Bridgeway Capital Management, Inc.; Notice of Application, 15786-15787 [E9-7776]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 65 (Tuesday, April 7, 2009)]
[Notices]
[Pages 15786-15787]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-7776]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28685; 812-13525]


Bridgeway Capital Management, Inc.; Notice of Application

April 1, 2009.
Agency: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order pursuant to section 
2(a)(9) of the Investment Company Act of 1940 (``Act'').

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Summary of Application:  Bridgeway Capital Management, Inc. 
(``Bridgeway Capital'') requests an order declaring that Leonora R. 
Montgomery (``Leonora Montgomery'') does not control Bridgeway Capital.

Applicant:  Bridgeway Capital.

Filing Dates:  The application was filed on April 21, 2008 and amended 
on October 2, 2008. Applicant has agreed to file an amendment during 
the notice period, the substance of which is reflected in this notice.

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 applicant with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on April 27, 2009, and should be accompanied by proof of service 
on applicant, 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, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090; Applicant, 5615 Kirby Drive, Suite 518, 
Houston, TX 77005-2448.

FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Attorney Adviser, at 
(202) 551-6826, or Marilyn Mann, 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 at the 
Commission's Public Reference Room, 100 F Street, NE., Washington, DC 
20549-1520 (telephone (202) 551-5850).
    Applicant's Representations:
    1. Bridgeway Capital, a Texas corporation, is registered with the 
Commission as an investment adviser under the Investment Advisers Act 
of 1940, and is engaged in the business of providing investment 
advisory services to investment companies registered under the Act 
(``RICs''), high net worth individuals, and institutional clients. As 
of the date of the application, Bridgeway Capital has investment 
advisory or subadvisory agreements with Bridgeway Funds, Inc., Calvert 
Large-Cap Growth Fund, Equitable Calvert Socially Responsible 
Portfolio, Valic I--Small Cap Fund, Valic II--Capital Appreciation 
Fund, State Farm Variable Small/Mid Cap Equity Fund, State Farm Retail 
Small/Mid Cap Equity Fund, and Calvert New Vision Small Cap-Fund, each 
of which is an open-end RIC. Bridgeway Capital was founded in 1993 by 
John N.R. Montgomery (``John Montgomery''). John Montgomery has served 
as chairman and president of Bridgeway Capital since its inception.
    2. The capitalization of Bridgeway Capital currently consists of 
3,000 shares of authorized common stock, of which 1,175.877 shares are 
issued and outstanding (``Bridgeway Capital Common Stock''). As of 
December 31, 2008, John Montgomery owned 766.800 shares (65.21%), 
Leonora Montgomery, John Montgomery's mother, owned 359.545 shares 
(30.58%), Franklin J. Montgomery, John Montgomery's brother, owned 
4.714 shares (0.40%), Catherine A. Montgomery, Franklin J. Montgomery's 
spouse, owned 0.560 shares (0.05%), Bethany M. Hays and Catherine M. 
Tinsley, John Montgomery's sisters, each owned 0.560 shares (0.05%), 
Diana Ryan and Diane Matthes, friends of Leonora Montgomery, owned 
0.780 shares (0.07%) and 0.280 shares (0.02%) respectively, and the 
Bridgeway Capital Employee Stock Ownership Program (``ESOP'') owned 
42.078 shares (3.58%).
    3. Leonora Montgomery received her shares of Bridgeway Capital 
Common Stock in 1995 and 1996 in exchange for an investment in 
Bridgeway Capital. Leonora Montgomery does not currently have, nor has 
she ever had, any significant or material interactions with Bridgeway 
Capital other than her ownership of Bridgeway Capital Common Stock. She 
has never served as an officer or director of Bridgeway Capital or been 
involved in the operation of Bridgeway Capital, and her interest in 
Bridgeway Capital is purely that of a passive long-term shareholder.
    4. Leonora Montgomery executed her written last will and testament 
(``Will'') on April 19, 2007. The Will provides that at the time of her 
death, Leonora Montgomery's Bridgeway Capital Common Stock will be 
transferred in equal amounts to each of her four children (i.e., 7.65% 
of outstanding Bridgeway Capital Common Stock to each of John 
Montgomery, Franklin J. Montgomery, Bethany M. Hays and Catherine M. 
Tinsley based on ownership data as of December 31, 2008). Absent any 
ensuing issuance of Bridgeway Capital Common Stock, such future 
transfer of shares will result in the increase of John Montgomery's 
aggregate share ownership in Bridgeway Capital Common Stock from 65.21% 
to 72.86% (based on ownership data as of December 31, 2008).
    5. No changes are contemplated in the existing management or 
operations of Bridgeway Capital in connection with the future transfer 
of Bridgeway Capital Common Stock. John Montgomery will continue to 
serve as chairman and president of Bridgeway Capital. It is currently 
contemplated that no share transactions will be effected by Bridgeway 
Capital that would have the effect of materially reducing John 
Montgomery's ownership of Bridgeway Capital Common Stock.
    Applicant's Legal Analysis:
    1. Bridgeway Capital requests an order under section 2(a)(9) of the 
Act declaring that Leonora Montgomery does not control it. Section 
2(a)(9) defines ``control'' as the power to exercise a controlling 
influence over the management or policies of a company. Section 2(a)(9) 
also provides that any person who owns beneficially, either directly or 
through one or more controlled companies, more than 25 percent of the 
voting securities of a company shall be presumed to control the 
company. Section 2(a)(9) further provides that this presumption may be 
rebutted by evidence but continues until a determination to the 
contrary is made by the Commission. For the reasons set forth below, 
applicant believes that the

[[Page 15787]]

evidence presented in the application rebuts the presumption that 
Leonora Montgomery controls Bridgeway Capital as a result of her 
ownership of more than 25 percent of Bridgeway Capital's voting 
securities.
    2. If Leonora Montgomery were determined to control Bridgeway 
Capital, the future transfer of her Bridgeway Capital Common Stock 
could be deemed to result in the ``assignment,'' as defined in section 
2(a)(4) of the Act, of Bridgeway Capital's investment advisory or 
subadvisory agreement with each RIC advised or subadvised by Bridgeway 
Capital at the time of the transfer (``Fund''), resulting in the 
automatic termination of each investment advisory or subadvisory 
agreement in accordance with section 15(a)(4) of the Act. If the 
investment advisory or subadvisory agreements were terminated, a new 
investment advisory or subadvisory agreement would have to be approved 
by each Fund's board of directors and shareholders pursuant to section 
15(a) of the Act, even though there would be no change to the terms of 
the investment advisory or subadvisory agreements, or to the investment 
policies, personnel, operations, or actual control of Bridgeway Capital 
as a result of the transfer of Bridgeway Capital Common Stock. 
Bridgeway Capital wants to eliminate the need for a special meeting of 
the shareholders of each Fund and to avoid the burden and expense of 
soliciting proxies merely for the purpose of approving an investment 
advisory or subadvisory agreement that would be identical to the 
existing investment advisory or subadvisory agreement, which already 
has been approved by each Fund's board of directors and shareholders in 
accordance with section 15(a) of the Act.
    3. Since Bridgeway Capital's inception, John Montgomery has solely 
``controlled'' Bridgeway Capital, as that term is defined in section 
2(a)(9) of the Act, and has been involved in the active management of 
all aspects of the operations and affairs of Bridgeway Capital in his 
capacity as chairman, president, and majority shareholder. 
Additionally, the shareholder voting provisions of Bridgeway Capital's 
articles of incorporation and by-laws support the fact that only John 
Montgomery controls Bridgeway Capital. For purposes of any meeting of 
shareholders, a quorum consists of the holders of 50% of the issued and 
outstanding Bridgeway Capital Common Stock entitled to vote, present in 
person or by proxy. Furthermore, assuming a quorum is present, any 
matter to be voted upon must be approved by a vote of a majority of 
Bridgeway Capital Common Stock present in person or by proxy.\1\ Each 
shareholder is entitled to one vote for each share of Bridgeway Capital 
Common Stock owned by such shareholder. As a result of John 
Montgomery's current 65.21% ownership of Bridgeway Capital Common 
Stock, a quorum cannot be reached without John Montgomery's shares of 
Bridgeway Capital Common Stock. Moreover, John Montgomery has 
sufficient voting power to control the election of directors as well as 
any other matter to be voted upon at a shareholder meeting.\2\
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    \1\ Bridgeway Capital's Articles of Incorporation do include one 
provision requiring a three-fourths affirmative vote of creditors or 
shareholders, as the case may be, to agree to proposed compromises 
or arrangements (including a reorganization) between Bridgeway 
Capital and its creditors or shareholders, as the case may be, over 
which a court has jurisdiction.
    \2\ Since April 1995, when Leonora Montgomery became a 
shareholder in Bridgeway Capital, Leonora Montgomery has voted on 
each matter that has required a shareholder vote (whether at a 
formal shareholder meeting or by written consent) in the same manner 
as John Montgomery. Additionally, even if Leonora Montgomery did 
attempt to exercise actual control, John Montgomery is the majority 
shareholder, and as such, Leonora Montgomery could only have a 
limited influence on the operations of Bridgeway Capital.
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    4. Applicant represents that Leonora Montgomery has never 
exercised, and will not exercise, a controlling influence over the 
management or policies of Bridgeway Capital and that John Montgomery 
does and will exercise control over its management. Applicant thus 
submits that the facts prescribed in the application rebut the 
presumption of control created by section 2(a)(9) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-7776 Filed 4-6-09; 8:45 am]
BILLING CODE 8010-01-P