[Federal Register Volume 66, Number 130 (Friday, July 6, 2001)]
[Notices]
[Pages 35676-35677]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 01-16879]



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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act of 1940, Release No. 25055/June 29, 2001]


Hillview Investment Trust II, Hillview Capital Advisors, LLC, 
1055 Washington Boulevard, Stamford, Connecticut 06901, (812-12062); 
Order Pursuant to Section 6(c) of the Investment Company Act of 1940 
Granting an Exemption From Section 15(a) of the Act and Rule 18f-2 
Under the Act and Denying a Request for a Hearing

    Hillview Investment Trust II (``Hillview Trust'') and Hillview 
Capital Advisors, LLC filed an application on April 14, 2000, and an 
amendment to the application on November 15, 2000, requesting an order 
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. The requested order would permit Hillview Trust, an open-end 
investment company registered under the Act (``fund'') that would 
operate under an adviser/subadviser(s) structure described in the 
application, to enter into and materially amend subadvisory agreements 
without shareholder approval (``manager of managers exemptive 
relief'').
    On February 6, 2001, a notice of the filing of the application was 
issued (Investment Company Act Release No. 24853). The notice gave 
interested persons an opportunity to request a hearing and stated that 
an order disposing of the application would be issued unless a hearing 
was ordered.
    On March 5, 2001, Fund Democracy, LLC (``Fund Democracy'') 
submitted a hearing request on the application (``Hearing Request''). 
Also on March 5, 2001, Institutional Shareholder Services (``ISS'') 
submitted a letter supporting the Hearing Request.
    Rule 0-5(c) under the Act states that the Commission will order a 
hearing on a matter, upon the request of an ``interested person'' or 
upon its own motion, if it appears that a hearing is ``necessary or 
appropriate in the public interest or for the protection of 
investors.''
    The Commission has reviewed the issues raised in the Hearing 
Request, which are summarized below.
    Fund Democracy asserts that a fund that has only one subadviser 
should not be entitled to the manager of managers exemptive relief 
(i.e., should not be able, among other things, to hire a new subadviser 
or reallocate fees between the adviser and the subadviser without 
shareholder approval). Fund Democracy also asserts that the conditions 
governing the manager of managers exemptive relief are insufficient to 
assure that funds relying on the relief hold themselves out to the 
public as operating pursuant to the manager of managers structure. The 
Hearing Request includes several examples of disclosures made by funds 
that have received the manager of managers exemptive relief that fund 
Democracy views as inadequate.
    The Commission finds that these issues were considered and decided 
when the Commission granted manager of managers exemptive relief in 
Frank Russell Investment Company, et al., Investment Company Act 
Release Nos. 21108 (June 2, 1995) (notice) (``Frank Russell Notice'') 
and 21169 (June 28, 1995) (order) (``Frank Russell Order''). Nearly 70 
other orders granting manager of managers exemptive relief under the 
conditions established in the Frank Russell Order have been issued 
since 1995 (``Other Orders''). The Frank Russell Order and the Other 
Orders allow funds that utilize the manager of managers structure to 
avoid the costs and burdens associated with seeking shareholder 
approval of subadvisory agreements. The order requested by the Hillview 
Trust would be subject to conditions substantially identical to those 
in the Frank Russell Order and the Other Orders.
    When we first granted manager of managers exemptive relief in the 
Frank Russell Order, we recognized that certain funds may employ 
subadvisers in a capacity similar to that of individual portfolio 
managers. The application for the Frank Russell Order stated that 
``primary responsibility for management of the [f]unds, in particular, 
the selection and supervision of the [subadvisers], will be vested in 
the [advisers], subject to oversight and approval by the [f]unds' 
directors.'' \1\ Under the terms and conditions of the Frank Russell 
Order and the Other Orders, the adviser was required to provide general 
management and administrative services to the fund and, subject to 
review and approval of the fund's board of directors, set the fund's 
overall investment strategies, select subadvisers, allocate the fund's 
assets among subadvisers, monitor and evaluate the performance of the 
subadvisers, and ensure that the subadvisers, comply with the fund's 
investment objectives, policies and restrictions.\2\ In such an 
arrangement, irrespective of the number of subadvisers employed or the 
frequency with which subadvisers are changed, we determined that relief 
from the shareholder approval requirements in section 15(a) of the Act 
and rule 18f-2 under the Act for subadvisory agreements was 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.\3\
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    \1\ Frank Russell Notice, applicants' legal analysis at 
paragraph 2.
    \2\ Id., applicants' condition #8.
    \3\ Neither the terms nor the conditions of the Frank Russell 
order required the funds to use multiple subadvisers; instead, the 
applicants represented specifically that the adviser to the funds 
``has engaged, or will engage, one or more subadvisers.'' Frank 
Russell Notice, applicants' representations at paragraph 3. The 
Frank Russell Order and the Other Orders similarly imposed no 
requirement that the subadvisers be changed with any frequency.
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    In the Frank Russell Order, we also specifically considered the 
advisory fee arrangement of a fund operating pursuant to a manager of 
managers structure. The Frank Russell Order and the Other Orders permit 
the adviser to allocate and reallocate advisory fees between itself and 
the subadviser(s), and among subadvisers, without a shareholder vote, 
provided that the aggregate advisory fee paid by the fund remains 
subject to approval by the shareholders, and subject to the other 
conditions in the Frank Russell Order and the Other Orders.
    Finally, the Commission finds that the conditions set forth in the 
Frank Russell Order and the Other Orders are appropriate to assure that 
funds relying on the manager of managers exemptive relief adequately 
disclose to the public the manner in which these funds operate.
    The Commission therefore finds that it has previously considered 
and decided the issues raised in the Hearing Request. Therefore, it 
appears that a hearing is not necessary or appropriate in the public 
interest or for the protection of investors.\4\ Accordingly,
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    \4\ The Commission does not deem it necessary to make a formal 
determination with respect to the status of Fund Democracy or ISS as 
an ``interested person'' within the meaning of section 40(a) of the 
Act and rule 0-5(c) under the Act inasmuch as the Commission has 
determined that the issues raised in the Hearing Request do not 
warrant a hearing.
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    It is ordered that the request for a hearing is denied.
    The matter having been considered, it is found, on the basis of the 
information set forth in the application, as amended, that granting the 
requested exemptions is 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.
    It is further ordered that the requested exemption under section 
6(c) of the Act

[[Page 35677]]

from section 15(a) of the Act and rule 18f-2 under the Act is granted, 
effective immediately, subject to the conditions contained in the 
application, as amended.

    By the Commission.
Jonathan G. Katz,
Secretary.
[FR Doc. 01-16879 Filed 7-5-01; 8:45 am]
BILLING CODE 8010-01-M