[Federal Register Volume 64, Number 31 (Wednesday, February 17, 1999)]
[Notices]
[Pages 7928-7930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3830]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23690; 812-11504]


Sweig/Glaser Advisers, et al.; Notice of Application

February 11, 1999.
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 prior shareholder approval, of certain sub-
advisory agreements in connection with the acquisition 
(``Acquisition'') of Zweig/Glaser Advisers (``Zweig/Glaser'') and Zweig 
Advisors Inc. (``Zweig,'' collectively with Zweig/Glaser, the ``Sub-
advisers'') by Phoenix Investment Partners, Ltd. (``Phoenix''). The 
order would cover a period of up to 150 days following the later of: 
(i) the date on which the Acquisition is consummated (the ``Acquisition 
Date''), or (ii) the date on which the requested order is issued (but 
in no event later than July 23, 1999) (``Interim Period''). The order 
also would permit the Sub-advisers to receive all fees earned under the 
New Sub-advisory Agreements during the Interim Period following 
shareholder approval.
    Applicants: The Sub-Advisers.
    Filing Dates: The application was filed on February 9, 1999. 
Applicants have agreed to file an amendment to the application, the 
substance of which is reflected 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 March 4, 
1999, 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, 900 Third Avenue, New York, NY 10022.

FOR FURTHER INFORMATION CONTACT: Janet M. Grossnickle, Attorney-
Adviser, at (202) 942-0526, or Nadya B. Roytblat, Assistant Director, 
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).

Applicants' Representations

    1. Zweig/Glaser, a New York general partnership, is an investment 
adviser registered under the Investment Advisers Act of 1940 
(``Adivsers Act''). Zweig, a Delaware corporation, is an investment 
adviser registered under the Advisers Act.
    2. Zweig/Glaser serves as the sub-adviser for the Zweig Asset 
Allocation Fund and the Sweig Equity (Small Cap) Fund (the ``Funds''), 
each a series of Legends Funds, Inc., an open-end management investment 
company registered under the Act.
    3. Zweig serves as the sub-adviser for the Strategic Equity Series 
and the Multiple Allocation Series (the ``Portfolios''), each a series 
of the GCG Trust, an open-end management investment company registered 
under the Act. The Funds and the Portfolios are each referred to as an 
``Investment Company'' and collectively, as the ``Investment 
Companies.'' The sub-advisory agreements currently in effect between 
the Sub-advisers and the Investment Companies are each referred to as 
an ``Existing Sub-advisory Agreement'' and collectively, as the 
``Existing Sub-advisory Agreements.''
    4. On December 15, 1998, the Sub-advisers entered into an 
acquisition

[[Page 7929]]

agreement with Phoenix, under which the Sub-advisers will be acquired 
by Phoenix. Phoenix, a Delaware corporation, is a diversified financial 
services company, and is an investment adviser registered under the 
Advisers Act. Applicants expect the Acquisition to be consummated on or 
about March 1, 1999.
    5. Applicants state that the Acquisition will result in an 
assignment and thus the automatic termination of the Existing Sub-
advisory Agreements. Applicants request an exemption to permit the 
implementation, without prior shareholder approval, of new sub-advisory 
agreements with respect to the Investment Companies (``New Sub-advisory 
Agreements''). The requested exemption will cover the Interim Period of 
not more than 150 days beginning on the later of the Acquisition Date 
or the date of the issuance of the requested order and continuing with 
respect to each Investment Company through the date on which each New 
Sub-advisory Agreement is approved or disapproved by the Investment 
Company's shareholders, but in no event after July 23, 1999. Applicants 
represent that the New Sub-advisory Agreements will contain 
substantially identical terms and conditions as the Existing Sub-
advisory Agreements, except in each case for the effective dates, the 
termination dates, the escrow provisions discussed below and terms 
relating to a servicing agreement between the Sub-advisers and Zweig 
Consulting LLC (``Servicing Agreement''), a company formed by Dr. 
Martin E. Zweig.\1\ Applicants further represent that each Investment 
Company will receive, during the Interim Period, the same investment 
sub-advisory services, provided in the same manner by substantially the 
same personnel, at the same fee levels as it received prior to the 
Acquisition.
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    \1\ Applicant state that as of the Acquisition date, Dr. Zweig, 
an officer of each of the Sub-advisers, and certain of his 
associates will not continue their positions with the Sub-advisers. 
Applicants further state that Dr. Zweig and his associates have been 
involved in the Sub-adviser's provision of services to the 
Investment Companies. Applicants represent that the Sub-Advisers 
will enter into the Servicing Agreement with a company formed by Dr. 
Zweig, Zweig Consulting LLC, in order for the Investment Companies 
to continue to receive the services of Dr. Zweig and his associates. 
Applicants state that Zweig/Glaser is controlled by Eugene J. Glaser 
and Zweig Management Corp. Applicants further state that Zweig 
Management Corp., Zweig, and Zweig Consulting LLC are controlled by 
Dr. Zweig Management Corp., Zweig, and Zweig Consulting LLC are 
controlled by Dr. Zweig. Applicants represent that all fees that 
will be payable to Zweig Consulting LLC in connection with the 
services provided to the Investment Companies will be paid by the 
Sub-advisers. Zweig Consulting LLC, a New York limited liability 
company, is an investment adviser registered under the Advisers Act. 
All references to New-Sub-advisory Agreements in this notice include 
the Service Agreement.
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    6. Applicants state that the board of directors of each Investment 
Company (the ``Board'') will meet prior to the Applicant Date to 
consider approval of the New Sub-advisory Agreements and submission of 
the New Sub-advisory Agreements to the shareholders for their approval, 
in accordance with section 15(c) of the Act.\2\ Applicants state that 
the Board will evaluate whether the terms of the New Sub-advisory 
Agreements, including the escrow provisions described below, are in the 
best interests of the Investment Companies and their shareholders.
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    \2\ Applicants acknowledge that, to the extent that the Board of 
any Investment Company cannot meet to approve a New Sub-advisory 
Agreement prior to the Acquisition Date, such Investment Company may 
not rely on the exemptive relief requested in this application.
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    7. Applicants submit that it will not be possible to obtain 
shareholder approval of the New Sub-advisory Agreements in accordance 
with section 15(a) of the Act prior to the Acquisition Date. Applicants 
state that each Investment Company will promptly schedule a meeting of 
shareholders to vote on the approval of the New Sub-advisory Agreements 
to be held within 150 days after the commencement of the Interim 
Period, but in of event later than July 23, 1999.
    8. Applicants also request an exemption to permit the Sub-advisers 
to receive from each Investment Company all fees earned under the New 
Sub-advisory Agreements during the Interim Period, if and to the extent 
the New Sub-advisory Agreements are approved by the shareholders of 
each Investment Company.\3\ Applicants propose to enter into an escrow 
arrangement with an unaffiliated financial institution (the ``Escrow 
Agent''). Advisory fees payable by the Investment Companies to the Sub-
advisers under the New Sub-advisory Agreements during the Interim 
Period will be paid into an interest-bearing escrow account maintained 
by the Escrow Agent. The amounts in the escrow account (including 
interest earned on such paid fees) will be paid to the Sub-advisers 
only after the New Sub-advisory Agreements are approved by the 
shareholders of the relevant Investment Company in accordance with 
section 15(a) of the Act. If shareholder approval is not obtained and 
the Interim Period has ended, the Escrow Agent will return the escrow 
amounts to the appropriate Investment Company. Before the release of 
any such escrow amounts, the Boards will be notified.
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    \3\ Applicants state that if the Acquisition Date precedes 
issuance of the requested order, the Sub-advisers will continue to 
serve as sub-advisers after the Acquisition Date (and prior to the 
issuance of the order) in a manner consistent with their fiduciary 
duty to continue to provide advisory services to the Investment 
Companies even though approval of the New Sub-advisory Agreements 
has not yet been secured from the Investment Companies' 
shareholders. Applicants also state that the Investment Companies 
may be required to pay, with respect to the period until receipt of 
the order, no more than the actual out-of-pocket costs to the Sub-
advisers for providing advisory services.
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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 registered investment 
company. Section 15(a) of the Act further requires that such written 
contract provide for its 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 an investment advisory or 
investment sub-advisory 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 Acquisition will result in a transfer 
of a controlling block of outstanding voting securities or ownership of 
each of the Sub-advisers. Accordingly, applicants state that an 
assignment of the Existing Sub-advisory Agreements will occur and the 
Existing Sub-advisory Agreements will terminate by their own terms.
    3. Rule 15a-4 under the Act provides, in pertinent part, that if an 
investment advisory contract with a registered investment company is 
terminated by an assignment, 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 that 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 of the benefits to the Sub-advisers and 
their shareholders arising from the Acquisition.

[[Page 7930]]

    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 note that the form and timing of the Acquisition were 
determined in response to a number of factors beyond the scope of the 
Act and substantially unrelated to the Investment Companies. Applicants 
state that it is not possible for the Investment Companies to obtain 
shareholder approval of the New Sub-advisory Agreements prior to the 
Acquisition Date. Applicants submit that the Boards will meet to 
approve the New Sub-advisory Agreements prior to the Acquisition Date, 
in accordance with section 15(c) under the Act, and the shareholders of 
the Investment Companies will be further protected by the establishment 
of the escrow account described in the application.
    6. Applicants submit that the Sub-advisers will take all 
appropriate steps to ensure that the scope and quality of advisory and 
other services provided to the Investment Companies during the Interim 
Period will be at least equivalent to the scope and quality of services 
previously provided. During the Interim Period, the Sub-advisers will 
operate under the New Sub-advisory Agreements, which will have 
substantially the same terms and conditions as the respective Existing 
Sub-advisory Agreements, except for the effective dates, the escrow 
provisions and terms relating to the Servicing Agreement. Applicants 
state that the fees to be paid during the Interim Period will not be 
greater than the fees currently paid by the Investment Companies. 
Applicants also assert that allowing the implementation of the New Sub-
advisory Agreements will ensure that there will be no disruption to the 
investment program and the delivery of related services to the 
Investment Companies because the personnel that provide such services 
to the Investment Companies will remain substantially the same as 
before the Acquisition Date.

Applicant's Conditions

    Applicants agree as conditions to the issuance of the exemptive 
order requested by the application that:
    1. The New Sub-advisory Agreements to be implemented following the 
commencement of the Interim Period will be substantially the same as 
the respective Existing Sub-advisory Agreements, except for the 
effective dates, the termination dates, the escrow provisions and terms 
relating to the Servicing Agreement.
    2. Fees payable to a Sub-adviser by an Investment Company for the 
period covered by the order will be maintained during the Interim 
Period in an interest-bearing escrow account (including interest earned 
on such amounts), and will be paid: (a) to the Sub-adviser after the 
requisite approval by shareholders is obtained; or (b) in the absence 
of such approval by the end of the Interim Period, to the relevant 
Investment Company.
    3. Each Investment Company will promptly schedule a meeting of 
shareholders to vote on approval of the New Sub-advisory Agreements to 
be held within 150 days after the commencement of the Interim Period, 
but in no event later than July 23, 1999.
    4. The Sub-advisers, not the Investment Companies, will pay the 
costs of preparing and filing the application and the costs relating to 
the solicitation of approval of the Investment Companies' shareholders 
of the New Sub-advisory Agreements.
    5. The Sub-advisers will take all appropriate steps to ensure 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 directors who are not ``interested persons'' of the 
Investment Companies, as defined in section 2(a)(19) of the Act 
(``Disinterested Directors''), to the scope and quality of services 
they previously provided. In the event of any material change in the 
personnel providing services pursuant to the New Sub-advisory 
Agreements, the Sub-advisers will apprise and consult with the Boards 
of the affected Investment Companies in order 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 SEC, by the Division of Investment Management, pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-3830 Filed 2-16-99; 8:45 am]
BILLING CODE 8010-01-M