellschaft (the ``Bank'') announces terms for the acquisition 
of GTM by the Bank through an offer (the ``Offer'') for all the shares 
of GTM to be made on behalf of the Bank and its subsidiaries. (The Bank 
and its subsidiaries collectively are referred to as ``BIL.'') On March 
23, 1989, BIL acquired a majority ownership interest in GTM, and thus 
acquired ``control'' over GTM and its various subsidiaries. The 
acquisition of such control resulted in the assignment of the 
investment advisory agreements of the Investment Companies, thus 
terminating such agreements in accord with their terms.
    3. GTM and BIL had concluded, in light of the disruptions that 
could occur if an advisory firm announced the existence of acquisition 
negotiations, that the existence of negotiations and the terms be kept 
strictly confidential. Accordingly, access to the knowledge that 
negotiations were underway was restricted by GTM and BIL. Moreover, 
negotiations between GTM and BIL were subject to the secrecy rules 
under the United Kingdom law and the City Code on Takeovers and Mergers 
(the ``U.K. Code''). Those rules required GTM and its subsidiaries, 
including the Adviser, to limit knowledge of the existence and 
substance of these negotiations to the maximum extent possible. Thus, 
during the period of negotiation, the Adviser's personnel were limited 
in their knowledge of the status and contents of the negotiations. 
Further, it was not certain that an agreement would be reached and 
approved by the GTM board until such agreement was reached and approval 
was obtained.
    4. Once the Offer was made public, the board of directors took all 
reasonable steps to evaluate the probable impact of the purchase on the 
provision of investment advisory services to the Investment Companies 
and to secure the continued provision of such services in the event the 
purchase was consummated and an assignment of former advisory 
agreements (the ``Former Advisory Agreements'') occurred. The timing 
for the Offer and the purchase was dictated by the provisions of the 
U.K. Code. Those considerations did not allow applicants the ability to 
utilize a time schedule that assured the solicitation of shareholder 
approval of the new advisory agreements prior to the consummation of 
the purchase. These factors necessitated the use of interim investment 
advisory agreements (the ``Interim Advisory Agreements'') between the 
Investment Companies and the Adviser as a fair and reasonable solution 
to this unforeseen situation. Applicants request an exemption from 
section 15(a) of the Act that would permit the Adviser to have served 
as investment adviser to each of the Investment Companies during the 
period in which the Interim Advisory Agreements were in effect (from 
March 23, 1989 to April 19, 1989, the ``Interim Period'')\1\ and to 
receive from each Investment Company fees for providing advisory 
services under the Interim Advisory Agreements.

    \1\The filing of the amended application has been delayed by a 
number of factors, including a change in General Counsel and a 
change in outside counsel to G.T. Capital during the period from 
March 15, 1989 to February 17, 1995.
    5. On February 3, 1989, the board of directors of each Investment 
Company, including a majority of the members who were not ``interested 
persons'' of the Investment Company as that term is defined in section 
2(a)(19) of the Act, approved the relevant Interim Advisory Agreements 
in compliance with the requirements of section 15(c) of the Act. The 
board of directors requested and evaluated the anticipated effects of 
the purchase on the Adviser's ability to provide investment advisory 
services to the Investment Companies. The Adviser and BIL assured the 
board of directors that there would be no diminution in the scope and 
quality of advisory and other services provided by the Adviser under 
the Interim Advisory Agreements, and that the services would be 
provided in the same manner by essentially the same personnel as they 
were before March 23, 1989. Applicants believe that there was no 
diminution in the scope and quality of services provided by the Adviser 
to the Investment Companies during the Interim Period.
    6. The board of directors also concluded that the payment of 
advisory fees earned during the Interim Period [[Page 33013]] would be 
fair considering that, among other things, (a) the Offer arose out of 
business considerations unrelated to the relationships between the 
Investment Companies and the Adviser, (b) because of the relatively 
short time frame involved, there was not reasonably sufficient time to 
seek shareholder approval of the Interim Advisory Agreements, and (c) 
the nonpayment of such fees would be unduly harsh result to the Adviser 
in view of the services provided by the Adviser under the Interim 
Advisory Agreements. Each Interim Advisory Agreement that was in effect 
during the Interim Period contained the same terms and conditions as 
the applicable Former Advisory Agreement. In addition, the amount 
payable to the Adviser under each Interim Advisory Agreement was 
unchanged from the fees paid under each Former Advisory Agreement. Fees 
earned during the Interim Period were placed in an escrow account 
pending ratification of the Interim Advisory Agreements by the 
Investment Companies' shareholders and issuance by the SEC of an order 
granting the relief requested herein. If the fees are not paid to the 
Adviser, the fees will revert to the Investment Companies.
    7. On February 24, 1989, the board of directors approved new 
advisory agreements. Applicants held shareholders meetings of each 
Investment Company on April 19, 1989, at which the shareholders 
approved the Interim Advisory Agreements as well as new advisory 
agreements. The Adviser has paid or will pay, as applicable, the costs 
of preparing and filing this application and the allocable costs of the 
meeting of each Investment Company's shareholders necessitated by the 
assignment of the Former Advisory Agreement, including the cost of 
proxy solicitations.

Applicants' Legal Conclusions

    1. Section 15(a) prohibits an investment adviser from providing 
investment advisory services to an investment company except pursuant 
to a written contract approved by a majority of the voting securities 
of the investment company. The section further requires that such 
written contract provide for its automatic termination in the event of 
an assignment.
    2. Under section 2(a)(4) of the Act, an assignment includes any 
direct or indirect transfer of a contract by the assignor or of a 
controlling block of the assignor's voting securities. Under Section 
2(a)(9), a beneficial owner of more than 25 percent of the voting 
securities of a company is presumed to control such company. Because 
BIL acquired more than 25 percent of GTM, the Investment Companies' 
investment advisory agreements were assigned and, consequently, 
terminated pursuant to their terms.
    3. Rule 15a-4 provides that, among other things, if an investment 
adviser's investment advisory contract 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 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 many of GTM's shareholders, including all its board 
of directors who owned GTM stock, received a benefit in connection with 
the assignment of the contracts, applicants may not rely on rule 15a-4.
    4. Applicants believe that the exemptive relief requested is 
necessary and 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. Because the change of control of the 
Adviser caused the termination of the Former Advisory Agreements, the 
board of directors were required to consider appropriate actions in the 
best interests of the Investment Companies and their respective 
shareholders. Appplicants believe that approval of the Interim Advisory 
Agreements by the board of directors was in accord with the general 
views of the SEC that an investment adviser has a fiduciary duty to 
seek to avoid disruption to the operations of an investment company 
client during any ``interim period'' and that advisory services should 
continue to be provided. The Adviser and the board of directors 
concluded that denying the Adviser its fees during the Interim Period 
would be a harsh result and would not afford shareholders of the 
Investment Companies any extra protection or long-term benefit. 
Applicants represent that their respective Interim Advisory Agreements 
had the same terms, conditions and fees as the respective Former 
Advisory Agreements.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-15500 Filed 6-23-95; 8:45 am]
BILLING CODE 8010-01-M