[Federal Register Volume 62, Number 69 (Thursday, April 10, 1997)]
[Notices]
[Pages 17650-17652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9173]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22598; 812-10576]
Chubb America Fund, Inc., et al.; Notice of Application
April 3, 1997.
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: Chubb America Fund, Inc. (the ``Fund''), on behalf of World
Growth Stock Portfolio, Money Market Portfolio, Domestic Growth Stock
Portfolio, Gold Stock Portfolio, Bond Portfolio, Growth and Income
Portfolio, Capital Growth Portfolio, Balanced Portfolio, and Emerging
Growth Portfolio (collectively, the ``Portfolios''), and Chubb
Investment Advisory Corporation (the ``Adviser'').
RELEVANT ACT SECTIONS: Order requested under section 6(c) granting an
exemption from section 15(a).
SUMMARY OF APPLICATION: Jefferson-Pilot Corporation (``Jefferson-
Pilot'') has agreed to acquire 100% of the issued and outstanding
shares of common stock of Chubb Life Insurance Company of America
(``Chubb Life''), the parent of the Adviser. The indirect change in
control of the Adviser will result in the assignment, and thus the
termination, of the existing investment management agreements between
the Fund and the Adviser (the ``Existing Agreements''). The order would
permit the implementation, without shareholder approval, of a new
investment management agreement (the ``New Agreement'') for an interim
period of not more than 120 days beginning on the date on which Chubb
Life is sold to Jefferson Pilot (but in no event later than August 28,
1997). The order also would permit the Adviser to receive from each
Portfolio all fees earned under the New Agreement following shareholder
approval.
FILING DATES: The application was filed on March 13, 1997 and amended
on April 2, 1997.
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 April 28, 1997
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: One Granite Place, Concord, NH 03301.
FOR FURTHER INFORMATION CONTACT: John K. Forst, Staff Attorney, at
(202) 942-0569, or Mary 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 may be obtained for a fee from
the SEC's Public Reference Branch.
Applicants' Representations
1. The Fund is a Maryland corporation registered under the Act as
an open-end, management investment company. The Portfolios are series
of the Fund, the assets of which are managed by the Adviser pursuant to
the Existing Agreements.
2. Under a stock purchase agreement (the ``Stock Purchase
Agreement'') dated as of February 23, 1997, between The Chubb
Corporation (``Chubb'') and Jefferson-Pilot, Chubb has agreed to sell
all the shares of Chubb Life to Jefferson-Pilot in exchange for
$875,000,000 in cash (subject to reduction to the extent of certain
distributions made prior to closing) (the ``Transaction''). As a result
of the Transaction, Chubb Life will become a wholly-owned subsidiary of
Jefferson-Pilot and the Adviser will remain a wholly-owned subsidiary
of Chubb Life. Applicants expect the Transaction to be consummated on
April 30, 1997. Consummation of the Stock Purchase Agreement is subject
to the satisfaction of certain conditions, including state insurance
department regulatory approvals.
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3. Applicants request an exemption to permit implementation,
without shareholder approval, of the New Agreement between the Fund and
the Adviser, on behalf of each of the Portfolios. The requested
exemption will cover an interim period of not more than 120 days
beginning on the date on which Chubb and Jefferson-Pilot consummate the
Transaction and continuing through the date the New Agreement is
approved or disapproved by the shareholders of the respective
Portfolios (but in no event later than August 28, 1997) (the ``Interim
Period''). It is anticipated that the New Agreement will be identical
in substance to the Fund's Existing Agreements. The aggregate
contractual rate chargeable for investment advisory services for each
Portfolio will remain the same as in the relevant Existing Agreement.
The Fund proposes to implement the New Agreement during the Interim
Period, subject to the conditions contained in the application.
4. The Fund's board of directors (the ``Board'') is expected to
meet on or about April 3, 1997 for the purpose of considering the New
Agreement in accordance with section 15(c) of the Act. The Board will
receive such information as the directors deem necessary to evaluate
whether the terms of the New Agreement are in the best interests of the
Portfolios and their shareholders. Proxy materials seeking approval of
the New Agreement are expected to be mailed to shareholders of each
Portfolio on or about April 15, 1997. A meeting of shareholders of the
Fund is expected to take place on or about May 30, 1997 to consider
approval of the New Agreement. Applicants believe that the Interim
Period is reasonable because it will allow for preparation and
distribution of proxy materials in order to obtain shareholder
approval.
5. Applicants also request an exemption to permit the Adviser to
receive from the Fund all fees earned under the New Agreement
implemented during the Interim Period if, and to the extent, the New
Agreement is approved by the shareholders of each Portfolio. The fees
to be paid during the Interim Period are at the same rate as the fees
currently payable by the Portfolios.
6. Applicants propose to enter into an escrow arrangement with an
unaffiliated financial institution that will serve as escrow agent. The
fees payable to the Adviser during the Interim Period will be paid into
an interest-bearing escrow account maintained by the escrow agent.
Amounts in the escrow account (including interest earned on such fees)
will be paid to the Adviser to the extent shareholders of each
Portfolio approve the New Agreement with their respective Portfolio. If
shareholders of any Portfolio fail to approve the New Agreement, the
escrow agent will pay to that Portfolio the applicable escrow amounts
(including interest earned). The escrow agent will release the escrow
funds only upon receipt of certificates from officers of the Fund
stating, if the escrow funds are to be delivered to the Adviser, that
the New Agreement has received the requisite Portfolio shareholder
vote, or, if the escrow funds are to be delivered to any Portfolio,
that the Interim Period has ended and the New Agreement has not been
approved by the requisite shareholder vote. Before any such certificate
is sent, the directors of the Fund who are not ``Interested Persons''
of the Fund within the meaning of section 2(a)(19) of the Act (the
``Independent Directors'') will be notified.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in pertinent part, that it
shall be unlawful for any person to serve or act as an investment
adviser of a registered investment company, except pursuant to a
written contract that has been approved by the vote of a majority of
the outstanding voting securities of such investment company. Section
15(a) further requires that such 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.
2. Applicants state that, upon completion of the Transaction, Chubb
Life, the Adviser's parent, will be controlled by Jefferson-Pilot
rather than Chubb. Applicants therefore believe that the Transaction
will result in an indirect ``assignment'' of the Existing Agreements
between the Fund and the Adviser within the meaning of section 2(a)(4).
3. Rule 15a-4 provides, in pertinent part, that if an investment
advisory contract with an investment company is terminated by
assignment, the adviser may continue to act as such for 120 days under
a written contract that has not been approved by the company's
shareholders, only to the extent that (a) the new contract is approved
by the company's board of directors (including a majority of directors
that are not ``interested persons'' of the investment company), (b) the
compensation to be paid under the new contract does not exceed the
compensation which would have been paid under the contract most
recently approved by shareholders of the investment company, and (c)
neither the investment adviser nor any controlling person of the
investment adviser ``directly or indirectly receives money or other
benefit'' in connection with the assignment. Applicants state that they
cannot rely on rule 15a-4 because of the benefits to Chubb arising from
the Transaction.
4. 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.
5. Applicants contend that the Fund has prepared the required proxy
materials as expeditiously as possible and shareholder meetings are
expected to be held on or about May 30, 1997. Applicants believe that
the timing of the shareholder meetings may not provide an adequate
solicitation period to obtain approval of the New Agreement by the
shareholders of each Portfolio prior to effecting the Transaction.
6. Applicants believe that the requested relief is necessary, as it
would permit continuity of investment management services to the
Portfolios during the Interim Period. Applicants submit that the scope
and quality of services provided to the Portfolios during the Interim
Period will not be diminished. During the Interim Period, the
Portfolios would operate under the New Agreement, which is anticipated
to be identical in substance to the Existing Agreements, except for
their effective dates. Applicants are not aware of any material changes
in personnel who will provide investment management services during the
Interim Period.
7. Applicants represent that the best interests of the Portfolios'
shareholders would be served if the Adviser receives fees for services
during the Interim Period as provided herein. In addition, applicants
believe that it would be unjust to deprive the Adviser of fees due to a
change in control of the corporate parent. 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 Agreements.
Applicants' Conditions
Applicants agree as conditions to the issuance of the exemptive
order requested by the application that:
1. The New Agreement will have substantially the same terms and
[[Page 17652]]
conditions as the Existing Agreements, except for the effective date.
2. Fees earned by the Adviser in respect of the New Agreement
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 the Adviser in accordance with
the New Agreement, after the requisite approvals are obtained, or (b)
to the respective Portfolio, in the absence of such approvals.
3. The Portfolios will hold a meeting of their shareholders to vote
on approval of New Agreement on or before the 120th day following the
termination of the Existing Agreements (but in no event later than
August 28, 1997).
4. Jefferson-Pilot and/or Chubb will bear the costs of preparing
and filing the application and the costs relating to the solicitation
of the shareholders approval necessitated by the Transaction.
5. The Adviser will take all appropriate steps so that the scope
and quality of advisory and other services provided to the Portfolios
during the Interim Period will be at least equivalent, in the judgment
of the Board, including a majority of the Independent Directors, to the
scope and quality of services previously provided. If personnel
providing material services during the Interim Period change
materially, the Adviser will apprise and consult with the Board to
assure that the directors, including a majority of the Independent
Directors of the Fund, are satisfied that the services provided will
not be diminished in scope or quality.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-9173 Filed 4-9-97; 8:45 am]
BILLING CODE 8010-01-M