[Federal Register Volume 62, Number 217 (Monday, November 10, 1997)]
[Notices]
[Pages 60538-60541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29533]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22873; 812-10848]
Travelers Group Inc., et al.; Notice of Application
November 3, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') from section 15(a) of the
Act.
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SUMMARY OF APPLICATION: Applicants seek an order to permit the
implementation, without shareholder approval, of new investment
advisory agreements between Salomon Brothers Asset Management Inc
(``SBAM''), Salomon Brothers Asset Management Limited (``SBAM Ltd''),
Salomon Brothers Asset Management Asia Pacific (``SBAM AP'')
(collectively, the ``Advisers'') and various registered investment
companies (``Investment
[[Page 60539]]
Companies''), for a period of up to 150 days following the date of
consummation of a merger (but in no event later than June 9, 1998). The
order also would permit the Advisers to receive all fees earned under
the new investment advisory agreements following shareholder approval.
APPLICANTS: Travelers Group Inc. (``Travelers''), Smith Barney Holdings
Inc. (``Smith Barney''), and Salomon Inc (``Salomon'').
FILING DATES: The application was filed on October 30, 1997. Applicants
have agreed to file an amendment during the notice period, the
substance of which is included in this notice.
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 November 24,
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 who wish to
be notified of a hearing may request notification by writing to the
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants: Travelers and Smith Barney, 388 Greenwich Street,
New York, NY 10013; Salomon, Seven World Trade Center, New York, NY
10048.
FOR FURTHER INFORMATION CONTACT: John K. Forst, Attorney Advisor, at
(202) 942-0569, or Christine Y. Greenless, Branch Chief, at (202) 942-
0564 (Office of Investment Company Regulation, Division of Investment
Management).
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, 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. 202-942-8090).
Applicant's Representations
1. Travelers is a diversified, integrated financial services
company engaged in investment and asset management, consumer finance,
and life and property-casualty insurance services. Salomon is a global
investment banking and securities and commodities trading company.
Salomon's U.S. asset management business is conducted through SBAM, an
indirect, wholly-owned subsidiary of Salomon and an investment adviser
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). SBAM and its non-U.S. investment advisory affiliates \1\
provide a broad range of fixed-income and equity investment advisory
services, and serve as investment adviser, investment manager, or
subadviser (as applicable) to the Investment Companies.\2\
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\1\ SBAM is affiliated with SBAM Ltd. and SBAM AP, each of which
is registered as an investment adviser under the Advisers Act. SBAM
Ltd. and SBAM AP act as subadviser to SBAM or share advisory
responsibility with SBAM with respect to the Investment Companies.
\2\ SBAM serves a the investment adviser to the following
registered investment companies: Salomon Brothers Investors Fund
Inc, Salomon Brothers Capital Fund Inc, Salomon Brothers Opportunity
Fund Inc, Salomon Brothers Series Funds Inc, Solomon Brothers
Institutional Series Fund Inc, The Salomon Brothers Fund Inc,
Salomon Brothers 2008 Worldwide Dollar Government Term Trust Inc,
Salomon Brothers Worldwide Income Fund Inc, Salomon Brothers High
Income Fund Inc, The Emerging Markets Income Fund Inc, The Emerging
Markets Income Fund II Inc, The Emerging Markets Floating Rate Fund
Inc., Global Partners Income Fund Inc., Municipal Partners Fund
Inc., and Municipal Partners Fund II Inc. SBAM serves as the
subadviser to the following registered investment companies: Salomon
Brothers Strategic Bond Opportunities Series and Salomon Brothers
U.S. Government Series of New England Zenith Fund; Salomon Brothers/
JNL Global Bond Series, Salomon Brothers/JNL U.S. Government &
Quality Bond Series, Salomon Brothers/JNL High Yield Series, and
Salomon Brothers/JNL Balanced Series of JNL Series Trust; Strategic
Bond Trust and U.S. Government Securities Trust, which are series of
NASL Series Trust; Strategic Income Fund, U.S. Government Securities
Fund and National Municipal Bond Fund, which are series of North
American Funds; Salomon Brothers U.S. Government Securities
Portfolio, a series of WNL Series Trust; the Emerging Markets Debt
Portfolio, a series of SEI International Trust; Nationwide Balanced
Fund and Nationwide Multi Sector Bond Fund, which are or will be
series of Nationwide Separate Account Trust; Americas Income Trust,
Inc.; Heritage Income Trust; Latin America Investment Fund; and
Irish Investment Fund. Inc. SBAM Ltd. serves as the subadviser to
SBAM with respect to: Salomon Brothers Strategic Bond Fund, a series
of Salomon Brothers Series Funds Inc; Salomon Brothers Strategic
Bond Opportunities Series, a series of New England Zenith Fund;
Salomon Brothers/JNL Global Bond Series, a series of JNL Series
Trust; Strategic Bond Trust, a series of NASL Series Trust;
Strategic Income Fund, a series of North American Funds; and
Nationwide Multi Sector Bond Fund, a series of Nationwide Separate
Account Trust. SBAM AP serves as the subadviser to SBAM with respect
to: Salomon Brothers Asia Growth Fund, a series of Salomon Brothers
Series Funds Inc; and, Salomon Brothers Institutional Asia Growth
Fund, a series of Salomon Brothers Institutional Series Fund Inc.
In each of the foregoing cases, whether acting as investment
manager, investment adviser, or subadviser, each Adviser (as
applicable) is acting as an investment adviser within the meaning of
section (2)(a)(20) of the Act, and serves as investment manager,
investment adviser or subadviser under a contract subject to section
15 of the Act.
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2. On September 24, 1997, Travelers entered into a merger agreement
with Salomon, under which a wholly-owned subsidiary of Travelers will
be merged into Salomon, with Salomon continuing as the surviving entity
and changing its name to Salomon Smith Barney Holdings Inc. (``Salomon
Smith Barney''). Thereafter, Smith Barney, a subsidiary of Travelers,
will merge with Salomon Smith Barney (the foregoing acquisitions are
hereinafter collectively referred to as the ``Transaction'').
Applicants expect consummation of the Transaction during the latter
part of November 1997.
3. Applicants request an exemption to permit implementation, in
connection with the Transaction, prior to obtaining shareholder
approval, of (i) new investment advisory agreements between each
Investment Company currently being advised by SBAM, and SBAM, and (ii)
new subadvisory agreements between each Investment Company's investment
adviser for whom an Adviser currently serves in the capacity of
subadviser and an Adviser (collectively, ``New Agreements'').\3\ The
requested exemption would cover an interim period of not more than 150
days beginning on the date the Transaction is consummated and
continuing through the date on which each New Agreement is approved or
disapproved by the shareholders of each Investment Company, but in no
event later than June 9, 1998 (the ``Interim Period''). Applicants
represent that the New Agreements will have substantially the same
terms and conditions as the existing investment advisory agreements
(``Existing Agreements''), except in each case for the effective dates.
Applicants state that each Investment Company should receive, during
the Interim Period, the same investment advisory services, provided in
the same manner and at the same fee levels, as it received prior to the
Transaction.
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\13\ In certain instances, Investment Companies have obtained
or, in the case of Nationwide Separate Account Trust, have applied
for exemptive relief permitting the investment adviser to the
Investment Company to hire and fire subadvisers without shareholder
approval. See NASL Financial Services Inc., et al., Investment
Company Act Release Nos. 22382 (December 9, 1996) (notice) and 22429
(December 31, 1996) (order); SEI Institutional Managed trust, et
al., Investment Company Act Release Nos. 21863 (April 1, 1996)
(notice) and 21921 (April 29, 1996) (order). To the extent permitted
by their respective exemptive orders, these Investment Companies
will not seek shareholder approval of new contracts with SBAM and
SBAM Ltd.
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4. Prior to consummation of the Transaction, the board of directors
of each Investment Company (the ``Board'') will meet, in accordance
with section 15(c) of the Act, to consider the New Agreements and to
evaluate whether the terms of the New Agreements are in the
[[Page 60540]]
best interests of the Investment Companies and their shareholders.\4\
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\4\ To the extent that the Board of any Investment Company
cannot meet prior to the consummation of the Transaction, applicants
acknowledge that such Investment Company may not rely on the
exemptive relief requested in the application.
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5. Applicants expect that those Investment Companies for which SBAM
provides advisory services will distribute proxy statements in November
and hold shareholder meetings no later than January, 1998; those
Investment Companies for which an Adviser provides subadvisory services
will distribute proxy statements and hold shareholder meetings prior to
the expiration of the Interim Period, but in no event later than June
9, 1998.
6. Applicants also request an exemption to permit the Advisers to
receive from each Investment Company, upon approval by their respective
shareholders, all fees earned under the New Agreements during the
Interim Period. Applicants state that the fees to be paid during the
Interim Period will be at the same rate as the fees that currently are
being paid under the Existing Agreements.
7. Applicants propose to enter into an escrow arrangement with an
unaffiliated financial institution. The fees payable to the Advisers
during the Interim Period under the New Agreements will be paid into an
interest-bearing escrow account maintained by the escrow agent. The
escrow agent will release the amounts held in the escrow account
(including any interest earned): (a) to the relevant Adviser only upon
approval of the relevant New Agreement by the shareholders of the
relevant Investment Company, or (b) to the relevant Investment Company
if the Interim Period has ended and its New Agreement has not received
the requisite shareholder approval. Before any such release is made,
the directors of the Investment Companies who are not ``interested
persons,'' as that term is defined in 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 is
unlawful for any person to serve as an investment adviser to 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 the investment company. Section 15(a) further
requires that the written contract provide for its automatic
termination in the event of its ``assignment.'' Section 2(a)(4) of the
Act defines the term ``assignment'' to include any direct or indirect
transfer of a contract by the assignor.
2. Applicants state that the Transaction could be deemed to result
in an assignment of the Existing Agreements and, therefore, their
termination upon consummation of the Transaction.
3. 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.
4. Applicants note that the form and timing of the Transaction were
determined by Travelers and Salomon in response to a number of factors
beyond the scope of the Act and unrelated to the Investment Companies
and the Advisers. Applicants submit that those considerations do not
allow a time schedule that permits the solicitation of shareholder
approval of the New Agreements prior to the consummation of the
Transaction. Applicants submit that it is in the best interests of each
Investment Company's shareholders to avoid any interruption in services
to the Investment Companies and to allow sufficient time for the
shareholders to consider the New Agreements.
5. Applicants submit that the scope and quality of services
provided to the Investment Companies during the Interim Period will not
be diminished. During the Interim Period, the Advisers would operate
under the New Agreements, which would be substantially the same as the
Existing Agreements, except for their effective dates. Applicants
submit that they are not aware of any material changes in the personnel
who will provide investment management services during the Interim
Period. Accordingly, the Investment Companies should receive, during
the Interim Period, the same advisory services, provided in the same
manner, at the same fee levels, and by substantially the same personnel
as they received before the Transaction.
6. Applicants contend that the best interests of shareholders of
the Investment Companies would be served if the Advisers receive fees
for their services during the Interim Period. Applicants state that the
fees are a substantial part of the Advisers' total revenues and, thus,
are essential to maintaining their ability to provide services to the
Investment Companies. In addition, the fees to be paid during the
Interim Period will be at the same rate as the fees that currently are
being paid under the Existing Agreements, which have been approved by
the Board and the shareholders of each Investment Company.
Applicants' Conditions
Applicants agree as conditions to the issuance of the exemptive
order requested by the application that:
1. (a) The new advisory agreements to be implemented during the
Interim Period will have substantially the same terms and conditions as
the existing advisory agreements, (b) the new subadvisory agreements to
be implemented during the Interim Period will have substantially the
same terms and conditions as the existing subadvisory agreements,
except in each case for the effective dates.
2. Fees earned by SBAM, SBAM Ltd and SBAM AP in respect of the new
advisory agreements during the Interim Period will be maintained in an
interest-bearing escrow account with an unaffiliated bank, and amounts
in the account (including interest earned on such paid fees) will be
paid (a) to SBAM, SBAM Ltd and SBAM AP in accordance with the new
advisory agreements, after the requisite shareholder approvals are
obtained, or (b) to the respective Investment Company, in the absence
of such approval with respect to such Investment Company.
3. The Investment Companies will hold meetings of shareholders to
vote on approval of the new advisory agreements on or before the 150th
day following the consummation of the Transaction (but in no event
later than June 9, 1998).
4. Travelers or its affiliates will pay the costs of preparing and
filing the application, and costs relating to the solicitation of
approval of the Investment Companies' shareholders necessitated by the
Transaction, unless such solicitation occurs in conjunction with a
particular Investment Company's annual meeting of shareholders at which
other matters are also considered, in which case a portion of the costs
may be allocated to such Investment Company.
5. SBAM, SBAM Ltd and SBAM AP will take all appropriate steps so
that the scope and quality of advisory and other services provided to
the Investment Companies during the Interim Period will be at least
equivalent, in the judgment of the respective Boards, including a
majority of the disinterested directors, to the scope and quality of
services previously provided. If personnel providing
[[Page 60541]]
material services during the Interim Period change materially, SBAM,
SBAM Ltd and/or SBAM AP will apprise and consult with the Boards of the
affected Investment Companies to assure that the Boards, including a
majority of the disinterested directors, 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. 97-29533 Filed 11-7-97; 8:45 am]
BILLING CODE 8010-01-M