[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]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.


[[Page 43414]]


    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