[Federal Register Volume 60, Number 154 (Thursday, August 10, 1995)]
[Notices]
[Pages 40875-40876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19716]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-21268; 812-8892]
TIFF Investment Program, Inc. and Foundation Advisers Inc.;
Notice of Application
Dated: August 3, 1995.
Agency: Securities and Exchange Commission (``SEC'').
Action: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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Applicants: TIFF Investment Program, Inc. (``TIP'') and Foundation
Advisers Inc. (``FAI'').
Relevant Act Sections: Order requested under section 6(c) for an
exemption from section 15(a) and rule 18f-2.
Summary of Application: TIP is a registered investment company advised
by FAI. FAI oversees the selection of other investment advisers for the
TIP portfolios, monitors such investment advisers, and allocates assets
among them. The order would permit an investment adviser other than FAI
to serve as an investment adviser to one or more portfolios of TIP
without receiving prior shareholders approval.
Filing Dates: The application was filed on March 18, 1994, and amended
on July 6, 1994, October 21, 1994, and July 19, 1995.
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 August 29, 1995,
and should be accompanied by proof of service on the 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 NW., Washington, DC 20549.
Applicants, c/o AMT Capital Services, Inc., 430 Park Avenue, 17th
Floor, New York, New York 10022.
For Further Information Contact: Marc Duffy, Senior Attorney, at (202)
942-0565, or C. David Messman, 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.
Applicants' Representations
1. TIP is a registered open-end management investment company
consisting of seven series: TIFF U.S. Equity Fund, TIFF International
Equity Fund, TIFF Emerging Markets Fund, TIFF Bond Fund, TIFF Short-
Term Fund, TIFF Global Equity Fund, and TIFF Multi-Asset Fund (each a
``Fund,'' and together, the ``Funds''). Investment in TIP is available
only to grantmaking foundations and other organizations that qualify
for exemption from federal income taxation under Section 501(c)(3) of
the Internal Revenue Code of 1986 (``501(c)(3) organizations''), other
than educational endowments.
2. FAI is registered as an investment adviser under the Investment
Advisers Act of 1940. FAI serves as investment adviser for the TIP
Funds. FAI is a not-for-profit corporation the purpose of which is to
facilitate investment by foundations and other 501(c)(3) organizations,
other than educational endowments, in securities and other assets. The
fee schedule between TIP and FAI reflects the essentially cost-
recovery, not-for-profit orientation of the undertaking.
3. Applicants believe that returns can be enhanced by careful
selection and blending of styles of several investment managers within
a single asset class. Accordingly, the Funds are structured as multi-
manager investment vehicles for implementation of long-term asset
allocation strategies. Investment advisory services for each Fund will
be provided by two or more outside money managers, each of whom will
have different but complementary styles and specific, targeted
performance objectives. Applicants believe that TIP's use of multiple
managers for each Fund will be a principal reason that foundations will
invest in the TIP Funds.
4. Applicants seek an exemption from section 15(a) and rule 18f-2
to permit an investment adviser other than FAI (a ``Money Manager'') to
serve as an investment adviser to one or more series funds established
and maintained by TIP under a written contract that has not been
approved by a vote of the majority of the outstanding voting securities
of the TIP series, including a contract that has terminated as a result
of its ``assignment.'' Although shareholders will not vote on Money
Manager changes, applicants will provide shareholders with an
information statement that includes all the information that would be
included in proxy statement within 60 days of the hiring of any new
Money Manager or the implementation of any proposed material change in
a Money Manager contract.
5. FAI bears responsibility for identifying, evaluating, selecting,
and monitoring Money Managers, formulating and refining objectives and
guidelines appropriate to each Money Manager, and evaluating and
negotiating advisory fees. To discharge its duties, FAI must recommend
the replacement of Money Managers, and propose changes in the agreement
between each Money Manager and the TIP Fund that employs it.
6. TIP will rely on FAI to monitor the performance of each Money
Manager employed by TIP, as well as other attributed that could affect
a Money Manager's future performance (e.g., growth in assets under
management, personnel turnover, etc.). Applicants believe that it is in
the best interest of TIP's shareholders for TIP's directors to be able
to respond promptly to FAI's recommendations by negotiating changes in
Money Managers' contracts or, if necessary, by adding one or more new
Money Managers.
[[Page 40876]]
Applicants' Legal Analysis
1. Section 15(a) makes it unlawful for any person to act as
investment adviser to a registered investment company except pursuant
to a written contract that has been approved by a majority of the
investment company's outstanding voting securities. Rule 18f-2 provides
that each series or class of stock in a series company affected by a
matter must approve such matter if the Act requires shareholder
approval.
2. Applicants believe the Funds would incur substantial unnecessary
expenses if they were required to obtain shareholder approval of Money
Manager changes deemed necessary for the effective functioning of TIP's
multi-manager program. Further, the delay associated with holding a
meeting solely for this purpose would hamper FAI in performing its
manager selection and allocation duties.
3. TIP's multi-manager structure is prominently featured in its
Prospectus and Statement of Additional Information. Descriptions of the
criteria used by FAI to select Money Managers and to establish
appropriate compensation structures for the Money Managers, as well as
descriptions of each Money Manager, are included in TIP's Prospectus
and Statement of Additional Information.\1\
\1\ Since TIP commenced operations in May 1994, it has disclosed
in its prospectus that it was seeking an exemptive order from the
SEC exempting it from the requirement that each agreement between
TIP and a Money Manager be approved by a vote of a majority of the
shareholders of the affected Fund.
4. Given TIP's multi-manager structure, a decision to hire a new
Money Manager for the TIP Funds is closely analogous to the decision by
a money management firm to hire another portfolio manager or analyst.
Under TIP's investment advisory agreements, the duties and
responsibilities of a Money Manager employed by TIP is limited to the
management of a defined portion of a Fund's assets allocated to the
Money Manager by FAI. No Money Manager has responsibility for the on-
going administration and corporate maintenance of TIP or for the
servicing of its shareholders, those functions being exclusively the
responsibility of FAI and AMT Capital Services, Inc., which acts
pursuant to contract with TIP as administrator and distributor of the
TIP Funds.
5. The relationship between FAI acting on behalf of TIP on the one
hand, and a Money Manager on the other, is entirely at arm's length.
The Money Managers employed by TIP have not sponsored the TIP Funds.
The order will be conditioned to ensure that there can be no officer or
director of TIP or FAI who will own (other than through a pooled
investment vehicle) any interest in a Money Manager except for
ownership of less than 1% of the outstanding securities of a publicly-
traded company that is a Money Manager or an entity that controls, is
controlled by, or is under common control with a Money Manager.
6. Section 6(c) of the Act 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
policies and purposes fairly intended by the policies and provisions of
the Act. Applicants believe that the requested relief meets this
standard.
Applicants' Conditions
Applicants agree that the requested exemption will be subject to
the following conditions:
1. FAI will not enter into a Money Manager contract with any Money
Manager that is an affiliated person (as defined in section 2(a)(3) of
the Act) of TIP or FAI other than by reason of serving as a Money
Manager to one or more of the Funds (an ``Affiliated Money Manager'')
without such agreement, including the compensation to be paid
thereunder, being approved by the shareholders of the applicable Fund.
2. At all times, a majority of the directors of TIP will be persons
each of whom is not an ``interested person'' of TIP (as defined in
section 2(a)(19) of the Act) (the ``Independent Directors''), and the
nomination of new or additional Independent Directors will be placed
with the discretion of the then existing Independent Directors.
3. When a Money Manager change is proposed for a Fund with an
Affiliated Money Manager, the directors of TIP, including a majority of
the Independent Directors, will make a separate finding, reflected in
TIP's board minutes, that such change is in the best interests of the
Fund and its shareholders and does not involve a conflict of interest
from which FAI or the Affiliated Money Manager derives an inappropriate
advantage.
4. FAI will provide general management and administrative services
to TIP, and, subject to review and approval by TIP's directors, will:
(a) set the Funds' overall investment strategies; (b) select Money
Managers; (c) allocate and, when appropriate, reallocate the Funds'
assets among Money Managers; (d) monitor and evaluate the performance
of Money Managers; and (e) ensure that the Money Managers comply with
TIP's investment objectives, policies, and restrictions.
5. New Funds of TIP created after the issuance of the order will
disclose their reliance on the order in their prospectuses and will
have such reliance approved by consent of their sole shareholder.
6. Within 60 days of the hiring of any new Money Manager or the
implementation of any proposed material change in a Money Manager
contract, FAI will furnish shareholders all information about a new
Money Manager or Money Manager contract that would be included in a
proxy statement. Such information will include any change in such
disclosure caused by the addition of a new Money Manager or any
proposed material change in the Fund's Money Manager contract. FAI will
meet this condition by providing shareholders, within 60 days of the
hiring of the Money Manager or the implementation of any material
change to the terms of a Money Manager contract, with an information
statement meeting the requirements of Regulation 14C and Schedule 14C
under the Securities Exchange Act of 1934 (the ``Exchange Act''). The
information statement also will meet the requirements of Schedule 14A
under the Exchange Act.
7. No director or officer of TIP or FAI will own directly or
indirectly (other than through a pooled investment vehicle that is not
controlled by any such director or officer) any interest in a Money
Manager except for: (a) ownership of interests in FAI or any entity
that controls, is controlled by, or is under common control with FAI;
or (b) ownership of less than 1% of the outstanding securities of any
class of equity or debt of a publicly-traded company that is either a
Money Manager or an entity that controls, is controlled by, or is under
common control with a Money Manager.
8. TIP will disclose in all prospectuses relating to any Fund the
existence, substance, and effect of any order granted pursuant to the
application.
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 95-19716 Filed 8-9-95; 8:45 am]
BILLING CODE 8010-01-M