[Federal Register Volume 65, Number 75 (Tuesday, April 18, 2000)]
[Notices]
[Pages 20841-20843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9635]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24388, 812-11636]


The Vantagepoint Funds and Vantagepoint Investment Advisers, LLC; 
Notice of Application

April 11, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``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: Applicants, The Vantagepoint Funds (the 
``Fund'') and Vantagepoint Investment Advisers, LLC (the ``Adviser'') 
request an order that would permit applicants to enter into and 
materially amend subadvisory agreements without shareholder approval.

Filing Dates: The application was filed on June 2, 1999 and amended on 
October 6, 1999 and February 9, 2000. 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 applicant with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on May 5, 2000 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 could 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 Commission's 
Secretary.

ADDRESSES:  Secretary, Securities and Exchange Commission, 450 5th 
Street, NW, Washington, DC 20549-0609. Applicant, 777 North Capitol 
Street, NE, Washington, DC 20002.

FOR FURTHER INFORMATION CONTACT:  Lawrence W. Pisto, Senior Counsel, at 
(202) 942-0527, or George J. Zornada, Branch Chief at (202) 942-0564, 
Office of Investment Company Regulation, Division of Investment 
Management.

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 5th Sreet NW, Washington, DC 
20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Fund, a Delaware business trust, is registered under the Act 
as an open-end management investment company. The Fund is currently 
comprised of thirteen different series (each a ``Portfolio,'' and 
collectively the ``Portfolios''), each of which has its own investment 
objectives and policies. The Adviser, a Delaware limited liability 
company, serves as investment adviser to each of the Portfolios, and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act''). \1\
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    \1\ Applicants also request relief with respect to any future 
Portfolios, and any other registered open-end management investment 
company or portfolio thereof, that is (i) managed in a manner 
consistent with the application and (ii) for which the adviser or 
any entity controlling, controlled by, or under common control with 
the Adviser serves as investment adviser (``Future Fund''). The Fund 
is the only existing ivnestment company that currently intends to 
rely on the order.

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[[Page 20842]]

    2. The Fund has entered into an investment advisory agreement with 
the Adviser (``Management Agreement''). The Management Agreement has 
been approved by the Fund's board of trustees (the ``Board''), 
including a majority of the trustees who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act, of the Fund or 
the Adviser (``Independent Trustees''), as well as the Fund's initial 
shareholder. The Fund and the Adviser have entered into agreements 
(``Subadvisory Agreements'') with one or more subadvisers 
(``Subadvisers''). Under the Management Agreement, the Adviser has 
overall supervisory responsibility for the investment program of the 
Portfolios and recommends to the Board the selection of Subadvisers to 
provide one or more Portfolios with day-to-day portfolio management 
services. The Portfolios currently have 21 Subadvisers, each of which 
is an investment adviser registered or exempt from registration under 
the Advisers Act. Future Subadvisers will be registered or exempt from 
registration under the Advisers Act. Each Portfolio pays the Adviser a 
fee based on the net assets of the Portfolio.
    3. The Adviser recommends each Subadviser based on, among other 
things, an evaluation of the Subadviser's investment style, experience, 
personnel, performance history, fees, consistency of return and 
compliance and control capabilities. The Adviser reviews, monitors and 
reports to the Board regarding the performance and procedures of the 
Subadvisers. The Adviser may recommend to the board reallocation of 
assets of a Portfolio among Subadvisers, if necessary, and the Adviser 
also may recommend hiring additional Subadvisers or the termination of 
Subadvisers in appropriate circumstances. Each Subadviser will be paid 
directly by the Fund at a rate that has been negotiated with the 
Adviser and approved by the Board. Applicants also state that, as a 
condition to the requested order, shareholders of a Portfolio will 
approve any change to a Subadvisory Agreement if such change would 
result in an increase in the overall management and advisory fees 
payable by the Portfolio that have been approved by the shareholders of 
the Portfolio.
    4. Applicants request an order to permit the Adviser, subject to 
oversight by the Board, to enter in and materially amend Subadvisory 
Agreements without shareholder approval. The requested relief will not 
extend to a Subadviser that is an affiliated person, as defined in 
section 2(a)(3) of the Act, of the Fund or the Adviser, other than by 
reason of serving as a Subadviser to me or more of the Portfolios (an 
``Affiliated Subadviser''). None of the current Subadvisers is an 
Affiliated Subadviser.

Applicants' 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 pursuant to a written contract that has been 
approved by the vote 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. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provision of the Act, or 
from any rule thereunder, if 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 request an exemption under section 6(c) of the Act from 
section 15(a) of the Act and rule 18f-2 under the Act to permit them to 
enter into and materially amend Subadvisory Agreements without 
shareholder approval.
    3. Applicants assert that under the structure described in the 
application, the Portfolios' shareholders rely on the Adviser to select 
and monitor one or more subadvisers best suited to achieve a 
Portfolios' investment objectives. Applicants contend that, from the 
perspective of the investor, the role of the Subadvisers is comparable 
to that of individual portfolio manages employed by other investment 
advisory firms. Applicants contend that requiring shareholder approval 
of each Subadviser Agreement would impose expenses and unnecessary 
delays on the Portfolios, and may preclude the Adviser from promptly 
acting in a manner considered advisable by the Board. Applicants note 
that the Management Agreement between the Fund and the Adviser will 
remain subject to section 15(a) of the Act and rule 18f-2 under the 
Act, including the requirements for shareholder approval.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Portfolio may rely on the order, the operation of the 
Portfolio as described in the application will be approved by the vote 
of a majority of the Portfolio's outstanding voting securities, as 
defined in the Act, or in the case of a Portfolio or Future Fund whose 
public shareholders purchased shares on the basis of a prospectus 
containing the disclosure contemplated by Condition 2, by the initial 
shareholder(s) before the shares of such Portfolio or Future Fund are 
offered to the public.
    2. The Fund will disclose in its prospectus the existence, 
substance and effect of any order granted pursuant to the application. 
In addition, each Portfolio and any Future Fund will hold itself out to 
the public is employing the management structure described in the 
application. The prospectus with respect to the Portfolios and any 
Future Fund will prominently disclose that the Adviser has the ultimate 
responsibility to oversee the Subadvisers and recommend their hiring, 
termination, and replacement.
    3. Within 90 days of the hiring of any new Subadviser, shareholders 
will be furnished all information about the new Subadviser that would 
be included in a proxy statement. Such information will include any 
changes caused by the addition of the new Subadviser. 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.
    4. At all times, a majority of the Board will be independent 
Trustees, and the nomination of new or additional Independent Trustees 
will be at the discretion of the then-existing Independent Trustees.
    5. No trustee or officer of the Fund or director of officer of the 
Adviser will own directly or indirectly (other than through a pooled 
investment vehicle that is not controlled by any such trustee, officer 
or director) any interest in a Subadviser except for: (a) Ownership of 
interests in the Adviser or any entity that controls, is controlled by, 
or is under common control with the Adviser, or (b) ownership of less 
than 1% of the outstanding securities of any class of equity or debt of 
a publicly-traded company that is either a Subadviser or an entity that 
controls, is controlled by or is under common control with a 
subadviser.

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    6. When a change of Subadviser is proposed for a Portfolio with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make ad separate finding, reflected in the 
minutes of the meeting of the Board, that such change is in the best 
interests of the Portfolio and its shareholders and that the change 
does not involve a conflict of interest from which the Adviser or the 
Affiliated Subadviser derives an inappropriate advantage.
    7. Neither the Fund nor the Adviser will enter into a Subadvisory 
Agreement with an Affiliated Subadviser without such agreement, 
including the compensation to be paid thereunder, being approved by the 
shareholders of the applicable Portfolio.
    8. The Adviser will provide management services to the Portfolios, 
including overall supervisory responsibility for the general management 
and investment of each Portfolio's securities portfolio, and, subject 
to review and approval by the Board will (a) set each Portfolio's 
overall investment strategies; (b) evaluate, select and recommend 
Subadvisers to manage all or a portion of a Portfolio's assets; (c) 
allocate and, when appropriate, reallocate a Portfolio's assets among 
multiple Subadvisers; (d) monitor and evaluate the investment 
performance of the Subadvisers; and (e) implement procedures reasonably 
designed to ensure that the Subadvisers comply with the relevant 
Portfolio's investment objectives, policies, and restrictions.
    9. Shareholders of a Portfolio will approve any change to a 
Subadvisory Agreement if such change would result in an increase in the 
overall management and advisory fees payable by the Portfolio that have 
been approved by the shareholders of the Portfolio.

    For the Commission, by the Division of Investment Management, 
under delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-9635 Filed 4-17-00; 8:45 am]
BILLING CODE 8010-01-M