[Federal Register Volume 63, Number 123 (Friday, June 26, 1998)]
[Notices]
[Pages 34947-34948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17081]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23263; 812-10804]


The Lipper Funds, Inc.; Notice of Application

June 22, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under section 6(c) of the 
Investment Company Act of 1940 (``Act'').

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SUMMARY OF APPLICATION: Applicants request an exemption from section 
15(f)(1)(A) of the Act to permit a former director (Mr. Biderman) of 
the Company to rejoin the Company's board of directors.

APPLICANTS: The Lipper Funds, Inc. and Prime Lipper Asset Management.

FILING DATES: The application was filed on October 1, 1997, and amended 
on June 2, 1998. Applicants have agreed to file an additional 
amendment, the substance of which is incorporated in this notice, 
during the notice period.

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 July 17, 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: The Lipper Funds, Inc. and Prime Lipper Asset 
Management, 101 Park Avenue, New York, N.Y. 10178.

FOR FURTHER INFORMATION CONTACT:
Mary T. Geffroy, Senior Counsel, at (202) 942-0553, 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, 450 Fifth Street, N.W., Washington, 
D.C. 20549 (tel. (202) 8090).

Applicant's Representations

    1. The Lipper Funds, Inc. (the ``Company'') is an open-end 
management investment company registered under the Act. The Company 
consists of three investment portfolios, one of which is the Prime 
Lipper Europe Equity Fund (the ``Europe Equity Fund''). Prime Lipper 
Asset Management (``PLAM''), a New York general partnership and an 
investment adviser registered under the Investment Advisers Act of 
1940, serves as investment adviser for the Europe Equity Fund.
    2. PLAM is a joint venture owned equally by its two general 
partners, Lipper Europe L.P. and Prime U.S.A. Inc. (``Prime USA''). 
Lipper Europe L.P. (``Lipper Europe'') is a Delaware limited 
partnership controlled by Lipper & Company, Inc. (``Lipper Inc.''). 
Prime USA, a Delaware corporation, is a wholly-owned subsidiary of 
Prime S.p.A., an asset management firm. Prime S.p.A. currently is 
controlled by Assicurazioni Generali (``Generali''), an Italian 
insurance company. Generali acquired control of Prime S.p.A. on 
December 20, 1996, when Fiat S.p.A. sold to Generali 95.1% of the 
outstanding stock of Prime S.p.A. (the ``Transaction''). The 
Transaction was deemed to result in an assignment of PLAM's investment 
advisory agreement with the Europe Equity Fund under the Act.
    3. PLAM is governed by a management committee of four individuals. 
Each general partner appointed two members to the management committee. 
Mr. Biderman is an employee of Lipper Inc. and serves on the management 
committee on PLAM as one of the two Lipper Europe representatives.

[[Page 34948]]

    4. Mr. Biderman previously served as a director on the board of 
directors of the Company (the ``Board''), including the Europe Equity 
Fund, but resigned effective as of the closing of the Transaction to 
enable the Transaction to remain subject to the safe harbor provisions 
of section 15(f) of the Act (described below). Applicants would like 
Mr. Biderman to rejoin the Board without removing the Transaction from 
the safe harbor.

Applicant's Legal Analysis

    1. Section 15(f) of the Act is a safe habor that permits an 
investment adviser to a registered investment company (or an affiliated 
person of the investment adviser) to receive ``any amount or benefit'' 
in connection with a sale of securities of, or sale of any other 
interest in, the investment adviser that results in an ``assignment'' 
of the advisory contract with the investment company, if certain 
conditions are met. Section 15(f)(1)(A) requires that, for a period of 
three years after the sale, at least 75 percent of the board of 
directors of the investment company may not be ``interested persons'' 
with respect to either the predecessor or successor adviser of the 
investment company.
    2. Section 2(a)(4) of the Act defines ``assignment'' to include: 
``any direct or indirect transfer * * * of a controlling block of the 
assignor's outstanding voting securities by a security holder of the 
assignor.'' Applicants state that the Transaction was deemed to result 
in an assignment of PLAM's investment advisory agreement with the 
Europe Equity Fund. Applicants further state that the parties to the 
Transaction sought to rely on the safe harbor in section 15(f) in 
connection with that assignment. Because Mr. Biderman may be deemed an 
interested person of PLAM, Mr. Biderman resigned from the Company's 
Board as the closing of the Transaction in order for the Company's 
Board to meet the requirements of section 15(f)(1)(A).
    3. Section 6(c) of the Act permits the SEC to exempt any person or 
transaction from any provision of the Act, or any rule or regulation 
thereunder, if the 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.
    4. Applicants request an order under section 6(c) to permit Mr. 
Biderman to rejoin the Board without causing the Transaction to fall 
outside the safe harbor of section 15(f) of the Act. Applicants state 
that Mr. Biderman was not affiliated with any party to the Transaction, 
except indirectly as a representative of Lipper Europe, a joint 
venturer with Prime USA in PLAM. Applicants further state that neither 
Mr. Biderman nor Lipper Inc. has any ownership interest in Prime USA, 
Prime S.p.A., Fiat or Generali and derived no economic interest from 
the Transaction. Applicants also state that the advisory fees received 
by Lipper Inc. and Prime S.p.A. through their respective ownership 
interests in PLAM are not a material portion of the revenues of either 
Lipper Inc. or Prime S.p.A.
    5. Applicants further state that the disinterested directors of the 
company unanimously approved the filing of the application for 
exemptive relief as in the best interests of the Company's shareholders 
to permit Mr. Biderman to rejoin the Board. Mr. Biderman has served on 
the Board since its initial organization in 1995 and has been 
intimately involved in the operations of the Europe Equity Fund. 
Applicants assert that Mr. Biderman's inability to serve on the Board 
also deprives the Company's other portfolios of his services.
    6. Applicants state that the Board could meet the requirements of 
section 15(f)(1)(A) if, in addition to Mr. Biderman, three 
disinterested directors were added to the Board. Applicants contend, 
however, that reconstituting the Board in this manner would result in a 
disproportionately large Board and would impose additional expenses on 
the Company. Applicants note that if Mr. Biderman rejoins the Board, 
the Board still will have a majority of directors who are not 
interested persons of PLAM.
    7. Applicants assert that the conditions by which they would abide 
as long as they are relying on the requested order will assure that the 
safeguards embodied in section 15(f)(1)(A) are maintained. These 
conditions require, among other things, that during the period covered 
by the requested order, the fees paid by the Europe Equity Fund to PLAM 
will not increase and that applicants take all appropriate actions to 
ensure that the scope and quality of services provided by PLAM to the 
Europe Equity Fund will be at least equivalent to that which PLAM has 
provided since the Transaction.
    8. For the reasons stated above, applicants submit that the 
requested relief is necessary and 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.

Applicant's Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. Applicants will take all appropriate actions to ensure that the 
scope and quality of investment advisory services that PLAM provides to 
the Europe Equity Fund will be at least equivalent to that which has 
been provided by PLAM since the Transaction.
    2. The investment advisory fees payable by the Europe Equity Fund 
to PLAM under its investment advisory agreement with PLAM will not be 
increased.
    3. If, within three years of the completion of the Transaction, it 
becomes necessary to replace any director of the Company, that director 
will be replaced by a director who is not an ``interested person'' of 
PLAM within the meaning of section 2(a)(19)(B) of the Act, unless at 
least 75% of the directors at that time are not interested persons of 
PLAM.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-17081 Filed 6-25-98; 8:45 am]
BILLING CODE 8010-01-M