[Federal Register Volume 61, Number 224 (Tuesday, November 19, 1996)]
[Notices]
[Pages 58913-58915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29553]


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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 22328; 812-10244]


The Enterprise Group of Funds, Inc., et al.; Notice of 
Application

November 13, 1996.
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: The Enterprise Group of Funds, Inc. (``Enterprise Group''), 
Enterprise Accumulation Trust (``Accumulation Trust'') (collectively 
with Enterprise Group, ``Funds'') and Enterprise Capital Management, 
Inc. (``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 permitting the 
Adviser to enter into new or amended agreements with the Funds' 
subadvisers without shareholder approval.

FILING DATES: The application was filed on July 11, 1996, and amended 
on September 9, 1996 and November 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 
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 December 9, 
1996, 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 such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants, c/o Catherine R. McClellan, Esq., Enterprise Capital 
Management, Inc., Atlanta Financial Center, 3343 Peachtree Road, N.E., 
Suite 450, Atlanta, Georgia 30326-1022.

FOR FURTHER INFORMATION CONTACT: Harry Eisenstein, Staff Attorney, at 
(202) 942-0552, or Mercer E. Bullard, 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.

Applicant's Representations

    1. Enterprise Group, registered under the Act as an open-end 
management investment company, is organized as a Maryland corporation 
that currently has ten separate investment portfolios (``Group 
Portfolios''). Each Group Portfolio is structured in three classes of 
shares, Class A, Class B, and Class Y. Class A shares of each Group 
Portfolio, other than the Money Market Porfolio, are offered at net 
asset value plus a front-end sales charge, for which a contingent 
deferred sales charge is substituted for purchases exceeding $1 
million. Class A shares of the Money Market Portfolio are not subject 
to any sales charge. Class B shares are subject to a declining 
contingent deferred sales charge. Class A shares and Class B shares 
(including those issued by the Money Market Portfolio) pay distribution 
fees under a plan adopted under rule 12b-1 under the Act. Class Y 
shares are not subject to any sales charge.
    2. Accumulation Trust, registered under the Act as an open-end 
management investment company, is organized as a Massachusetts business

[[Page 58914]]

trust that currently has five separate investment portfolios. (``Trust 
Portfolios'' and collectively with the Group Portfolios, 
``Portfolios''). Trust Portfolios shares are sold exclusively to 
separate accounts of the Municipal Life Insurance Company of New York 
(``MONY'') and a life insurance company affiliate of MONY that were 
established to fund certain Flexible Payment Variable Annuity and Life 
Insurance contracts. Shares of each Trust Portfolio are priced at the 
net asset value of such Portfolio, without sales charges, or surrender 
or redemption fees; however, MONY imposes certain charges upon a 
complete or partial surrender of a policy. Each fund is managed by the 
Adviser.
    3. The Funds have each entered into an investment advisers 
agreement with the Adviser, which is registered as an investment 
adviser under the Investment Advisers Act of 1940. The Adviser is 
responsible for conducting all operations of the Funds, except for 
those operations which have been contracted to the transfer agent and 
custodian. The Adviser is also responsible for selecting portfolio 
managers (``Portfolio Managers''), subject to the review and approval 
of the Board of Directors or Trustees of each Fund (``Boards''), to 
provide investment advice for the Portfolios. A Portfolio may be 
managed by one or more Portfolio Managers. Currently, no Porfolio has 
more than a single Portfolio Manager. The Adviser renders portfolio 
advice directly to one of the Group Portfolios.
    4. Each Portfolio Manager's responsibilities are limited to 
providing investment advice with respect to a Portfolio's assets and 
directing securities transactions pursuant to such advice. Such 
transactions must accord with investment objectives and restrictions of 
the Portfolio set forth in the Fund's registration statement. The Funds 
pay the Adviser a fee for its services as a percentage of the value of 
the average daily net assets of each Portfolio and, in turn, the 
Adviser pays the fee of each Portfolio Manager. One of the Portfolio 
Managers, 1740 Advisers, Inc. is an affiliated person of the Adviser, 
as defined in section 2(a)(3) of the Act. None of the other Portfolio 
Managers is an affiliated person of the Adviser within the meaning of 
section 2(a)(3).
    5. Applicants request an exemption from section 15(a) of the Act 
and Rule 18f-2 thereunder to permit the Adviser to enter into new and 
amended agreements with Portfolio Managers (``Portfolio Manager 
Agreements'') without obtaining shareholder approval.\1\ Such relief 
would include any Portfolio Manager Agreement necessitated because the 
prior Portfolio Manager Agreement was terminated as a result of an 
``assignment,'' as defined in section 2(a)(4) of the Act.
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    \1\ Applicants also request relief for any series of the Funds 
organized in the future, and any open-end management investment 
companies in the future advised by the Adviser or by a person 
controlling, controlled by, or under common control with the Adviser 
that operates in substantially the same manner as either Fund and 
complies with the conditions to the requested order as set forth in 
the application.
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Applicants' Legal Analysis

    1. Section 15(a) of the Act makes it unlawful for any person to act 
as an 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 assert that the primary party on which an investor in 
a Fund will rely will be the Adviser. Applicants also believe that 
shareholders will understand and expect that the Adviser will change 
Portfolio Managers when appropriate. The Funds' prospectuses disclose 
information concerning the identity, ownership, qualifications and 
compensation of the Portfolio Managers in full compliance with Form N-
1A. In addition, information regarding a new Portfolio Manager or a 
material change in a Portfolio Manager Agreement would be disclosed in 
an information statement provided to shareholders to the same extent as 
would be set forth in a proxy statement.
    3. Applicants contend that the proposed arrangement would avoid the 
administrative burden and expense associated with a formal proxy 
solicitation, while allowing investors to make an informed decision 
regarding the purchase or retention of shares in a Portfolio. Since 
commencement of operations of the Adviser in 1987, seventeen changes in 
Portfolio Managers or material changes in Portfolio Manager Agreements 
for the Group Portfolios have been submitted for shareholder approval. 
The Adviser became the investment adviser to Accumulation Trust in 
1994.
    4. 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 state that the requested exemptions would be in accordance 
with the standards of section 6(c).

Applicants' Conditions

    Applicants agree that the order shall be subject to the following 
conditions:
    1. The Adviser will provide general management and administrative 
services to the Funds, including overall supervisory responsibility for 
the general management and investment of the Funds' securities 
portfolios, and, subject to review and approval by each Board with 
respect to its respective Portfolios, will (i) set the Portfolios' 
overall investment strategies; (ii) select Portfolio Managers; (iii) 
monitor and evaluate the performance of Portfolio Managers; (iv) 
allocate and, when appropriate, reallocate a Portfolio's assets among 
its Portfolio Managers in those cases where a Portfolio has more than 
one Portfolio Manager; and (v) implement procedures reasonably designed 
to ensure that the Portfolio Managers comply with the relevant Fund's 
investment objectives, policies, and restrictions.
    2. 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 its outstanding 
voting securities (or, in the case of Accumulation Trust, by the 
unitholders of any separate account for which Accumulation Trust serves 
as a funding medium), as defined in the Act, or, in the case of a new 
Portfolio whose public shareholders purchased shares on the basis of a 
prospectus containing the disclosure contemplated by condition 4 below, 
by the sole shareholder before offering of shares of such Portfolio to 
the public.
    3. Each Fund will furnish to its shareholders all information about 
a new Portfolio Manager or Portfolio Manager Agreement for one of its 
Portfolios that would be included in a proxy statement. Such 
information will include disclosure as to the level of fees to be paid 
to the Adviser and each Portfolio Manager of the Portfolio and any 
change in such information caused by the addition of a new Portfolio 
Manager or any proposed material change in a Portfolio Manager 
Agreement. Each Fund will meet this condition by providing its 
shareholders with an informal information statement complying with the 
provisions of Regulation 14C under the Securities Exchange Act of 1934 
and Schedule 14C

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thereunder. With respect to a newly retained Portfolio Manager, or a 
change in a Portfolio Manager Agreement, this information statement 
will be provided to shareholders of the Portfolio a maximum of sixty 
(60) days after the addition of the New Portfolio Manager or the 
implementation of any change in a Portfolio Manager Agreement. The 
information statement will also meet the requirements of Schedule 14A. 
Accumulation Trust will ensure that the information statement is 
furnished to the unitholders of any separate account for which 
Accumulation Trust serves as a funding medium.
    4. Each Fund will disclose in its prospectuses the existence, 
substance and effect of any order granted pursuant to the application. 
In addition, each Trust Portfolio will hold itself out to the public as 
employing the ``manager of managers'' approach described in the 
application. The prospectuses and any sales materials or other 
shareholder communications relating to a Trust Portfolio will 
prominently disclose that the Adviser has ultimate responsibility for 
the investment performance of the Portfolio due to its responsibility 
to oversee Portfolio Managers and recommend their hiring, termination, 
and replacement.
    5. No director, trustee or officer of the Funds or director or 
officer of 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 any Portfolio Manager 
except for (i) ownership of interests in the Adviser or any entity that 
controls, is controlled by or is under common control with the Adviser; 
or (ii) ownership of less than 1% of the outstanding securities of any 
class of equity or debt of a publicy-traded company that is either a 
Portfolio Manager or any entity that controls, is controlled by or is 
under common control with a Portfolio Manager.
    6. The Adviser will not enter into a Portfolio Manager Agreement 
with any Portfolio Manager that is an affiliated person, as defined in 
section 2(a) (3) of the Act, of the Adviser or the Funds other than by 
reason of serving as Portfolio Manager to one or more Portfolios 
(``Affiliated Portfolio Manager'') without such agreement, including 
the compensation to be paid thereunder, being approved by the 
shareholders of the applicable Portfolio.
    7. At all times, a majority of the members of the Board will be 
persons each of whom is not an ``interested person'' of the respective 
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.
    8. When a Portfolio Manager change is proposed for a Portfolio with 
an Affiliated Portfolio Manager, the Board, including a majority of the 
Independent Directors, will make separate finding, reflected in the 
Board's minutes, that such change is in the best interests of the 
Portfolio and its shareholders (or, in the case of Accumulation Trust, 
of the unitholders of any separate account for which Accumulation Trust 
serves as a funding medium) and does not involve a conflict of interest 
from which the Adviser or the Affiliated Portfolio Manager derives an 
inappropriate advantage.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-29553 Filed 11-18-96; 8:45 am]
BILLING CODE 8010-01-M