[Federal Register Volume 64, Number 153 (Tuesday, August 10, 1999)]
[Notices]
[Pages 43412-43414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20490]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23933; 812-11606]
Amway Mutual Fund Trust et al.; Notice of Application
August 3, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
section 15(a) of the Act and rule 18f-2 under the Act.
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SUMMARY OF APPLICATION: The requested order would permit applicants,
Amway Mutual Fund Trust (the ``Trust''), Amway Management Company
(``Amway''), and Activa Asset Management LLC (``Activa'' and together
with Amway, the ``Managers''), to enter into and materially amend
subadvisory agreements without obtaining shareholder approval.
FILING DATES: The application was filed on February 24, 1999, and was
amended on July 13, 1999. Applicants have agreed to file an amendment
during the notice period, the substance of which is reflected in this
notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on August 30, 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
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 Commission's Secretary.
ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC
20549-0609; Applicants, 2905 Lucerne SE, Grand Rapids, MI 45546.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 942-0574 or George J. Zornada, 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 at the
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington,
DC 20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. The Trust, a Delaware business trust, is registered under the
Act as an open-end management investment company and operates as a
series company. The only series of the Trust presently offered to the
public is Amway Mutual Fund (``Fund''). The Trust has recently
authorized four additional series (``New Funds'') (together with the
Fund, the ``Funds'').\1\
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\1\ Applicants also request that the relief apply to all
registered open-end management investment companies or series
thereof that are now, or in the future will be, advised by the
Managers or any entity controlling, controlled by, or under common
control with the Managers and which operate in substantially the
same manner as the Trust (``Future Funds''). Applicants state that
all existing investment companies that currently intend to rely on
the requested order have been named as applicants, and any Future
Funds that subsequently rely on the requested order will comply with
the terms and conditions in the application.
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2. Anyway is an investment adviser registered under the Investment
Advisers Act of 1940 (``Advisers Act''). Amway serves as investment
adviser to the Fund under an investment management agreement between
Amway and the Fund that was approved by the Trust's board of trustees
(``Board''), including a majority of trustees who are not ``interested
persons,'' as defined in section 2(a)(19) of the Act (``Independent
Trustees''), and the shareholders of the Fund (the ``Management
Agreement''). Activa, an investment adviser which will be registered
under the Advisers Act, will serve as investment adviser to the Fund
and the New Funds under an investment management agreement between
Activa and the Funds that was approved by the Board, including a
majority of the Independent Trustees, and will be approved by the
initial shareholders of the New Funds before they are offered to the
public and by shareholders of the Fund at a meeting scheduled to be
held on August 30, 1999 (the ``New Management Agreement'').\2\ The
Managers are under
[[Page 43413]]
common control and have the same principal officers and employees.
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\2\ The New Management Agreement will not be effective until the
effective date of Activa's registration under the Advisers Act. If
the New Management Agreement is not approved by shareholders of the
Fund, Amway will continue to serve as investment adviser to the
Fund.
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3. The investment management responsibilities under the Management
Agreement and the New Management Agreement (together the ``Management
Agreement'') are essentially the same. Under the Management Agreement,
the Managers have overall general supervisory responsibility for the
investment management of the Funds and, subject to the supervision of
the Board, the power to select subadvisers (``Subadvisers'') to provide
portfolio management services for all or a portion of a Fund. The Fund
currently has, and each of the New Funds is expected to have, a single
subadviser.
4. The Managers will select Subadvisers based on a continuing
quantitative and qualitative evaluation of their skills and proven
abilities in managing assets pursuant to a particular investment style.
A Subadviser performs services pursuant to a written investment
subadvisory agreement between the Subadviser and the Manager
(``Subadvisory Agreement''). The Subadvisers are, and will be,
registered under the Advisers Act. The Manager pays the Subadvisers out
of the fees the Manager receives from the Trust.
5. Applicants request an order to permit the Managers to enter
into, and materially amend Subadvisory Agreements without obtaining
shareholder approval. The requested relief will be extend to a
Subadviser that is an ``affiliated person,'' as defined in section
2(a)(3) of the Act, of the Trust or the Managers, other than be reason
of serving as a Subadviser to one or more of the Funds (an ``Affiliated
Subadviser'').
Applicants's Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is
unlawful for any person to act as an investment adviser to a registered
investment company except under a written contract approved by majority
of the investment 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 the matter if the Act
requires shareholder approval.
2. Section 6(c) of the Act authorizes the Commission to exempt
persons or transactions from the provisions of the Act to the extent
that the exemption is necessary or appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policies and provisions of the Act. Applicants believe
that their requested relief meets this standard for the reasons
discussed below.
3. Applicants assert that investors rely upon the Manager to select
one or more Subadvisers for the Fund. Applicants contend that the role
of the Subadviser, from the perspective of the investor, is comparable
to that of the individual portfolio managers employed by other
investment advisory firms. Applicants also contend that requiring
shareholder approval of Subadvisory Agreements would impose expenses
and unnecessary delays on the Funds, and could prevent the prompt
implementation of actions deemed advisable by the Manager and the
Board. Applicants note that the Management Agreements will continue to
be fully subject to section 15 of the Act and rule 18f-2 under the Act.
Applicants' Conditions
Applicants agree that the requested order will be subject to the
following conditions:
1. The Managers will provide management and administrative services
to the Funds and, subject to the review and approval of the Board will:
(i) Set the overall investment strategies of the Funds; (ii) evaluate
and recommend Subadvisers; (iii) allocate, and when appropriate,
reallocate, the assets of the Funds among Subadvisers in those cases
where a Fund has more than one Subadviser; and (iv) monitor and
evaluate the investment performance of the Subadvisers, including their
compliance with the investment objectives, policies, and restrictions
of the Funds.
2. Before any Fund may rely on the order requested in the
application, the operation of the Fund in the manner described in this
application will be approved by a majority of its outstanding voting
securities, as defined in the Act, or, in the case of a Fund whose
public shareholders purchased shares on the basis of a prospectus
containing the disclosure contemplated by condition 4 below, by the
sole initial shareholder(s) before offering shares of such Fund to the
public.
3. Within 90 days of the hiring of any Subadviser, the Managers
will furnish shareholders of the affected Fund with all information
about such Subadviser that would be included in a proxy statement,
including any change in such disclosure caused by the addition of the
new Subadviser. The Managers will meet this condition by providing
shareholders with an information statement meeting the requirements of
Regulation 14C and Schedule 14C under the Securities Exchange Act of
1934, as amended (``1934 Act''). The information statement also will
meet the requirements of Item 22 of Schedule 14A under the 1934 Act.
4. The Trust and any Future Fund will disclose in its prospectus
the existence, substance, and effect of any order granted pursuant to
the application. In addition, each Fund will hold itself out to the
public as employing the ``manager of managers'' approach described in
the application. The prospectus will prominently disclose that the
Managers, subject to Board oversight, have the ultimate responsibility
for the investment performance of the Fund due to their responsibility
to oversee Subadvisers and recommend their hiring, termination, and
replacement.
5. No director, trustee, or officer of the Trust, the Funds, or a
Future Fund, or director or officer of the Managers, 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 Subadviser except for (a) ownership of interests in the Manager or
any entity that controls, is controlled by, or under common control
with the Manager, or (b) ownership of less than 1% of the outstanding
securities of any class of equity or debt securities of any publicly
traded company that is either a Subadviser or controls, is controlled
by, or is under common control with a Subadviser.
6. Neither the Trust nor the Managers will enter into subadvisory
Agreements on behalf of a Fund with any Affiliated Subadviser without
such agreement, including the compensation to be paid thereunder, being
approved by the shareholders of the applicable Fund.
7. At all times, a majority of the Board will be Independent
Trustees, and the nomination of new or additional Independent Trustees
will be placed within the discretion of the then-existing Independent
Trustees.
8. When a change of Subadviser is proposed for a Fund with an
Affiliated Subadviser, the Board including a majority of the
Independent Trustees, will make a separate finding, reflected in the
minutes of meetings of the Board that any such change of Subadvisers is
in the best interest of the Fund and its shareholders and does not
involve a conflict of interest from which the Manager or Affiliated
Subadviser derives an inappropriate advantage.
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For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-20490 Filed 8-9-99; 8:45 am]
BILLING CODE 8010-01-M