[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

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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