[Federal Register Volume 60, Number 244 (Wednesday, December 20, 1995)]
[Notices]
[Pages 65716-65718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30859]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21598; 812-9762]


The One Hundred Fund, Inc., et al.; Notice of Application

December 13, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANTS: The One Hundred Fund, Inc., dba Berger 100 Fund (the ``100 
Fund''), Berger One Hundred and One 

[[Page 65717]]
Fund, Inc. (the ``101 Fund''), and Berger Investment Portfolio Trust 
(the ``Trust'') (collectively, the ``Funds''), and Berger Associates, 
Inc. (``BAI'').

RELEVANT ACTION SECTIONS: Order requested under section 6(c) of the Act 
for an exemption from sections 13(a)(2), 13(a)(3), 18(f)(1), 22(f), and 
22(g) of the Act; and under sections 6(c) and 17(b) of the Act for an 
exemption from section 17(a)(1) of the Act; and pursuant to section 
17(d) of the Act and rule 17d-1 thereunder.

SUMMARY OF APPLICATION: Applicants request an order that would permit 
the applicant investment companies to enter into deferred compensation 
arrangements with their independent directors.

FILING DATES: The application was filed on September 13, 1995 and 
amended on November 30, 1995. Applicant's counsel has stated in a 
letter dated December 12, 1995 that an amendment, the substance of 
which is incorporated herein, will be filed during the notice period.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on January 8, 1996 
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 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 SEC's 
Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants, 210 University Boulevard, Denver, Colorado 80206.

FOR FURTHER INFORMATION CONTACT: David W. Grim, Law Clerk, at (202) 
942-0571, or Robert A. Robertson, 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 from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. Each of the Funds is a registered open-end management investment 
company. BAI serves as the investment adviser to each of the Funds. 
Applicants request that the exemption also apply to any registered 
open-end investment company for which BAI, or any entity under common 
control with or controlled by BAI, subsequently serves as investment 
adviser.
    2. Each Fund has a board of trustees or board of directors. Each 
board has ten members, eight of whom are not ``interested persons'' 
within the meaning of section 2(a)(19) of the Act (``independent 
directors''). Each independent director receives an annual fee plus a 
meeting attendance fee. No director who is an interested person of a 
Fund receives any remuneration from such Fund.
    3. Applicants request relief so that the Funds may offer their 
independent directors deferred compensation plans (each, a ``Plan''). 
Each Fund's Plan will be administered by its board or by such person or 
persons as the board may designate to carry out administrative 
functions under the Plan (the ``Administrator''). Each Plan would 
permit independent directors of a Fund annually to elect to defer 
receipt of all or a portion of their fees. This election would enable 
the independent directors to defer payment of income taxes on such 
fees.
    4. Under the Plans, the Administrator shall maintain a book entry 
account (an ``Account'') with respect to each deferral election by an 
independent director and shall credit to that Account an amount equal 
to all compensation deferred by the independent director under such 
election, as of the date such fees would have been paid to such 
independent director absent such deferral. The value of an Account will 
be equal to the value such account would have had if the amount 
credited to it had been invested and reinvested in certain designated 
securities (the ``Designated Shares''). The Designated Shares for an 
Account will be shares of one or more of the Funds or a money market 
fund approved by the board of the Fund on which such independent 
director serves (the ``Investment Funds''), as designated by the 
participating independent director. The money market fund currently 
proposed to be included as an Investment Fund is the Cash Account 
Trust, for which Kemper Financial Services, Inc. acts as investment 
adviser, and for which BAI provides sub-administration services. The 
Cash Account Trust is not an ``affiliated person'' of the Funds, as 
such term is defined in section 2(a)(3) of the Act. Each Account shall 
be credited or charged with book adjustments representing all interest, 
dividends, and other earnings and all gains and losses that would have 
been realized had such account been invested in the Underlying Shares.
    5. The amounts paid to the independent directors under the Plans 
are expected to be insignificant in comparison to the total net assets 
of the Funds. Each Plan provides that a Fund's obligation to make 
payments from an Account will be a general obligation of the Fund and 
payments made pursuant to each Plan will be made from the Fund's 
general assets and property. With respect to the obligations created 
under the Plans, the relationship of an independent director to a Fund 
will be that of a general unsecured creditor.
    6. The Plans do not create an obligation of a Fund to any 
independent director of a Fund to purchase, hold, or dispose of any 
investments. if a Fund should choose to purchase investments in order 
to cover its obligations under a proposed Plan, any and all such 
investments will continue to be part of the general assets and property 
of such Fund. In this regard, a Fund may purchase its own shares or the 
shares of any other Investment Fund to cover its obligations.
    7. Under the Plans, an independent director may specify that his or 
her deferred fees be distributed in whole or in part commencing on (a) 
a date at least five years following the deferral election, or (b) the 
date on which the independent director ceases to be a member of the 
board, but not later than such cessation date. Deferred payments will 
be made in a lump sum or in monthly or quarterly installments over a 
period not to exceed ten years, as elected by the independent director. 
In the event of the independent director's death, amounts payable under 
a Plan will be payable to his or her designated beneficiary, or, in the 
absence of such a beneficiary, to his or her estate. In all other 
events, the independent director's right to receive payments cannot be 
transferred, assigned, pledged, subjected to garnishment or otherwise 
alienated.
    8. The Plans will not obligate any Fund to retain the services of 
an independent director, nor will they obligate any Fund to pay any (or 
any particular level of) director's fees to any director.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act for an 
exemption from sections 13(a)(2), 13(a)(3), 18(f)(1), 22(f), and 22(g) 
of the Act to permit the Funds to enter into deferred fee arrangements 
with their independent directors; under sections 6(c) and 17(b) of the 
Act for an exemption from section 17(a)(1) to permit the Investment 
Funds to sell securities issued by them to 

[[Page 65718]]
participating Funds; and pursuant to section 17(d) of the Act and rule 
17d-1 thereunder to permit the Funds to engage in certain joint 
transactions incident to such deferred fee arrangements.
    2. Section 6(c) provides that the SEC may exempt any person, 
security, or transaction from any provision of the Act, 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 policy and provisions of the Act.
    3. Section 18(f)(1) generally prohibits a registered open-end 
investment company from issuing senior securities. Section 13(a)(2) 
requires that a registered investment company obtain shareholder 
authorization before issuing any senior security not contemplated by 
the recitals of policy in its registration statement. The Plans would 
result in the issuance of a senior security only if it was an 
obligation or instrument ``similar'' to a bond, debenture or note, and 
it evidenced indebtedness. In any event, applicants state that the 
Plans possess none of the characteristics of senior securities that led 
Congress to enact these sections. The Plans would not confused 
investors, make it difficult for them to value their shares or convey a 
false impression of safety. Further, the Plans would not be 
inconsistent with the theory of mutuality of risk.
    4. Section 22(f) prohibits undisclosed restrictions on the 
transferability or negotiability of redeemable securities issued by 
open-end investment companies. The Plans would set forth any 
restrictions on transferability or negotiability, and such restrictions 
are primarily to benefit the participating directors and would not 
adversely affect the interests of the independent directors or of any 
Fund shareholder.
    5. Section 22(g) prohibits registered open-end investment companies 
from issuing any of their securities for services or for property other 
than cash or securities. These provisions prevent the dilution of 
equity and voting power that may result when securities are issued for 
consideration that is not readily valued. Applicants believe that the 
Plans would provide for deferral of payment of fees and thus should be 
viewed as being issued not in return for services but in return for a 
Fund not being required to pay such fees on a current basis.
    6. Section 13(a)(3) provides that no registered investment company 
shall, unless authorized by the vote of a majority of its outstanding 
voting securities, deviate from any investment policy that is 
changeable only if authorized by shareholder vote. Each of the existing 
Funds has limitations on its ability to purchase securities issued by 
other investment companies. Any relief granted from section 13(a)(3) 
would extend only to the existing Funds. Applicants believe that an 
exemption is appropriate to enable the existing Funds to invest in 
Designated Shares without a shareholder vote. Applicants will provide 
notice to shareholders of the deferred fee arrangements with the 
independent directors in their registration statements. The value of 
the Designated Shares will be de minimis in relation to the total net 
assets of the respective Fund. Changes in the value of the Designated 
Shares will not affect the value of shareholders' investments. 
Applicants believe that permitting the Funds to invest in Designated 
Shares without shareholder approval, therefore, would result in no harm 
to shareholders.
    7. Section 17(a)(1) generally prohibits an affiliated person of a 
registered investment company from selling any security to such 
registered investment company, except in limited circumstances. Funds 
that are advised by the same entity may be ``affiliated persons'' of 
one another by reason of being under the common control of their 
adviser. Applicants believe that an exemption from this provision would 
not implicate Congress' concerns in enacting the section, but would 
facilitate the matching of each Fund's liability for deferred 
directors' fees with the Designated Shares that would determine the 
amount of such Fund's liability.
    8. Section 17(b) authorizes the SEC to exempt a proposed 
transaction from section 17(a) if evidence establishes that: (a) The 
terms of the transaction, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching; (b) 
the transaction is consistent with the policy of each registered 
investment company concerned; and (c) the transaction is consistent 
with the general purposes of the Act. Because section 17(b) may apply 
only to a specific proposed transaction, applicants also request an 
order under section 6(c) so that relief will apply to a class of 
transactions. Applicants believe that the proposed transactions satisfy 
the criteria of sections 6(c) and 17(b).
    9. Section 17(d) of the Act prohibits affiliated persons from 
participating in joint transactions with a registered investment 
company in contravention of rules and regulations prescribed by the 
SEC. Rule 17d-1 under the Act prohibits affiliated persons of a 
registered investment company from entering into joint transactions 
with the investment company unless the SEC has granted an order 
permitting the transaction after considering whether the participation 
of such investment company is consistent with the provisions, policies, 
and purposes of the Act and the extent to which such participation is 
on a basis different from or less advantageous than that of other 
participants. Under the Plans, participating independent directors 
would not receive a benefit that otherwise would inure to a Fund or its 
shareholders. The effect of the Plans is to defer the payment of 
compensation that a Fund otherwise would be obligated to pay on a 
current basis as services are performed by its independent directors. 
Applicants also believe that the Funds' ability to recruit and retain 
highly qualified independent directors would be enhanced if they were 
able to offer their independent directors the option of deferred 
payment of their directors' fees.

Applicants' Condition

    Applicants agree that the order granting the requested relief shall 
be subject to the following condition:
    1. If a Fund purchases Designated Shares issued by itself, an 
affiliated Fund, or any other fund which has been approved as an 
Investment Fund, the purchasing Fund will vote such shares in 
proportion to the votes of all other holders of shares of such Fund, 
affiliated Fund, or other Investment Fund.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 95-30859 Filed 12-19-95; 8:45 am]
BILLING CODE 8010-01-M