

[Federal Register: October 24, 2005 (Volume 70, Number 204)]
[Notices]               
[Page 61477-61478]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24oc05-86]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27117; 812-13097]

 
BBH Fund, Inc. and Brown Brothers Harriman & Co.; Notice of 
Application

October 18, 2005.
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.

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    Summary of the Application: The requested order would permit 
certain registered open-end management investment companies to enter 
into and materially amend subadvisory agreements (``Subadvisory 
Agreements'') without shareholder approval.
    Applicants: BBH Fund, Inc. (``BBH'') and Brown Brothers Harriman & 
Co. (the ``Adviser,'' together with BBH, the ``Applicants'').
    Filing Date: The application was filed on June 14, 2004 and amended 
on June 17, 2005, August 8, 2005 and October 12, 2005.
    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 November 14, 2005, 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 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, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-9303. Applicants, Gail C. Jones, 
Esq., Reed Smith LLP, Federated Investors Tower, 12th Floor, 1001 
Liberty Avenue, Pittsburgh, PA 15222-3779.

FOR FURTHER INFORMATION CONTACT: Todd F. Kuehl, Branch Chief, at (202) 
551-6821 (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 from 
the Commission's Public Reference Branch, 100 F Street, NE., 
Washington, DC 20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. BBH, a Maryland corporation, is registered under the Act as an 
open-end management investment company. BBH currently offers multiple 
series (each a ``Fund,'' and collectively, the ``Funds''), each of 
which has its own investment objectives, policies and restrictions.\1\ 
BBH International Equity Fund (``International Equity Fund'') is the 
only Fund that currently intends to rely on the requested order.
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    \1\ Applicants also request relief with respect to any other 
existing or future registered open-end management investment company 
or series therof that: (a) Is advised by the Adviser or any entity 
controlling, controlled by or under common control with the Adviser; 
(b) uses the management structure described in this application; and 
(c) complies with the terms and conditions of this application 
(included in the term ``Funds''). The only existing registered open-
end management investment company that currently intends to rely on 
the requested order is named as an Applicant. If the name of any 
Fund contains the name of Subadviser (as defined below), the name of 
the Adviser that serves as the primary adviser to the Fund will 
preced the name of the Subadviser.
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    2. The Adviser, registered under the Investment Advisers Act of 
1940 (``Advisers Act''), serves as investment adviser to each Fund 
pursuant to an investment advisory agreement with BBH (``Advisory 
Agreement''), that was approved by the board of directors of BBH (the 
``Board''), including a majority of the directors who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Directors''), and the shareholders of each Fund. Under 
the terms of the Advisory Agreement, the Adviser provides the 
International Equity Fund with investment research, advice and 
supervision, and furnishes an investment program for the Fund 
consistent with the investment objectives and policies of the Fund. The 
Adviser has entered into, or will enter into, Subadvisory Agreements 
with subadvisers (``Subadvisers''), to whom the Adviser may delegate 
responsibility for providing investment advice and making investment 
decisions for the International Equity Fund. Pursuant to the Advisory 
Agreement, the Adviser receives a fee from the International Equity 
Fund based on the average daily net assets. Each Subadviser is or will 
be an investment adviser registered under the Advisers Act. The Adviser 
has delegated daily management of the International Equity Fund's 
assets to Subadvisers, who are paid by the Adviser out of the fee it 
receives from the International Equity Fund. In the future, a Fund may 
contract directly with and pay a Subadviser directly (``Direct Contract 
Fund'').
    3. Applicants request relief to permit the Adviser, subject to 
Board approval, to enter into 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 a Fund or the Adviser, other than by 
reason of serving as a Subadviser to one or more of the Funds (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 a majority 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 and to the extent that such 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 state that the Funds' shareholders will rely on the 
Adviser, subject to oversight by the Board, to select Subadvisers for 
the Funds. Applicants assert that, from the perspective of the 
investor, the role of the Subadvisers is substantially equivalent to 
that of individual portfolio managers employed by traditional 
investment advisory firms. Applicants contend that requiring 
shareholder approval of Subadvisory Agreements would impose costs and 
unnecessary delays on the Funds and may preclude the Adviser from 
acting promptly in a manner considered advisable by the

[[Page 61478]]

Board. Applicants also note that the Advisory Agreement will remain 
subject to the shareholder approval requirements in section 15(a) of 
the Act and rule 18f-2 under the Act.
    4. Applicants note that the Commission has proposed rule 15a-5 
under the Act and agree that the requested order will expire on the 
effective date of rule 15a-5 under the Act, if adopted.\2\
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    \2\ Investment Company Act Release No. 26230 (Oct. 23, 2003).
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Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the order requested in the 
application, the operation of the Fund in the manner described in the 
application will be approved by a majority of the Fund's outstanding 
voting securities, as defined in the Act, or, in the case of a Fund 
whose public shareholders purchase shares on the basis of a prospectus 
containing the disclosure contemplated by condition 2 below, by the 
initial shareholder(s) before shares of such Fund are offered to the 
public.
    2. Each Fund relying on the requested order will disclose in its 
prospectus the existence, substance, and effect of any order granted 
pursuant to the application. In addition, each Fund relying on the 
requested order will hold itself out to the public as employing the 
``manager of managers'' structure described in the application. Such 
Fund's prospectus will prominently disclose that the Adviser has 
ultimate responsibility, subject to oversight by the Board, to oversee 
the Subadvisers and recommend their hiring, termination, and 
replacement.
    3. The Adviser will provide general management and administrative 
services to each Fund, including overall supervisory responsibility for 
the general management and investment of the Fund's assets, and, 
subject to review and approval by the Board, will (i) Set each Fund's 
overall investment strategies; (ii) evaluate, select and recommend 
Subadvisers to manage all or a part of a Fund's assets; (iii) when 
appropriate allocate and reallocate a Fund's assets among multiple 
Subadvisers; (iv) monitor and evaluate the performance of the 
Subadvisers; and (v) implement procedures reasonably designed to ensure 
that the Subadvisers comply with the relevant Fund's investment 
objective, policies, and restrictions.
    4. Each Fund will comply with the fund governance standards that 
the Commission adopted in Investment Company Act Release No. 26520, by 
the compliance date set forth therein (``Compliance Date''). Prior to 
the Compliance Date, a majority of the Board will be Independent 
Directors, and the nomination of new or additional Independent 
Directors will be at the discretion of the then-existing Independent 
Directors. Any person who acts as legal counsel for the Independent 
Directors will be an independent legal counsel, as defined in rule 0-
1(a)(6) under the Act.
    5. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without such agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    6. When a Subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Directors, will make a separate finding, reflected in the 
Board minutes, that such change is in the best interests of the Fund 
and its shareholders and does not involve a conflict of interest from 
which the Adviser or the Affiliated Subadviser derives an inappropriate 
advantage.
    7. Shareholders of any Direct Contract 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.
    8. No director or officer of a Fund, 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 (i) ownership of interests in the Adviser 
or any entity that controls, is controlled by, or is under common 
control with the Adviser; or (ii) ownership of less than 1% of the 
outstanding securities of any class of equity or debt of any 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. Within 90 days of the hiring of a new Subadviser, the Adviser 
will furnish shareholders of the applicable Fund all information about 
the new Subadviser that would be included in a proxy statement. To meet 
this obligation, the Adviser will provide shareholders of the 
applicable Fund 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.
    10. The requested order will expire on the effective date of rule 
15a-5 under the Act, if adopted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
 [FR Doc. E5-5862 Filed 10-21-05; 8:45 am]

BILLING CODE 8010-01-P
