[Federal Register Volume 66, Number 30 (Tuesday, February 13, 2001)]
[Notices]
[Pages 10037-10039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3566]


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

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24853; 812-12062]


Hillview Investment Trust II and Hillview Capital Advisors, LLC; 
Notice of Application

February 6, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application 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: Applicants, Hillview Investment Trust II 
(the ``Trust'') and Hillview Capital Advisors, 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 April 14, 2000 and 
amended on November 15, 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 applicants with copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on March 5, 2001, 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

[[Page 10038]]

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 notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609; Applicants, c/o Joseph A. Bracken, Hillview Capital 
Advisors, LLC, 1055 Washington Boulevard, Stamford, Connecticut 06901.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 942-0527, or Christine Y. Greenlees, 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 is a Delaware business trust registered under the Act 
as an open-end management investment company. The Trust is organized as 
a series investment company and currently has two series, Hillview 
Alpha Fund and Hillview International Alpha Fund (each a ``Fund'' and 
collectively, the ``Funds''), each of which has its own distinct 
investment objective and policies. The Adviser, a Delaware limited 
liability company, serves as investment adviser to the Funds, and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act'').\1\ The Adviser is a subsidiary of Value 
Asset Management, Inc., a privately held financial services holding 
company.
---------------------------------------------------------------------------

    \1\ The applicants request that any relief granted pursuant to 
the application also apply to future series of the Trust and any 
other registered open-end management investment companies and their 
series that: (a) Are advised by the Adviser or any entity 
controlling, controlled by, or under common control with the 
Adviser; (b) are managed in a manner consistent with this 
application, and (c) comply with the terms and conditions in the 
application (together, ``Future Funds''). The Trust is the only 
existing investment company that currently intends to rely on the 
requested order.
---------------------------------------------------------------------------

    2. The Trust, on behalf of each Fund, has entered into an 
investment advisory agreement with the Adviser (``Advisory 
Agreement''). The Advisory Agreement has been approved by the Trust'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 Trust or the Adviser (``Independent Trustees''), as 
well as each Fund's initial shareholder. Under the terms of the 
Advisory Agreement, the Adviser, subject to oversight by the Board, has 
overall supervisory responsibility for the investment program of each 
Fund. The Trust and the Adviser have entered into investment 
subadvisory agreements (``Subadvisory Agreements'') with multiple 
subadvisers (``Subadvisers'') for each of the Funds. Under the 
Subadvisory Agreements, each Subadviser, subject to general supervision 
by the Adviser and the Board, has discretionary authority to invest a 
portion of a Fund's assets allocated to it by the Adviser. Currently, 
Hillview Alpha Fund has five Subadvisers and Hillview International 
Alpha Fund has four Subadvisers. Each of the Subadvisers is registered 
as an investment adviser under the Advisers Act. Future Subadvisers 
will be registered or exempt from registration under the Advisers Act. 
Each fund pays the Adviser a fee based on the Fund's average daily net 
assets.
    3. The Adviser monitors the Funds and the Subadvisers and makes 
recommendations to the Board regarding allocation, and reallocation, of 
assets between Subadvisers and is responsible for recommending the 
hiring, termination and replacement of Subadvisers. The Adviser 
recommends Subadvisers based on a number of factors used to evaluate 
their skills in managing assets pursuant to particular investment 
objectives. Each Subadviser will be paid by the Trust at a rate that 
has been negotiated with each Subadviser by the Adviser and approved by 
the Board. Applicants also state that, as a condition to the requested 
order, shareholders of a Fund 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 a Fund that have been approved 
by the shareholders of the Fund.
    4. Applicants request an order to permit the Adviser to enter into 
and materially amend Subadvisory Agreements without obtaining 
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 Trust or the Adviser, other than by reason of 
serving as a Subadviser to one or more of the Funds (``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 under 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 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 the shareholders are relying on the 
Adviser's experience to select one or more Subadvisers best suited to 
achieve a Fund's desired investment objectives. Applicants assert that, 
from the perspective of the investor, the role of the Subadvisers is 
comparable to that of individual portfolio managers employed by other 
investment advisory firms. Applicants contend that requiring 
shareholder approval of each Subadvisory Agreement would impose costs 
and unnecessary delays on the Funds, and may preclude the Adviser from 
acting promptly in a manner considered advisable by the Board. 
Applicants note that the Advisory Agreement will remain fully subject 
to section 15(a) of the Act and rule 18f-2 under the Act, including the 
requirements for shareholder approval, and that shareholders of a Fund 
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 a Fund that have been approved by the shareholders of the 
Fund.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before applicants may rely on the requested order as to any 
Fund, the operation of the Fund in the manner described in the 
application will be approved by a majority of its outstanding voting 
securities, as defined in the Act, or by its initial shareholder, 
provided that, in the case of approval by

[[Page 10039]]

the initial shareholder, the pertinent Fund's shareholders purchase 
shares on the basis of a prospectus containing the disclosure 
contemplated by condition 2 below. Similarly, before a Future Fund may 
rely on the order requested in the application, the operation of the 
Future Fund in the manner described in the application will be approved 
by its initial shareholder before a public offering of shares of such 
Future Fund, provided that shareholders purchase shares on the basis of 
a prospectus containing the disclosure contemplated by condition 2 
below.
    2. Each Fund will disclose in its prospectus the existence, 
substance and effect of any order granted pursuant to the application. 
In addition, each Fund and any Future Fund relying on the requested 
order will hold themselves out to the public as employing the 
management structure described in the application. The prospectus with 
respect to each Fund and any Future Fund will prominently disclose that 
the Adviser has the ultimate responsibility (subject to oversight by 
the Board) to oversee the Subadvisers and recommend their hiring, 
termination, and replacement.
    3. 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.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. When a Subadviser change is proposed for a Fund or any Future 
Fund with an Affiliated Subadviser, the Board, including a majority of 
the Independent Trustees, will make a separate finding, reflected in 
the Board minutes, that the change is in the best interests of the Fund 
or the Future Fund and its shareholders and does not involve a conflict 
of interest from which the Adviser or the Affiliated Subadviser derives 
an inappropriate advantage.
    6. 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, including any change in such 
disclosure caused by the addition of the new Subadviser. Each Fund will 
meet this condition by providing 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 
within 90 days of the hiring of any new Subadviser.
    7. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets, and, subject to review 
and approval by the Board, will: (a) Set the Fund's overall investment 
strategies, (b) select Subadvisers, (c) when appropriate, allocate and 
reallocate a Fund's assets among multiple Subadvisers; (d) monitor and 
evaluate the performance of the Subadvisers, and (e) ensure that the 
Subadvisers comply with each Fund's investment objective, policies and 
restrictions by, among other things, implementing procedures reasonably 
designed to ensure compliance.
    8. No trustee or officer of the Trust, or director or officer of 
the Adviser will own, directly or indirectly (other than through a 
pooled investment vehicle that is not controlled by such person), 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.
    9. Shareholders of a Fund 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 Fund that have been 
approved by the shareholders of the Fund.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-3566 Filed 2-12-01; 8:45 am]
BILLING CODE 8010-01-M