[Federal Register Volume 61, Number 46 (Thursday, March 7, 1996)]
[Notices]
[Pages 9211-9213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5403]



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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. IC-21794; 812-9986]


Pacifica Funds Trust, et al.; Notice of Application

March 1, 1996.
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: Pacifica Funds Trust and Pacifica Variable Trust (the 
``Trusts''), on behalf of their separate investment portfolios 
(``Funds''), and First Interstate Capital Management, Inc. 
(``Adviser'').

RELEVANT ACT SECTIONS: Order requested under section 6(c) for an 
exemption from section 15(a).

SUMMARY OF APPLICATION: First Interstate Bancorp (``First 
Interstate''), the Adviser's indirect holding company, will be merged 
with Wells Fargo & Company (``Wells Fargo''). The merger will result in 
the assignment, and thus the termination, of the Funds' existing 
investment advisory agreements (``Existing Advisory Agreements'') with 
the Adviser. Applicants request an order to permit the implementation, 
without shareholder approval, of interim advisory agreements (the ``New 
Advisory Agreements'') during a period not to exceed 120 days beginning 
with the earlier of the consummation date of the merger (the 
``Effective Date'') or May 1, 1996, and ending with shareholder 
approval or disapproval of the New Advisory Agreements (the ``Interim 
Period''). The order also will permit the Adviser to receive fees 
earned during the Interim Period following approval by the Funds' 
shareholders.

FILING DATE: The application was filed on February 9, 1996, and amended 
on February 29, 1996.

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 
applicant 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 26, 1996, 
and should be accompanied by proof of service on applicant, 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, NW., Washington, DC 20549. 
Applicants: The Trusts, 237 Park Avenue, New York, New York 10017; the 
Adviser, 7501 McCormick Parkway, Scottsdale, Arizona 85258.

FOR FURTHER INFORMATION CONTACT: Mercer E. Bullard, Staff Attorney, 
(202) 942-0565, or Alison E. Baur, Branch Chief, (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 at the 
SEC's Public Reference Branch.

[[Page 9212]]

Applicants' Representations

    1. Pacifica Funds Trust is a Massachusetts business trust that is 
registered as an open-end management investment company under the Act. 
It is organized as a series investment company and currently offers 
twenty-three Funds to the public. Pacifica Variable Trust is a Delaware 
business trust that is registered as an open-end management investment 
company under the Act. It is organized as a series company and 
currently offers five Funds to purchasers of variable annuity contracts 
investing in a separate account established and maintained by Anchor 
National Life Insurance Company, an indirect wholly-owned subsidiary of 
SunAmerica, Inc. The Adviser is a wholly-owned subsidiary of First 
Interstate Bank of California, which is a wholly-owned subsidiary of 
First Interstate, a multi-bank holding company. The Adviser currently 
serves as investment adviser to all of the Funds.
    2. On January 24, 1996, First Interstate and Wells Fargo entered 
into an Agreement, pursuant to which First Interstate will be merged 
with and into Wells Fargo (the ``Merger''). Wells Fargo will be the 
surviving corporation. Applicants have set March 28, 1996, as the date 
the respective shareholders of First Interstate and Wells Fargo will 
vote on whether to approve the Merger. Applicants anticipate that the 
Merger will occur between April 1, 1996 and May 1, 1996.
    3. At a regularly scheduled meeting held on February 22, 1996, the 
respective Boards of Trustees of the Trusts (``Boards'') met to discuss 
the Merger. During this meeting, the Boards, including a majority of 
the Board members who are not ``interested persons'' (as that term is 
defined in the Act) of the respective Trusts (the ``Independent 
Trustees''), with the advice and assistance of counsel to the 
Independent Trustees and to the Trusts, made a full evaluation of the 
New Advisory Agreements. In accordance with section 15(c) of the act, 
the Boards voted to approve the New Advisory Agreements. In approving 
the New Advisory Agreements, the Boards considered that each such 
Agreement would have the same terms and conditions as the respective 
Existing Advisory Agreement except for the effective and termination 
dates, and that the Adviser would provide investment advisory and other 
services to the Funds during the Interim Period of a scope and quality 
at least equivalent to the scope and quality of services currently 
provided to the Funds. The Board of each Trust also voted to recommend 
that the shareholders of each Fund approve the related New Advisory 
Agreement.
    4. In approving the New Advisory Agreements, the Boards concluded 
that payment of the advisory fee 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 will 
be unchanged from the fees paid under the Existing Advisory Agreements, 
the fees will 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 the Adviser in view of the substantial 
services to be provided.

Applicants' Legal Analysis

    1. Section 15(a) of the Act prohibits any person from acting as 
investment adviser to a registered investment company except under a 
written contract that, among other things, provides for its automatic 
termination in the event of an assignment and has been approved by a 
majority of the company's outstanding voting securities. 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. Section 2(a)(9) of the Act 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 a 
company's voting securities is presumed to constitute control.
    2. Upon consummation of the Merger, many management changes are 
expected to occur. The Chairman and Chief Executive Officer of First 
Interstate will not succeed to any position in Wells Fargo, the 
surviving corporation. In addition, the Adviser will become a wholly-
owned subsidiary of Wells Fargo. Applicants believe, therefore, that it 
is reasonable to conclude that the Merger will result in an 
``assignment'' of the Existing Advisory Agreements and that the 
contracts will terminate by their terms on the Effective Date.
    3. Rule 15a-4 provides, among other things, that if an advisory 
contract is terminated by assignment, the investment adviser may 
confine 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 the shareholders of First Interstate will receive a benefit in 
connection with the assignment of the Existing Advisory Agreements, 
applicants may not rely on the rule.
    4. 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.
    5. Applicants maintain that because the Funds did not have 
sufficient advance notice of the Merger, given the uncertainty 
surrounding the events leading up to the Merger and the setting of the 
Effective Date, it will not be possible for the Funds to obtain 
shareholder approval of the New Advisory Agreements in accordance with 
section 15(a) of the 1940 Act prior to the closing of the Merger. In 
this regard, Applicants assert that the terms and timing of the Merger 
were determined by First Interstate and Wells Fargo in response to a 
number of factors relating principally to their commercial banking and 
other similar business concerns.
    6. Applicants also assert that it is likely that one or more Funds 
will be merged into a corresponding fund of the Wells Fargo family of 
funds during or by the end of the Interim Period. Applicants maintain 
that the 120-day period requested by the Application would facilitate 
the orderly and reasonable consideration of the New Advisory Agreements 
by the shareholders, as well as the possible fund reorganization, by 
allowing one proxy solicitation to be conducted, in which shareholders 
will be presented with one overall plan of reorganization of the funds 
and the New Advisory Agreements for approval. Applicants contend that 
proceeding in this manner would benefit shareholders of the Funds 
because it would reduce costs and minimize any shareholder confusion 
that might arise in the circumstances.

Applicants' Conditions

    Applicants agree, as conditions to the requested exemptive relief, 
that:
    1. Each New Advisory Agreements will have the same terms and 
conditions as the respective Existing Advisory Agreements, except for 
the effective and termination dates.
    2. Fees earned by the Adviser and paid by a Fund during the Interim 
Period in accordance with a New

[[Page 9213]]

Advisory Agreements will be maintained in an interest-bearing escrow 
account, and amounts in such account (including interest earned on such 
paid fees) will be paid to the Adviser only upon the approval of the 
related Fund shareholders or, in the absence of such approval, to the 
related Fund.
    3. Each Trust will hold meetings of shareholders to vote on the 
approval of the New Advisory Agreements for the Funds on or before the 
120th day following the earlier of the termination of the Existing 
Advisory Agreements on the Effective Date or May 1, 1996.
    4. First Interstate and/or one or more of its subsidiaries will pay 
the costs of preparing and filing this Application. First Interstate 
and/or one or more of its subsidiaries will pay the costs relating to 
the solicitation of the Fund shareholder approvals, to the extent such 
costs relate to approval of the New Advisory Agreements necessitated by 
the Merger.
    5. The Adviser will take all appropriate actions to ensure that the 
scope and quality of advisory and other services provided to the Funds 
under the New Advisory Agreements will be at least equivalent, in the 
judgment of the respective Boards, including a majority of the 
Independent Trustees, to the scope and quality of services provided 
previously. In the event of any material change in personnel providing 
services pursuant to the New Advisory Agreements, the Adviser will 
apprise and consult the Boards of the affected Funds to assure that 
such Boards, including a majority of the Independent Trustees, are 
satisfied that the services provided by the Adviser will not be 
diminished in scope or quality.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Maragret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5403 Filed 3-6-96; 8:45 am]
BILLING CODE 8010-01-M