[Federal Register Volume 61, Number 47 (Friday, March 8, 1996)]
[Notices]
[Pages 9511-9513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5550]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 21801; International Series Release
No. 941; 812-10022]
Nations Fund Portfolios, Inc., et al.; Notice of Application
March 4, 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: Nations Fund Portfolios, Inc. (``Nations Fund
Portfolios''), Nations Fund, Inc. (``Nations Fund''), NationsBanc
Advisors, Inc. (``NationsBanc Advisors''); and Nations Gartmore
Investment Management (``Nations Gartmore'').
Relevant Act Sections: Order requested under section 6(c) of the Act of
an exemption from section 15(a) of the Act.
Summary of Application: National Westminster Bank plc (``NatWest'') has
agreed to acquire control of Gartmore plc (``Gartmore''), the parent of
Nations Gartmore, the sub-adviser to applicant investment companies
(the ``Funds''). The change of control of Gartmore will result in the
assignment, and thus the termination, of the existing sub-advisory
contract between the Funds and Nations Gartmore. The order would permit
the implementation, without shareholder approval, of new sub-advisory
contracts for a period of up to 120 days following the change in
control of Gartmore (but in no event later than September 30, 1996).
The order also would permit Nations Gartmore to receive from the Funds
fees earned under the new sub-advisory contracts following approval by
the Funds' shareholders.
Filing Date: The application was filed on March 4, 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
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 March 22, 1996
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 of a hearing by
writing to the SEC's Secretary.
Addresses: Secretary, Securities and Exchange Commission, 450 5th
Street, N.W., Washington, D.C. 20549. Applicants, c/o Wilmer, Cutler &
Pickering, 2445 M Street, N.W., Washington, D.C. 20037, Attention:
Jeremy N. Rubenstein and c/o Morrison & Foerster, 2000 Pennsylvania
Avenue, N.W., Washington, D.C. 20006, Attention: Marco E. Adelfio.
For Further Information Contact: Sarah A. Buescher, Staff Attorney, at
(202) 942-0573, or Robert A. Robertson, 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 is available for a fee at the
SEC's Public Reference Branch.
Applicant's Representations
1. Nations Fund Portfolios and Nations Fund are open-end,
management investment companies registered under the Act. Nations
Emerging Markets Fund, Nations Pacific Growth Fund and Nations Global
Government Income Fund are series of Nations Fund Portfolio; and
Nations International Equity Fund is a series of Nations Fund (the
series are referred to collectively as the ``Funds''). Each Fund has
retained NationsBanc Advisors to act as its investment adviser.
NationsBanc Advisors, in turn, has engaged Nations Gartmore to provide
the day-to-day management of each Fund's portfolio pursuant to a sub-
advisory agreement among NationsBanc Advisors, Nations Gartmore, and
the Funds (the ``Existing Sub-Advisory Agreements'').
2. Nations Gartmore is structured as an equally-owned general
partnership between NB Partners, a subsidiary of NationsBank, N.A.
(``NationsBank'') and Gartmore U.S. Limited (``Gartmore U.S. Ltd.''), a
wholly-owned subsidiary of Gartmore, a U.K. company.
3. NatWest has agreed to acquire control of Gartmore from Compagnie
de Suez and affiliated entities (collectively, ``Compagnie de Suez'')
through a two-part transaction involving (i) the direct purchase from
Compagnie de Suez of its indirect subsidiary Indosuez UK Asset
Management Limited (``IUKAM''), which holds 75% of Gartmore's
outstanding voting shares (the ``Direct Purchase''); and (ii) a tender
offer for the remaining portion of Gartmore's shares held by public
shareholders (the ``Tender Offer'').
4. The first part of the acquisition was agreed to in an Agreement
for Purchase of Shares dated as of February 26, 1996, between Compagnie
de Suex and NatWest (``Direct Purchase Agreement''). Settlement of the
transactions provided for under the Direct Purchase Agreement is
subject to the satisfaction or waiver of several conditions. Applicants
expect that a change in control of Nations Gartmore may occur as early
as the end of March. The latest date that all conditions to the Direct
Purchase Agreement are required to be satisfied or waived is April 30,
1996.
5. The consummation of the Direct Purchase, which must occur before
the consummation of the Tender Offer, will result in a change of
control of Gartmore from Compagnie de Suez to NatWest. The change of
control of Gartmore will constitute an assignment of the existing sub-
advisory agreements within the meaning of section 2(a)(4) of the Act.
6. Applicants seek an exemption to permit the implementation,
without formal shareholder approval, of new sub-advisory agreements
among the Funds, NationsBanc Advisors, and Nations Gartmore. The
requested exemption would cover an interim period of not more than 120
days (the ``Interim Period'') beginning on the day the Direct Purchase
is consummated and continuing through the date new sub-advisory
agreements are approved or disapproved by the Funds' shareholders (but
in no event later than September 30, 1996). During the Interim Period,
that portion of NationsBanc Advisors' advisory fees paid by NationsBanc
Advisors to Nations Gartmore for sub-advisory services would be paid
into escrow.
7. The sub-advisory agreements among Nations Gartmore, NationsBanc
Advisors, and each Fund to be entered into upon consummation of the
Direct Purchase (collectively, the ``New Sub-Advisory Agreements'') are
identical to the Existing Sub-Advisory Agreements, except for their
effective date and escrow provisions. For each Fund, the fee levels for
Sub-advisory services will remain the same as in the Existing Sub-
Advisory Agreement. Each Fund Proposes to implement its New sub-
Advisory Agreement during the Interim
[[Page 9512]]
Period, subject to the conditions contained in the application.
8. In accordance with section 15(c) of the Act, \1\ the boards of
directors will meet on a date prior to the consummation of the Direct
Purchase, and they will receive all information that in the directors'
view is reasonably necessary to evaluate the New Sub-Advisory
Agreements and to determine whether the agreements would be in the best
interests of the respective Funds and their shareholders. Although the
specific date of the board meetings has not been finalized, applicants
represent that they are taking all actions necessary to hold the
meetings in March 1996.
\1\ Section 15(c) provides, in relevant part, that it shall be
unlawful for any registered investment company to enter into an
investment advisory contract unless the terms of such contract have
been approved by the vote of a majority of directors, who are not
parties to such contract or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval.
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9. Nations Fund Portfolios and Nations Fund intend to mail the
necessary proxy materials to Fund shareholders as soon as practicable,
and, in any event, in sufficient time to allow for a shareholder vote
to approve the New Sub-Advisory Agreements within 120 days from the
assignment of the Existing Sub-Advisory Agreements (but in no event
later than September 30, 1996).
10. Applicants propose to enter into an escrow arrangement with an
unaffiliated financial institution as escrow agent. The arrangement
would provide that: (a) that portion of NationsBanc Advisors' fees
payable by NationsBanc Advisors to Nations Gartmore during the Interim
Period under the New Sub-Advisory Agreements would be paid into an
interest-bearing escrow account maintained by the escrow agent; (b) the
amounts in the escrow account (including interest earned on such paid
fees) would be paid to Nations Gartmore only upon approval of Fund
shareholders of the New Sub-Advisory Agreements or, in the absence of
such approval, to the respective Fund; and (c) the escrow agent would
release the moneys only upon receipt of a certificate from an officer
of Nations Fund Portfolios and/or Nations Fund stating that the moneys
are to be delivered to Nations Gartmore and that the New Sub-Advisory
Agreement has received the requisite Fund shareholder vote or, if the
moneys are to be delivered to the Funds, that the Interim Period has
ended, and the New Sub-Advisory Agreement has not received the
requisite Fund shareholder vote. Before any certificate is sent, the
Boards of Directors of Nations Fund Portfolios and/or Nations Fund
would be notified.
Applicants' Legal Analysis
1. Applicants request an order pursuant to section 6(c), exempting
them from section 15(a) of the Act to the extent necessary (i) to
permit the implementation during the Interim Period, without
shareholder approval, of the New Sub-Advisory Agreements and (ii) to
permit Nations Gartmore to receive from NationsBanc Advisors all fees
earned under each New Sub-Advisory Agreement (which would be the same
as all fees that would have been earned under each Existing Sub-
Advisory Agreement) implemented during the Interim Period if and to the
extent the New Sub-Advisory Agreement is approved by the shareholders
of a Fund. The proposed timing of the consummation of the Direct
Purchase and Tender Offer may not present an opportunity to secure
prior approval of the New Sub-Advisory Agreements by Fund shareholders.
2. Section 15(a) of the Act 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 the investment company. Section 15(a) further
requires that the written contract provide for automatic termination in
the event of this 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.
3. Upon consummation of the Direct Purchase, Compagnie de Suez will
transfer ownership of IUKAM, which holds 75% of the outstanding voting
shares of Gartmore, to NatWest; and if sufficient acceptances are
received under the Tender Offer, NatWest intends to acquire all of
Gartmore's outstanding shares. The Direct Purchase will result in an
``assignment'' within the meaning of section 2(a)(4) of the Existing
Sub-Advisory Agreements, terminating each Existing Agreement according
to its terms.
4. Rule 15a-4 provides, in relevant part, that if an investment
adviser's investment advisory contract with an investment company 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
neither the investment adviser nor a controlling person thereof
directly or indirectly receives money or other benefit in connection
with the assignment. Applicants cannot rely on rule 15a-4 because of
the benefits to Compagnie de Suez, Gartmore U.S. Ltd.'s ultimate
parent, arising from the Direct Purchase and Tender Offer.
5. 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.
6. Nations Gartmore believes that the requested relief is
necessary, as it would permit continuity of investment management to
each Fund during the period following the consummation of the Direct
Purchase and Tender Offer so that services to the Funds would not be
disrupted.
7. Applicants represent that the best interests of the Funds'
shareholders would be served if Nations Gartmore receives fees for
services during the Interim Period as provided herein. These fees are
an important part of Nations Gartmore's total revenue and are important
to maintaining its ability to provide services to the Funds. In
addition, the fees to be paid during the Interim Period are at the same
rate as the fees currently payable by the Funds under the Existing
Agreements.
Applicants' Conditions
Applicants agree as conditions to the issuance of the exemptive
order requested by this application that:
1. The New Sub-Advisory Agreements will have the same terms and
conditions as the Existing Sub-Advisory Agreements, except for their
effective dates and escrow provisions.
2. That portion of NationsBanc Advisors' fee paid to Nations
Gartmore by NationsBank Advisors during the Interim Period will be
maintained in an interest-bearing escrow account, and amounts in the
account (including interest earned on such paid fees) will be paid (a)
to Nations Gartmore in accordance with the New Sub-Advisory Agreement,
after the requisite approvals are obtained, or (b) to the respective
Fund, in the absence of such approvals.
3. The Funds will hold meetings of shareholders to vote on approval
of the New Sub-Advisory Agreements on or before the earlier of the
120th day following the termination of the Existing Sub-Advisory
Agreements or September 30, 1996.
[[Page 9513]]
4. Nations Gartmore will bear the costs of preparing and filing
this application. The Funds will not bear the costs relating to the
solicitation of shareholder approval of the Funds' shareholders
necessitated by the consummation of the Direct Purchase and Tender
Offer.
5. Nations Gartmore will take all appropriate steps so that the
scope and quality of sub-advisory services provided to the Funds during
the Interim Period will be at least equivalent, in the judgment of the
respective Boards of Directors, including a majority of the non-
interested Boards of Directors members, to the scope and quality of
services previously provided. If personnel providing material services
during the Interim Period change materially, Nations Gartmore will
apprise and consult with the Board of Directors of the affected Fund or
Funds to assure that they, including a majority of the non-interested
Board members, are satisfied that the services provided will not be
diminished in scope or quality.
6. The Board of Directors of each Fund, including a majority of
non-interested Directors, will have approved the New Sub-Advisory
Agreements in accordance with the requirements of section 15(c) of the
Act prior to termination of the Existing Sub-Advisory Agreements.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5550 Filed 3-7-96; 8:45 am]
BILLING CODE 8010-01-M