[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]
[[Page 35676]]
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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,
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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