[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