SEC Division of Investment Management staff letter: Benson White & Company

JUN 14 /995 ) ætlBUt
Our Ref. No. 94-638
Benson White &
Company
File No. 801-46820 RESPONSE OF THE OFFICE OF CHIEF COUNSEL DIVISION OF INVESTMENT MANAGEMENT Your letter of May 10, 1995 requests assurance that we would not recommend enforcement action to the Commission against Benson White & Company (IIBenson Whitell) or its affiliates if they offer, and provide asset allocation services in connection with, the Life Cycle Mutual Funds program (the IIProgramll) without registering the Program under the Investment Company Act of 1940 ( II Investment Company Act II) or registering the participants' accounts under the Securities Act of 1933 (IISecurities Act II ) . You also seek our assurance that we would not recommend enforcement action to the Commission under section 36 (b) of the Investment Company Act if Benson White or its affiliates are paid' a management fee as described in your letter. 1 . The Program ') Under the Program, a participant's assets would be allocated among two or more of the following four mutual fund portfolios: 1 Life Cycle Equity Fund (the "Equity Fund II ); Life Cycle Bond Fund (the IIBond Fund II ); Life Cycle Retirement Income Fund (the IIRetirement Fund II ); and Life Cycle Harvest Fund (the IIHarvest Fund II ) .2 Assets would be allocated in accordance with predetermined age-based asset allocation ratios. 3 In the event lEach of the portfolios would be a registered investment company or would be a series of a registered investment company. 2The Equity Fund would consist mostly of stocks included in the Standard & Poor's 500 Stock Index. The Bond Fund principally would invest in U. S. government securities of between five and ten years in duration. The Retirement Fund would invest in the same type of securities as the Bond Fund, except that the securities generally would have longer durations to generate additional cash flow. The Harvest Fund primarily would consist of short - term U. S. government securities; its investment obj ective would be the preservation of capital. 3Specifically, under the program, a participant's asset allocation would be 80% in the Equity Fund and 20% in the Bond Fund until the participant reaches age 46. Thereafter, on each successive birthday, the participant's asset allocation would be adjusted automatically to reflect a deduction of holdings in the Equity Fund and an increase in holdings in either the Bond Fund for investors age 65 or younger, or in the Retirement Fund for investors over 65. ) The asset allocation formula would be compulsory for all investors except those who invest $1 million or more. Such persons may invest directly in the portfolios and determine