Document ID: SEC-2012-1232-0001
Agency: sec
Document Type: Notice
Title: Applications: Capital Research and Management Co., et al.
Posted Date: 2012-07-31T04:00Z

[Federal Register Volume 77, Number 147 (Tuesday, July 31, 2012)]
[Notices]
[Pages 45385-45388]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-18561]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30150; 812-13616-09]

Capital Research and Management Company, et al.; Notice of 
Application

July 25, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940, as amended (``Act'') for an exemption 
from section 15(a) of the Act and rule 18f-2 under the Act, as well as 
from certain disclosure requirements.

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    Summary of the Application: Applicants request an order that would 
permit them to enter into and materially amend subadvisory agreements 
without shareholder approval and would grant relief from certain 
disclosure requirements.
    Applicants: AMCAP Fund, American Balanced Fund, American Funds 
Fundamental Investors, American Funds Global Balanced Fund, The 
American Funds Income Series, American Funds Insurance Series, American 
Funds Money Market Fund, American Funds Mortgage Fund, American Funds 
Portfolio Series, American Funds Short-Term Tax-Exempt Bond Fund, 
American Funds Target Date Retirement Series, American Funds Tax-Exempt 
Fund of New York, The American Funds Tax-Exempt Series I, The American 
Funds Tax-Exempt Series II, American High-Income Municipal Bond Fund, 
American High-Income Trust, American Mutual Fund, The Bond Fund of 
America, Capital Income Builder, Capital World Bond Fund, Capital World 
Growth and Income Fund Inc., EuroPacific Growth Fund, The Growth Fund 
of America, Inc., The Income Fund of America, Intermediate Bond Fund of 
America, International Growth and Income Fund, The Investment Company 
of America, Limited Term Tax-Exempt Bond Fund of America, The New 
Economy Fund, New Perspective Fund, Inc., New World Fund, Inc., Short-
Term Bond Fund of America, SMALLCAP World Fund, Inc., The Tax-Exempt 
Bond Fund of America, and Washington Mutual Investors Fund (the 
``Investment Companies'') and Capital Research and Management Company 
(``CRMC'').
    Filing Dates: The application was filed on December 19, 2008, and 
amended on August 5, 2009, April 15, 2010, December 16, 2011, April 19, 
2012, and July 13, 2012.
    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 August 17, 2012 and should be accompanied by proof of 
service on applicants, in the form of an

[[Page 45386]]

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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants, 
Capital Research and Management Company, 333 South Hope Street, 33rd 
Floor, Los Angeles, California 90071.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, 
at (202) 551-6990, or Jennifer L. Sawin, Branch Chief, at (202) 551-
6821 (Office of Investment Company Regulation, Division of Investment 
Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Investment Companies are each registered under the Act as an 
open-end investment company, consisting of one or more series, and each 
is organized as a Maryland corporation, Massachusetts business trust or 
Delaware statutory trust.\1\ CRMC is, and each other Adviser will be, 
registered under the Investment Advisers Act of 1940, as amended 
(``Advisers Act''). CRMC is a wholly-owned subsidiary of The Capital 
Group Companies, Inc. (``CGC''), a privately owned Delaware 
corporation. CGC is the parent company of a group of investment 
management companies, including CRMC, and related service companies. 
CRMC currently manages equity assets through two investment divisions, 
Capital Research Global Investors and Capital World Investors, and 
manages fixed-income assets through its Fixed Income division. An 
Adviser will serve as the investment adviser to each Fund pursuant to 
an investment advisory agreement between the Adviser and the Investment 
Company, on behalf of the Fund (each, an ``Advisory Agreement''). The 
Advisory Agreement, and material amendments thereto, will be approved 
by the shareholders of the Fund and by the applicable board of 
directors or trustees (the ``Board'') including a majority of the 
directors or trustees who are not ``interested persons'' (as defined in 
section 2(a)(19) of the Act) of the applicable Investment Company 
(``Independent Trustees'') at the time and in the manner required by 
sections 15(a) and (c) of the Act and rule 18f-2 under the Act.
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    \1\ Applicants request that any relief granted pursuant to the 
application apply to any current or future series of the Investment 
Companies and any other existing or future registered open-end 
investment company and its series that: (a) Are advised by CRMC or 
any person controlling, controlled by, or under common control with 
CRMC or its successors (each, an ``Adviser''); (b) use the multi-
manager structure described in the application; and (c) comply with 
the terms and conditions of the application (any such company or 
series, a ``Fund'' and collectively the ``Funds''). All Funds that 
currently intend to rely on the requested order are named as 
Applicants. For purposes of the requested order, ``successor'' is 
limited to an entity that results from a reorganization into another 
jurisdiction or a change in the type of business organization.
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    2. The Adviser will be responsible for providing a program of 
continuous investment management to the Fund in accordance with the 
investment objective, policies and limitations of the Fund as stated in 
its prospectus and statement of additional information. Applicants 
intend to implement a multi-manager structure in which all sub-advisers 
are direct or indirect, wholly-owned subsidiaries, as that term is 
defined in section 2(a)(43) of the Act, of CGC (a ``Wholly Owned Sub-
Adviser'') pursuant to an investment sub-advisory agreement (each 
agreement with a Wholly Owned Sub-Adviser, a ``Sub-Advisory 
Agreement''). Primary responsibility for management of a Fund, 
including the selection and supervision of Wholly Owned Sub-Advisers, 
is vested in its Adviser, subject to the oversight of the Board. The 
Adviser will select Wholly Owned Sub-Advisers based on its evaluation 
of the capabilities of the Wholly Owned Sub-Adviser in managing assets 
pursuant to particular investment styles and will recommend their 
hiring to the applicable Board. The Adviser will evaluate, allocate 
assets to, and oversee the Wholly Owned Sub-Advisers, and make 
recommendations about their hiring, termination and replacement to the 
Board, at all times subject to the authority of the Board. Each Wholly 
Owned Sub-Adviser will be an investment adviser registered under the 
Advisers Act or exempt from such registration.
    3. In return for providing overall management services, including 
Wholly Owned Sub-Adviser selection and monitoring services, the Adviser 
will have a contractual right to receive from the Fund a periodic fee, 
computed as a percentage of the Fund's average daily net assets (and in 
some cases also a percentage of income) in accordance with the relevant 
requirements of the Act. The Adviser will compensate the Wholly Owned 
Sub-Adviser(s) out of the fees paid to the Adviser under its Advisory 
Agreement with the Fund.
    4. Applicants request an order to permit an Adviser, subject to the 
approval of the applicable Board, including a majority of Independent 
Trustees, to do the following without obtaining shareholder approval: 
(a) Select Wholly Owned Sub-Advisers to manage all or a portion of the 
assets of a Fund pursuant to a Sub-Advisory Agreement; and (b) 
materially amend a Sub-Advisory Agreement (all such changes are 
referred to as ``Eligible Sub-Adviser Changes'').\2\ The requested 
relief will not extend to any sub-adviser, other than a Wholly Owned 
Sub-Adviser, who is an affiliated person, as defined in section 2(a)(3) 
of the Act, of the Fund or of the Adviser, other than by reason of 
serving as a sub-adviser to one or more of the Funds (``Affiliated Sub-
Adviser'').
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    \2\ Applicants do not request relief for any other sub-adviser 
changes not already permitted by Commission rule or other Commission 
or staff action (all such changes are referred to as ``Ineligible 
Sub-Adviser Changes''). If the name of a Fund contains the name of a 
Wholly Owned Sub-Adviser, the name of the Adviser to that Fund, or a 
trademark or trade name that is owned by the Adviser to that Fund, 
will precede the name of the Wholly Owned Sub-Adviser.
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    5. Applicants also request an order exempting the Funds from 
certain disclosure obligations described below that Applicants believe 
may require a Fund to disclose fees paid by the Adviser to each Wholly 
Owned Sub-Adviser. Applicants seek an order to permit the Investment 
Companies to disclose for each Fund (as both a dollar amount and as a 
percentage of the applicable Fund's net assets) the aggregate fees paid 
to the Adviser and any Wholly Owned Sub-Advisers (the ``Aggregate Fee 
Disclosure''). Any Fund that employs an Affiliated Sub-Adviser that is 
not a Wholly Owned Sub-Adviser also will provide separate disclosure of 
any fees paid to such Affiliated Sub-Adviser.

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that 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 a 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 investment company affected by a matter must 
approve that

[[Page 45387]]

matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to an investment company to comply with Schedule 14A under the 
Securities Exchange Act of 1934 (``1934 Act''). Items 22(c)(1)(ii), 
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, 
require a proxy statement for a shareholder meeting at which the 
advisory contract will be voted upon to include the ``rate of 
compensation of the investment adviser,'' the ``aggregate amount of the 
investment adviser's fees,'' a description of the ``terms of the 
contract to be acted upon,'' and, if a change in the advisory fee is 
proposed, the existing and proposed fees and the difference between the 
two fees.
    4. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require 
a registered investment company to include in its financial statement 
information about investment advisory fees.
    5. 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 provisions 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 state that the requested relief meets this standard for 
the reasons discussed below.
    6. Applicants assert that shareholders of the Fund expect the 
Adviser to select the Wholly Owned Sub-Adviser(s) deemed appropriate by 
the Adviser and the Board, that provide day-to-day investment 
management services to the investment company. Applicants assert that, 
from the perspective of an investor in the Fund, the roles of the 
Adviser and Wholly Owned Sub-Adviser(s) with respect to the Fund will 
be substantially equivalent to the roles of an investment adviser and 
its portfolio-manager employees under a more traditional structure. 
Applicants state that requiring shareholder approval of each Sub-
Advisory Agreement or each material amendment to a Sub-Advisory 
Agreement would impose unnecessary delays and expenses on the Funds and 
may preclude the Funds from acting promptly when the Adviser and Board 
consider it appropriate to hire Wholly Owned Sub-Advisers or amend Sub-
Advisory Agreements. Applicants note that the Advisory Agreement for 
each Fund will remain subject to the shareholder approval requirements 
of section 15(a) of the Act and rule 18f-2 under the Act.
    7. The Fund(s) will inform shareholders of the hiring of a new 
Wholly Owned Sub-Adviser pursuant to the following procedures 
(``Modified Notice and Access Procedures''): (a) within 90 days after a 
Wholly Owned Sub-Adviser is hired for any Fund, that Fund will send its 
shareholders either a Multi-manager Notice or a Multi-manager Notice 
and Multi-manager Information Statement; \3\ and (b) the Fund will make 
the Multi-manager Information Statement available on the Web site 
identified in the Multi-manager Notice no later than when the Multi-
manager Notice (or Multi-manager Notice and Multi-manager Information 
Statement) is first sent to shareholders, and will maintain it on that 
Web site for at least 90 days. In the circumstances described in the 
application, a proxy statement would provide no more meaningful 
information to investors than the proposed use of the Multi-manager 
Information Statement. Applicants state that each Board will comply 
with the requirements of sections 15(a) and 15(c) of the Act regarding 
Board actions before entering into, or materially amending any of the 
Sub-Advisory Agreements.
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    \3\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Exchange 
Act, and specifically will, among other things: (a) summarize the 
relevant information regarding the new Wholly Owned Sub-Adviser; (b) 
inform shareholders that the Multi-manager Information Statement is 
available on the Web site; (c) provide the Web site address; (d) 
state the time period during which the Multi-manager Information 
Statement will remain available on that Web site; (e) provide 
instructions for accessing and printing the Multi-manager 
Information Statement; and (f) instruct the shareholder that a paper 
or email copy of the Multi-manager Information Statement may be 
obtained, without charge, by contacting the Funds.
    A ``Multi-manager Information Statement'' will meet the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Exchange Act for an information statement, except as 
modified by the requested order to permit Aggregate Fee Disclosure. 
Multi-manager Information Statements will be filed electronically 
with the Commission via the EDGAR system.
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    8. Applicants state that disclosure of the fees that the Adviser 
pays to each Wholly Owned Sub-Adviser would not serve any meaningful 
purpose because investors pay the Adviser to retain and compensate the 
Wholly Owned Sub-Advisers. The Adviser will compensate each Wholly 
Owned Sub-Adviser out of the fees paid to the Adviser pursuant to its 
Advisory Agreement with the applicable Fund. The fees negotiated 
between the Adviser and the Wholly Owned Sub-Advisers under the 
proposed manager-of-managers structure would be the equivalent of the 
compensation packages that an investment manager negotiates with its 
employees who are portfolio managers in a more traditional structure. 
Applicants submit that granting the requested relief is appropriate in 
the public interest and consistent with the protection of investors and 
the policies fairly intended by the policy and provisions of the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions: \4\
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    \4\ Applicants will only comply with conditions 8, 9 and 12 if 
they rely on the relief that would allow them to provide Aggregate 
Fee Disclosure.
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    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, including the hiring of Wholly Owned Sub-Advisers, 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 all of whose public 
shareholders purchase shares on the basis of a prospectus containing 
the disclosure contemplated by condition 2 below, by the sole initial 
shareholder before offering the Fund's shares to the public.
    2. The prospectus for each Fund will disclose the existence, 
substance, and effect of any order granted pursuant to the application. 
In addition, each Fund will hold itself out to the public as employing 
the multi-manager structure described in the application. The 
prospectus will prominently disclose that the Adviser has ultimate 
responsibility, subject to oversight by the Board, to oversee the 
Wholly Owned Sub-Advisers and recommend their hiring, termination, and 
replacement.
    3. A Fund will inform shareholders of the hiring of a new Wholly 
Owned Sub-Adviser within 90 days after the hiring of a new Wholly Owned 
Sub-Adviser pursuant to the Modified Notice and Access Procedures.
    4. The Adviser will not make any Ineligible Sub-Adviser Changes 
without that sub-advisory agreement, including the compensation to be 
paid thereunder, being approved by the shareholders of the applicable 
Fund.

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    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination and selection of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    6. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, will be engaged to represent the Independent Trustees. The 
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
    7. When a sub-adviser change is proposed for a Fund, the applicable 
Board, including a majority of the Independent Trustees, will make a 
separate finding, reflected in the applicable 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 any 
sub-adviser that is an affiliated person of the Adviser derives an 
inappropriate advantage.
    8. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per-Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any sub-adviser during 
the applicable quarter.
    9. Whenever a sub-adviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    10. The Adviser will provide general management 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 of the Board (except that with respect to (c) and (d) 
below, no approvals are necessary), the Adviser will: (a) Set the 
Fund's overall investment strategies; (b) evaluate, select and 
recommend Wholly Owned Sub-Advisers to manage all or part of the Fund's 
assets; (c) allocate and, when appropriate, reallocate each Fund's 
assets among one or more Wholly Owned Sub-Advisers; (d) monitor and 
evaluate the performance of Wholly Owned Sub-Advisers; and (e) 
implement procedures reasonably designed to ensure that the Wholly 
Owned Sub-Advisers comply with the Fund's investment objective, 
policies and restrictions.
    11. No trustee or officer of the Trust, or a Fund, or director, 
manager, 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 sub-adviser to a Fund, except for 
ownership of interests in the Adviser or any entity, except a Wholly 
Owned Sub-Adviser, that controls, is controlled by, or is under common 
control with the Adviser.
    12. Each Fund will disclose the Aggregate Fee Disclosure in its 
registration statement.
    13. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that requested in the 
application, the requested order will expire on the effective date of 
that rule.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-18561 Filed 7-30-12; 8:45 am]
BILLING CODE 8011-01-P