[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