[Federal Register Volume 61, Number 236 (Friday, December 6, 1996)]
[Notices]
[Pages 64771-64773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31083]


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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 22360; International Series Release 
No. 1034; 812-10418]


The Lipper Funds, Inc., et al.; Notice of Application

December 2, 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: The Lipper Funds, Inc. (the ``Company''), on behalf of its 
portfolio

[[Page 64772]]

series, Prime Lipper Europe Equity Fund (the ``Fund''), and Prime 
Lipper Asset Management (``PLAM'').

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

SUMMARY OF APPLICATION: Assicurazioni Generali S.p.A. (``Generali'') 
has agreed to acquire a controlling interest in Prime S.p.A., the 
parent of Prime U.S.A. Inc. (``Prime U.S.A.''), which owns 50% of PLAM, 
the investment adviser to the Fund. The indirect change of control in 
Prime U.S.A. will result in the assignment, and thus the termination, 
of the existing advisory contract between the Fund and PLAM. The order 
would permit the implementation, without shareholder approval, of a new 
advisory contract for a period of up to 120 days following the date of 
the change in control of Prime S.p.A. (but in no event later than May 
31, 1997). The order also would permit PLAM to receive from the Fund 
fees earned under the new advisory contract following approval by the 
Fund's shareholders.

FILING DATE: The application was filed on November 8, 1996 and amended 
on November 25, 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 December 27, 
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, 101 Park Avenue, New 
York, New York 10178.

FOR FURTHER INFORMATION CONTACT: Sarah A. Buescher, Staff Attorney, at 
(202) 942-0573, or May Kay Frech, 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.

Applicants' Representations

    1. The Company has three investment portfolios, one of which is the 
Fund. PLAM serves as investment adviser to the Fund and Lipper & 
Company, L.L.C. serves as investment adviser to the other two 
portfolios.
    2. PLAM is a joint venture structured as an equally-owned New York 
general partnership between Lipper Europe L.P., a Delaware limited 
partnership controlled by Lipper & Company, and Prime U.S.A., a 
Delaware corporation and a wholly-owned subsidiary of Prime S.p.A., an 
Italian company that is currently controlled by Fiat S.p.A.
    3. On October 22, 1996, Generali and Fiat S.p.A. entered into an 
agreement pursuant to which Generali agreed to acquire 95.1% of the 
outstanding stock of Prime S.p.A. from Fiat S.p.A. (the ``Purchase''). 
Consummation of the Purchase is subject to the satisfaction or waiver 
of certain conditions, including regulatory approvals in Italy. Prime 
S.p.A. has informed applicants that the only significant condition to 
closing is the receipt of regulatory approval that is currently pending 
and that could be received at any time. While regulatory approvals 
could be delayed or denied, applicants believe that a change in control 
of PLAM could occur soon. Applicants represent that Fiat S.p.A. and 
Generali determined the terms and timing of the Purchase in response to 
factors beyond the scope of the Act and unrelated to the Fund and 
Lipper Europe L.P.
    4. The consummation of the Purchase will directly result in a 
change in control of Prime U.S.A. from Fiat S.p.A. to Generali. Because 
Prime U.S.A. is an equal partner of PLAM with Lipper Europe L.P., the 
indirect change of control of Prime U.S.A. will constitute an 
assignment of the existing investment advisory agreement between the 
Fund and PLAM within the meaning of section 2(a)(4) of the Act.
    5. Applicants request an exemption to permit the implementation, 
without formal shareholder approval, of a new investment advisory 
agreement between the Fund and PLAM. The requested exemption would 
cover an interim period (the ``Interim Period'') of not more than 120 
days beginning on the day the Purchase is consummated and continuing 
through the date the new investment advisory agreement is approved or 
disapproved by the Fund's shareholders (but in no event later than May 
31, 1997). During the Interim Period, PLAM's advisory fees would be 
paid into escrow.
    6. The investment advisory agreement between PLAM and the Fund to 
be entered into upon consummation of the Purchase is identical to the 
existing investment advisory agreement, except for its effective date 
and escrow provisions. The aggregate contractual rate chargeable for 
advisory services will remain the same as in the existing agreement. 
The Fund proposes to implement the new investment advisory agreement 
during the Interim Period, subject to the conditions contained in the 
application.
    7. In accordance with section 15(c) of the Act,\1\ the Company's 
board of directors will meet on a date prior to the assignment of the 
existing investment advisory agreement and they will receive all 
information that in their view is reasonably necessary to evaluate 
whether the new investment advisory agreement would be in the best 
interest of the Fund and its shareholders. The board also will consider 
whether to vote to recommend that the Fund's shareholders approve the 
new investment advisory agreement.
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    \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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    8. The Fund expects to prepare the required proxy materials and 
schedule a shareholder meeting as soon as practicable. Applicants 
believe that a 120 day period will allow for reasonable adjournments of 
a shareholder meeting if necessary to obtain sufficient shareholder 
response in order to obtain the required approval.
    9. Applicants propose to enter into an escrow arrangement with an 
unaffiliated financial institution, such as the Fund's custodian, as 
escrow agent. The arrangement would provide that: (a) The investment 
advisory fees payable to PLAM during the Interim Period under the new 
investment advisory agreement would be paid into an interest-bearing 
escrow account maintained by the interest earned on such paid fees) 
would be paid to PLAM only upon approval of Fund shareholders of the 
new investment advisory agreement or, in the absence of such approval, 
to the Fund; and (c) the escrow agent would release the moneys only 
upon receipt of a certificate from an officer of the Company who is not 
an interested person of PLAM stating that the moneys are to be 
delivered to PLAM and that the new investment advisory agreement has 
received the requisite Fund shareholder vote or, if the moneys are to 
be delivered to the Fund, that the Interim

[[Page 64773]]

Period has ended, and the new investment advisory agreement has not 
received the requisite Fund shareholder vote. Before any certificate is 
sent, the boards of directors of the Company would be notified.

Applicants' Legal Analysis

    1. Applicants request an order pursuant to section 6(c) of the Act 
exempting them from section 15(a) of the Act to the extent necessary 
(a) to permit the implementation during the Interim Period of the new 
investment advisory agreement prior to receiving shareholder approval 
and (b) to permit PLAM to receive from the Fund all fees earned under 
the new investment advisory agreement (which would be the same as all 
fees that would have been earned under the existing investment advisory 
agreement) implemented during the Interim Period if and to the extent 
the new investment advisory agreement is approved by the shareholders 
of the Fund. Because the Fund has not had sufficient advance notice of 
the Purchase, it will not be possible for the Fund to obtain prior 
approval of the new investment advisory agreement by Fund shareholders.
    2. Section 15(a) 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 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.
    3. Upon consummation of the Purchase, Fiat S.p.A. will transfer 
ownership of its interest in Prime S.p.A., the parent of Prime U.S.A., 
to Generali. The Purchase will result in an ``assignment'' within the 
meaning of section 2(a)(4) of the existing investment advisory 
agreement, terminating the agreement according to its terms.
    4. Rule 15a-4 provides, in relevant part, that if an investment 
adviser's 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 relay on rule 15a-4 because of the benefits which 
will accrue to Fiat S.p.A. due to the Purchase.
    5. 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.
    6. Applicants believe that the requested relief is necessary, as it 
would permit continuity of investment management to the Fund during the 
period following the consummation of the Purchase so that services to 
the Fund would not be disrupted. Applicants also believe that the 
Interim Period would facilitate the orderly and reasonable 
consideration of the new advisory agreement by the Fund's shareholders.
    7. Applicants represent that the best interests of the Fund's 
shareholders would be served if PLAM receives fees for services during 
the Interim Period as provided herein. In addition, applicants believe 
that it would be unjust to deprive Lipper Europe L.P. of fees due to a 
change in control of the parent of Prime U.S.A. Finally, the fees to be 
paid during the Interim Period are at the same rate as the fees 
currently payable by the Fund under the existing investment advisory 
agreement.

Applicants' Conditions

    Applicants agree as conditions to the issuance of the exemptive 
order requested by the application that:
    1. The new investment advisory agreement will have the identical 
terms and conditions as the existing investment advisory agreement, 
except for its effective date and escrow provisions.
    2. The investment advisory fees paid to PLAM 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 PLAM in accordance with the new investment advisory 
agreement, after the requisite approval is obtained, or (b) to the 
Fund, in the absence of such approval.
    3. The Fund will hold a meeting of shareholders to vote on approval 
of the new investment advisory agreement on or before the 120th day 
following the termination of the existing advisory agreement (but in no 
event later than May 31, 1997).
    4. PLAM will bear the costs of preparing and filing the 
application. The Fund will not bear any costs relating to the 
solicitation of shareholder approval of the Fund's shareholders 
necessitated by the consummation of the Purchase.
    5. PLAM will take all appropriate steps so that the scope and 
quality of investment advisory services provided to the Fund during the 
Interim Period will be at least equivalent, in the judgment of the 
Company's board of directors, including a majority of the non-
interested directors, to the scope and quality of services previously 
provided. If personnel providing material services during the Interim 
Period change materially, PLAM will apprise and consult with the board 
of directors of the Company 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 the Company, including a majority of 
non-interested directors, will have approved the new investment 
advisory agreement in accordance with the requirements of section 15(c) 
of the Act prior to termination of the existing investment advisory 
agreement.

    For the SEC, by the Division of Investment Management, pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-31083 Filed 12-5-96; 8:45 am]
BILLING CODE 8010-01-M