[Federal Register Volume 63, Number 110 (Tuesday, June 9, 1998)]
[Notices]
[Pages 31537-31539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15277]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23240; 812-11102]
The Munder Funds, Inc., et al.; Notice of Application
June 3, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from section 15(a)
of the Act.
-----------------------------------------------------------------------
SUMMARY OF APPLICATION: Applicants seek an order to permit the
implementation, without prior shareholder approval, of new investment
advisory and sub-advisory agreements (``New Management Agreements'')
for a period of up to 150 days following the date on which a transfer
of a controlling interest in Munder Capital Management (``MCM'') occurs
(but in no event later than November 30, 1998) (the ``Interim
Period''). The order also would permit MCM, World Asset Management
(``World''), and Framlington Overseas Investment Management Limited
(``Framlington Management''), following shareholder approval, to
receive all fees earned under the New Management Agreements during the
Interim Period.
APPLICANTS: The Munder Funds, Inc. (``Munder''), The Munder Funds Trust
(``Munder Trust''), The Munder Framlington Funds Trust
(``Framlington''), St. Clair Funds, Inc. (``St. Clair''), Select Asset
Fund, Series 1, Inc. (``Select 1'') Select Asset Fund, Series 2, Inc.
(``Select 2''), Great Lakes Fund, Inc. (``Great Lakes''), Huron
Investment Fund, Inc. (``Huron''), Central Asset Fund, Inc. (``Central
Asset''), Central Investment Fund, Inc. (``Central Investment''),
Lernoult Investment Fund, Inc. (``Lernoult''), INVESCO Specialty Funds,
Inc. (``INVESCO Specialty''), SEI Index Funds (``SEI Index'')
(collectively, the ``Investment Companies''), MCM, World, Framlington
Management, and INVESCO Funds Group, Inc. (``INVESCO'').
FILING DATES: The application was filed on April 8, 1998. 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 June 29, 1998,
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: Munder, Munder Trust, Framlington, St. Clair, and
MCM, 480 Pierce Street, Birmingham, Michigan 48009; World, 225 E. Brown
Street, Suite 250, Birmingham, Michigan, 48009; Select 1, Select 2,
Great Lakes, Huron, Central Asset, Central Investment, Lernoult, 411 W.
Fafayette, Detroit, Michigan, 48226; INVESCO Specialty and INVESCO,
7800 E. Union Avenue, Denver, Colorado 80237; SEI, c/o CT Corporation,
2 Oliver Street, Boston, Massachusetts 02109; and Framlington
Management, 155 Bishopsgate, London England EC2M 3XJ.
FOR FURTHER INFORMATION CONTACT: J. Amanda Machen, Senior Counsel, at
(202) 942-7120, or Christine Y. Greenlees, 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 at the
SEC's Public Reference Branch, 450 Fifth Street, NW., Washington, DC
20549 (tel. 202-942-8090).
Applicants' Representations
1. The Investment Companies, each of which is organized either as a
Maryland corporation or a Massachusetts business trust, are registered
under the Act as open-end management investment companies. Munder and
the Munder Trust each offer fifteen investment portfolios. Framlington
offers four investment portfolios, and St. Clair offers eleven. INVESCO
Specialty is organized as a series fund.
2. MCM, World, and Framlington Management are investment advisers
registered under the Investment Advisers Act of 1940. MCM serves as
investment adviser to each portfolio of Munder, the Munder Trust,
Framlington, and St. Clair. World serves as investment adviser to
Select 1, Select 2, Great Lakes, Huron, Central Asset, Central
Investment, Lernoult, and SEI Index, and as sub-adviser to a series of
INVESCO Specialty. Framlington Management serves as sub-adviser to the
portfolios of Framlington. INVESCO, a subsidiary of AMVESCAP, PLC, an
international investment management company, serves as the investment
adviser, administrator, and transfer agent for INVESCO Specialty.
3. MCM is a general partnership, whose interests are owned by Old
MCM, Inc. (44%) (``Old MCM''), World Holdings, Inc. (44%), and Munder
Group L.L.C. (12%) (the ``Munder Group''). Mr. Lee P. Munder (``Mr.
Munder''), Chairman of MCM, indirectly owns 44% of MCM through his
ownership interests in Old MCM and the Munder Group. Comerica
Incorporated (``Comerica''), a bank holding company, indirectly owns
44% of MCM through its wholly-owned subsidiary, World Holdings, Inc.
World is wholly-owned by MCM.
4. Comerica and Mr. Munder have reached an agreement under which
Comerica will purchase 85% of Old MCM's interest in MCM and 85% of Mr.
Munder's interest in the Munder Group (the ``Transaction''), after
which Comerica will own or control 88% of the partnership interests in
MCM.
5. Applicants state that consummation of the Transaction will
result in a transfer of a controlling block of MCM's outstanding voting
securities. Applicants believe, therefore, that consummation of the
Transaction may result in an assignment and, thus, the termination of
the current management agreements between MCM or World and each of the
Investment Companies, the current sub-advisory agreements between MCM,
Framlington and Framlington Management, and the current sub-advisory
agreement between World and INVESCO (collectively, the ``Current
Management Agreements''). Applicants request an exemption to permit the
implementation, without prior shareholder approval, of the New
Management Agreements. The requested exemption would cover an Interim
Period of not more than 150 days,
[[Page 31538]]
beginning on the date on which the Transaction is consummated and
continuing with respect to each Investment Company through the date on
which each New Advisory Agreement is approved or disapproved by the
Investment Company's shareholders, but in no event after November 30,
1998. Applicants state that the terms and conditions of the
corresponding Current and New Management Agreements will be the same in
all material respects. While the scheduled closing of the Transaction
is expected on or before June 30, 1998, applicants state that the
closing will not occur until receipt of the requested order.
6. The boards of directors/trustees of the Investment Companies
(the ``Boards'') met, in accordance with section 15(c) of the Act, to
consider the implications of the Transaction.\1\ After a full
evaluation, the Boards, including a majority of the non-interested
directors/trustees, voted to approve the New Management Agreements as
consistent with the best interests of each Investment Company and its
shareholders, and to submit the New Management Agreements to
shareholders.
---------------------------------------------------------------------------
\1\ The Boards of Munder, Munder Trust, Framlington, and St.
Clair met on April 7, 1998. The Boards of Select 1, Select 2, Great
Lakes, Huron, Central Asset, Central Investment, and Lernoult met on
May 7, 1998. The INVESCO Specialty Board met on May 13, 1998, and
the Board of SEI Index Funds met on May 18, 1998.
---------------------------------------------------------------------------
7. Applicants propose to enter into an escrow arrangement with an
unaffiliated financial institution (``Escrow Agent''), and fees earned
under the New Management Agreements during the Interim Period will be
paid into an account maintained by the Escrow Agent. The Escrow Agent
will release the amounts held in the escrow account (including any
interest earned): (a) to MCM, World, or Framlington only upon approval
by the shareholders of the relevant Investment Company; or (b) to the
relevant Investment Company in the absence of approval by its
shareholders. Before any amounts are released from the escrow account,
the relevant Board 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 the registered investment company.
Section 15(a) of the Act 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.
2. Applicants state that the consummation of the Transaction will
result in a transfer of a controlling block of MCM's outstanding voting
securities. Applicants believe, therefore, that the consummation of the
Transaction may result in an ``assignment'' of the Current Management
Agreements and that the Current Management Agreements may terminate by
their terms and in accordance with the Act as a result of the
Transaction.
3. Rule 15a-4 under the Act provides, in pertinent part, that if an
investment advisory contract with an investment company is terminated
by an assignment in which the adviser does not directly or indirectly
receive a benefit, the adviser may continue to serve for 120 days under
a written contract that has not been approved by the company's
shareholders, provided that: (a) the new contract is approved by the
company's board of directors (including a majority of the non-
interested directors); (b) the compensation to be paid under the new
contract does not exceed the compensation that would have been paid
under the contract most recently approved by the company's
shareholders; and (c) neither the adviser nor any controlling person of
the 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 Mr. Munder and Comerica may be deemed to
receive a benefit in connection with consummation of 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 assert that the requested relief meets this standard.
5. Applicants submit that the terms and timing of the closing of
the Transaction were dictated by a partnership agreement entered into
by Mr. Munder and Comerica upon formation of MCM in 1994 and,
therefore, were determined by factors beyond the scope of the Act and
substantially unrelated to the Investment Companies. Applicants state
that there is insufficient time to gain shareholder approval of the New
Management Agreements before closing of the Transaction. Applicants
also state that the requested relief would permit continuity of
investment management of the Investment Companies, without
interruption, following consummation of the Transaction.
6. Applicants submit that the scope and quality of investment
advisory services provided for the Investment Companies during the
Interim Period will not be diminished. Applicants assert that the
Investment Companies should receive, during the Interim Period,
equivalent investment management services, provided in substantially
the same manner and at the same fee level, by substantially the same
personnel, as they receive under the Current Management Agreements.
Applicants state that, in the event of any material change in
personnel, MCM, World, and Framlington Management will apprise and
consult the Boards to assure that the Boards, including a majority of
the non-interested directors/trustees, are satisfied that the services
provided by MCM, World, and Framlington Management will not be
diminished in scope or quality.
7. Applicants note that the fees payable to MCM, World, and
Framlington Management under the New Management Agreements have been
approved by the appropriate Board, including a majority of the non-
interested directors/trustees, and that the fees are the same as are
payable under the Current Management Agreements. Applicants also state
that the fees will not be released to MCM, World, or Framlington
Management by the Escrow Agent without the approval of the New
Management Agreements by the relevant Investment Company's
shareholders.
Applicants' Conditions
Applicants agree that any order of the SEC granting the requested
relief will be subject to the following conditions:
1. The New Management Agreements will have the same terms and
conditions as the Current Management Agreements, except for their
effective and termination dates.
2. Fees earned by MCM, World, and Framlington Management during the
Interim Period will be maintained in an interest-bearing account with
an unaffiliated financial institution, and amounts in the account
(including interest earned on such amounts) will be paid (a) to MCM,
World, and Framlington Management in accordance
[[Page 31539]]
with the New Management Agreements, after the requisite shareholder
approval of the New Management Agreements is obtained, or (b) to such
Investment Company in the absence of shareholder approval.
3. The Investment Companies will convene special meetings of
shareholders to approve the New Management Agreements on or before the
150th day following termination of the Current Management Agreements
(but in no event later than November 30, 1998).
4. The Investment Companies will not bear the costs of preparing
and filing the Application, or any costs relating to the solicitation
of approval of each Investment Company's shareholders of the New
Management Agreements. These costs will be borne by MCM and World.
5. MCM, World, and Framlington will take all appropriate actions to
ensure that the scope and quality of investment management services
provided to the Investment Companies during the Interim Period will be
at least equivalent, in the judgment of the Boards, including a
majority of the non-interested directors/trustees, to the scope and
quality of such services provided prior to the Interim Period. In the
event of any material change in personnel providing services pursuant
to the New Management Agreements, MCM, World, or Framlington
Management, as appropriate, will apprise and consult with each Board to
assure that the Board, including a majority of the non-interested
directors/trustees, is satisfied that the services provided will not be
diminished in scope or quality.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-15277 Filed 6-8-98; 8:45 am]
BILLING CODE 8010-01-M