[Federal Register Volume 61, Number 159 (Thursday, August 15, 1996)]
[Notices]
[Pages 42452-42453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20830]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22129; 812-7754]
Accessor Funds, Inc., et al.; Notice of Application
August 9, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (``Act'').
-----------------------------------------------------------------------
APPLICANTS: Accessor Funds, Inc. (``Fund''), Bennington Capital
Management L.P. (``Adviser'') , and each open-end management investment
company in the future advised by the Adviser.
RELEVANT ACT SECTIONS: Exemption requested under section 6(c) of the
Act from the provisions of section 15(a) of the Act and rule 18f-2
thereunder.
SUMMARY OF APPLICATION: Applicants request an order to permit the Fund
and the Adviser to enter into and amend contracts with the Fund's
subadvisers without prior shareholder approval.
FILING DATES: The application was filed on July 16, 1991, and amended
on June 19, 1996, and August 6, 1996.
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
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on September 3,
1996, and should be accompanied by proof of service on applicant, 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: Fund and Adviser, 1420 Fifth Avenue, Suite 3130,
Seattle, Washington 98101.
FOR FURTHER INFORMATION CONTACT:
Mercer E. Bullard, Branch Chief, (202) 942-0564, or Elizabeth G.
Osterman, Assistant Director, (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.
Applicants' Representations
1. The Fund, a Maryland corporation that has eight series
(``Portfolios''), is registered under the Act as an open-end management
investment company. Each Portfolio, except for the U.S. Government
Money Portfolio, employs one subadviser (``Money Manager'') to manage
all or part of the Portfolio's assets. The U.S. Government Money
Portfolio is managed by the Adviser. The Adviser, in the future, may
manage other Portfolios. Although no Portfolio currently has more than
one Money Manager, the Fund is structured so that each Portfolio could
have more than one.
2. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 and as a transfer agent under the
Securities Exchange Act of 1934. The Adviser manages the Portfolios
under a management agreement (``Management Agreement'') with the Fund.
Under the Management Agreement, the Adviser acts as manager and
administrator of the Fund, and provides or oversees the providing of
all general management, administration, investment advisory and
portfolio management services for the Fund. The Adviser also is
responsible for supervising Money Managers, subject to oversight by the
Fund's board of directors, and recommending Money Managers for board
approval. The Adviser is paid a fee by each Portfolio, based on a
percentage of the Portfolio's average daily net assets, for acting as
manager and administrator to the Fund.
3. Each Money Manager has discretionary authority to invest that
portion of a Portfolio's assets assigned to it, and its
responsibilities are limited to this role. Each Money Manager receives
an advisory fee that is paid by the Portfolio and based on the assets
of the Portfolio.
4. Pursuant to a proxy solicitation made August 15, 1995, the
Fund's shareholders approved a proposal, conditioned on the receipt of
the requested order, to allow the Fund and the Adviser to enter into
advisory agreements with Money Managers (``Money Manager Agreements'')
without shareholder approval.
5. Applicants request an exemption from section 15(a) of the Act
and rule 18f-2 thereunder to permit the Fund and the Adviser to enter
into and amend Money Manager Agreements without prior shareholder
approval. Such relief would include any Money Manager Agreement that
terminates as a result of an ``assignment,'' as defined in section
2(a)(4) of the Act.
Applicants' Legal Analysis
1. Section 15(a) of the Act 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 company's outstanding voting securities. Rule 18f-2 under the Act
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 that a change in a Money Manager or Money
Manager Agreement is not an event that significantly alters the nature
of the shareholder's investment and thus does not implicate the policy
concerns requiring shareholder approval. Applicants assert that the
Fund's use of the manager of managers structure will be a principal
reason that shareholders invest in the Fund. Shareholders rely
primarily on the Adviser to manage the Fund, including changing Money
Managers when appropriate. Shareholders will receive an information
statement about changes in Money Managers or Money Manager Agreements
that provides the information that would be included in a proxy
solicitation.
3. Applicants contend that requiring shareholder approval of Money
Managers and Money Manager Agreements would cause unnecessary expense
to the Portfolios and harmful delays in executing changes in Money
Managers or the Agreements. Changes to Money Manager Agreements have
required at least four special shareholder meetings since 1992.
Applicants expect the direct expenses of convening a special meeting to
be at least $8 to $20 per shareholder account.
[[Page 42453]]
Applicants contend that, because the Fund is not required under state
law to hold annual shareholder meetings, these expenses need not be
incurred unless a shareholder meeting is specifically required,
4. Applicants assert that shareholders have determined, by
approving the Management Agreement, to rely on the Adviser's ability to
recommend and monitor Money Managers. Thus, shareholders understand and
expect the Adviser to be primarily responsible for changing Money
Managers or Money Manager Agreements.
5. Applicants argue that it is not necessary to require shareholder
approval to implement the applicable shareholder protections of the Act
because changes in Money Managers or Money Manager Agreements that are
not approved by shareholders will be negotiated at arms-length with
unaffiliated Money Managers.
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
purposes fairly intended by the policy and provisions of the Act.
Applicants believe that the requested order is 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 shall be subject to the following
conditions:
1. Before a Portfolio may rely on the order requested in the
application, the operation of the Portfolio in the manner described in
the application will be approved by a majority of the outstanding
voting securities, as defined in the Act, of the Portfolio or, in the
case of a new Portfolio whose public shareholders purchase shares on
the basis of a prospectus containing the disclosure contemplated by
condition 2 below, by the sole initial shareholder(s) before offering
shares of such Portfolio to the public.
2. Any Portfolio relying on the requested relief will disclose in
this prospectus the existence, substance, and effect of any order
granted pursuant to the application.
3. The Adviser will provide management and administrative services
to the Fund and, subject to the review and approval of the Fund's
Board, will: set the Portfolios' overall investment strategies; select
Money Managers; allocate and, when appropriate, reallocate each
Portfolio's assets among Money Managers; monitor and evaluate Money
Manager performance; and oversee Money Manager compliance with the
Portfolio's investment objectives, policies, and restrictions.
4. A majority of the Fund's board will be persons who are not
``interested persons'' of the Fund (as defined in section 2(a)(19) of
the Act) (``Independent Directors''), and the nomination of new or
additional Independent Directors will be placed within the discretion
of the then existing Independent Directors.
5. The Fund will not enter into a Money Manager Agreement with any
Money Manager that is an ``affiliated person'' of the Fund or the
Adviser (as defined in section 2(a)(3) of the Act) (``Affiliated Money
Manager'') other than by reason of serving as Money Manager to one or
more Portfolios without such Agreement, including the compensation to
be paid thereunder, being approved by the shareholders of the
applicable Portfolio.
6. When a Money Manager change is proposed for a Portfolio with an
Affiliated Money Manager, the Fund's directors, including a majority of
the Independent Directors, will make a separate finding, reflected in
the Fund's board minutes, that such change is in the best interests of
the Portfolio and its shareholders and does not involve a conflict of
interest from which the Adviser or the Affiliated Money Manager derives
an inappropriate advantage.
7. No director, trustee, or officer of the Fund or the Adviser will
own directly or indirectly (other than through a pooled investment
vehicle that is not controlled by any such director, trustee, or
officer) any interest in a Money Manager except for ownership of (i)
interests in the Adviser or any entity that controls, is controlled by,
or is under common control with the Adviser, or (ii) 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. Within 60 days of the hiring of any new Money Manager or the
implementation of any proposed material changed in a Money Manager
Agreement, the Adviser will furnish shareholders all information about
the new Money Manager or Money Manager Agreement that would be included
in a proxy statement. Such information will include any change in such
information caused by the addition of a new Money Manager or any
proposed material change in a Money Manager Agreement. To meet this
condition, the Adviser will provide shareholders with an information
statement meeting the requirements of Regulation 14C, Schedule 14C, and
Item 22 of Schedule 14A under the Securities Exchange Act of 1934.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-20830 Filed 8-14-96; 8:45 am]
BILLING CODE 8010-01-M