No-Action Letter under:
Investment Company Act of 1940:
Section 15(a); Rule 18f-2

AHA Investment Funds, Inc.

Response of the Division of Investment Mangement

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

March 8, 2001

Our Ref. No. 2001-02-ICR
AHA Investment Funds, Inc.

RESPONSE OF THE OFFICE OF
INVESTMENT COMPANY REGULATION
DIVISION OF INVESTMENT MANAGEMENT

Your letter of March 7, 2001 requests our assurance that we would not recommend that the Commission take any enforcement action under section 15(a) of the Investment Company Act of 1940 (the "Act"), rule 18f-2 under the Act, and certain disclosure requirements, if AHA Investment Funds, Inc. (the "Fund") continues to rely on an exemptive order ("Exemptive Order") issued to the Fund.¹ The Exemptive Order permits investment managers approved by the Fund's Board of Directors ("Investment Managers") to serve as investment advisers to the Fund without obtaining shareholder approval of the advisory agreements with the Investment Managers, and permits those agreements to be terminated without shareholder approval. The Exemptive Order also exempts the Fund from certain disclosure requirements regarding advisory fees paid to Investment Managers.

You state that the Fund, an open-end management investment company registered under the Act and consisting of four portfolios ("Portfolios"), was organized through the joint cooperation of Hewitt Associates ("Hewitt") and American Hospital Association Services, Inc., a subsidiary of the American Hospital Association ("AHA"). Hewitt serves as an asset management consultant and provides related services toAHA member hospitals and their affiliated organizations ("Member Organizations") through the AHA Investment Program ("AHA Program"). Shares of the Portfolios are available for purchase only by Member Organizations that have entered into program services agreements ("Services Agreements") with Hewitt. The Services Agreements provide for payment by each Member Organization (a "Program Participant") of a single fee directly to Hewitt. Pursuant to a corporate management agreement (the "Management Agreement") with the Fund, Hewitt evaluates, selects (subject to approval of the Fund's Board of Directors), and monitors the Investment Managers that make specific investment decisions for each Portfolio. Hewitt pays the Investment Managers for their advisory services. The Fund pays no fees to Hewitt or the Investment Managers.

Hewitt has entered into an asset purchase agreement under which CCM Advisors, LLC ("CCMA") will purchase the assets of Hewitt related to the operations of theAHA Program and the Fund (the "Transaction"). Hewitt has agreed to assign the Services Agreements to CCMA in connection with the Transaction, subject in each case to the written consent of the Program Participant that is a party to the agreement. As a result of these assignments, CCMA will be responsible for providing Program Participants with the same investment consulting services as are currently provided by Hewitt.

Consummation of the Transaction is subject to various conditions, including a condition that shareholders of each Portfolio approve a new corporate management agreement between the Fund and CCMA (the "New Management Agreement"). You state that on February 28, 2001, the shareholders of the Fund approved the New Management Agreement by the vote of a majority of the outstanding voting securities of each Portfolio. You represent that the New Management Agreement is the same in all material respects as the Management Agreement and was approved unanimously by the Board of Directors of the Fund, including the vote of the directors who are not "interested persons," as defined by section 2(a)(19) of the Act, of the Fund or Hewitt. You state that the Transaction will be consummated on or about March 8, 2001.

You state that the Transaction will not alter the nature of the AHA Program or result in any change in the nature or scope of services provided to Program Participants or the Fund. You state that the Fund will continue to and CCMA will comply with all of the terms and conditions of the Exemptive Order. You note that neither CCMA (or any person controlling, controlled by, or under common control with CCMA), nor any director, officer, or employee of the Fund, knowingly has or will have any direct or indirect beneficial interest in any security issued by an Investment Manager or by a person controlling, controlled by, or under common control with an Investment Manager or stand to profit or benefit in any manner from transactions in an Investment Manager's securities, and that no Investment Manager will be an affiliated person (as defined in section 2(a)(3) of the Act) of the Fund or CCMA, or an affiliated person of such a person, other than by reason of serving as an Investment Manager to a Portfolio.

Based on the facts and representations made in your letter, we would not recommend that the Commission take enforcement action under section 15(a) of the Act, rule 18f-2 under the Act, or certain disclosure requirements, if the Fund relies on the Exemptive Order upon consummation of the Transaction. This response expresses the Division's position on enforcement action only, and does not purport to express any legal conclusions on the questions presented. Facts or conditions different from those presented in your letter might require a different conclusion.

Sara Crovitz
Senior Counsel
Office of Investment Company Regulation

Footnotes

Initial Inquiry

SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, NY 10022
(212) 756-2000
fax (212) 593-5955
www.crz.com
(212) 756-2533

E-mail
kenneth.gerstein@srz.com

March 7, 2001

ICA/§ 6(c)

Ms. Nadya B. Roytblat
Assistant Director
Office of Investment Company Regulation
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: AHA Investment Funds, Inc.
File No. 812-7016

Dear Ms. Roytblat:

We are writing on behalf of AHA Investment Funds, Inc. (the "Fund") to request the assurance of the Staff of the Division of Investment Management of the Securities and Exchange Commission (the "Commission") that it will not recommend to the Commission that it take any enforcement action against the Fund under Section 15(a) of the Investment Company Act of 1940 (the "1940 Act"), Rule 18f-2 under the 1940 Act, and certain disclosure requirements if, on and after the effective date of the assumption by CCM Advisors, LLC ("CCMA") of investment advisory responsibilities as the Fund's investment consultant, the Fund continues to rely on an existing exemptive order (In the Matter of AHA Investment Funds, Inc., File No. 812-7016) (the "Order"), which granted exemptions from certain provisions of Section 15(a) of the 1940 Act, Rule 18f-2 thereunder and certain disclosure requirements. n1 As discussed below, we believe that it is appropriate for the Fund to continue to rely on the Order because the nature and scope of services furnished to the Fund and its shareholders by CCMA will be the same in all material respects as those that have been furnished to the Fund by Hewitt Associates LLC ("Hewitt"), the Fund's current investment consultant.

I. Background.

A. The Order.

The Order was issued by the Commission in 1988, pursuant to Section 6(c) of the 1940 Act, upon application of the Fund. It provides an exemption, subject to certain conditions, from the provisions of Section 15(a) of the 1940 Act and Rule 18f-2 thereunder pursuant to which the investment advisory agreements between the Fund and the various investment advisers that manage the Fund's investment portfolios (the "Investment Managers") need not be approved by shareholders of the Fund. In addition, the Order exempts the Fund from the provisions of various rules to the extent that they would otherwise require disclosure of: (i) the methods of computation, rates and amounts of advisory fees paid to the Investment Managers in the Fund's registration statement, annual and semi-annual reports to shareholders and to the Commission, and in proxy statements; and (ii) financial information relating to the Investment Managers and information regarding transactions by certain persons in securities of the Investment Managers (and their parents) in the Fund's proxy statements.

In its application for the Order, the Fund made various representations concerning the nature and scope of services provided by Hewitt to the Fund and to participants in theAHA Investment Program (the "AHA Program"). Among other things, the Fund stated that neither Hewitt nor any director, officer or employee of the Fund would knowingly have a direct or indirect beneficial interest in any security issued by an Investment Manager or by a controlling person of an Investment Manager or stand to profit or benefit in any manner from transactions in an Investment Manager's securities.

B. The Fund.

The Fund is registered under the 1940 Act as an open-end, management investment company and sells its shares on a no-load basis. It was organized through the joint cooperation of Hewitt and American Hospital Association Services, Inc., a subsidiary of the American Hospital Association (" AHA"). The Fund operates in conjunction with theAHA Program, which is a program through which Hewitt makes asset management consulting and related services available toAHA member hospitals and their affiliated organizations ("Member Organizations"), including employee benefit plans. It is a "multi-manager" fund that is currently comprised of four investment portfolios (the "Portfolios"), each represented by a separate series of the Fund's shares.

Hewitt has served as investment consultant to the Fund since commencement of the Fund's operations. In this capacity, Hewitt is responsible for, among other things, evaluating, selecting (subject to the approval of the Fund's directors) and monitoring the Investment Managers that manage the assets of the Portfolios. Hewitt's services are provided to the Fund in accordance with the terms of a corporate management agreement between Hewitt and the Fund dated July 15, 1988 (the "Management Agreement"). Subsequent to its initial two-year term, the Management Agreement has been continued in effect from year to year by action of the Board of Directors of the Fund, including the vote of a majority of the directors who are not "interested persons," as defined by Section 2(a)(19) of the 1940 Act, of the Fund or Hewitt (the "Independent Directors").

Subject to general supervision by the Board of Directors of the Fund and to the coordination and review of investment activities of the Portfolios by Hewitt, the specific investment decisions for each Portfolio are made by the Investment Managers. Each Investment Manager is retained and provides services to the Fund pursuant to the terms of a Portfolio Advisory Agreement entered into by the Investment Manager, Hewitt, and the Fund (the "Advisory Agreements").

Under the terms of the Management Agreement, Hewitt is obligated to pay all fees payable to the Investment Managers under the Advisory Agreements. The Fund pays no fees to Hewitt or to the Investment Managers.

C. The AHA Program.

The Fund is an integral part of theAHA Program. It was organized to enable Hewitt to provide its asset management consulting and investment manager selection services to Member Organizations on a basis that is efficient and cost effective. The Fund is provided the benefit of Hewitt's investment manager evaluation and selection services and, in turn, makes its shares available to Member Organizations to permit implementation of the asset allocation and investment objective selection decisions made by those organizations with assistance given to them by Hewitt. By pooling assets of Member Organizations in the Portfolios, Hewitt is able to provide small and medium size Member Organizations a means to implement asset allocation decisions on an economically viable basis.

Shares of the Portfolios are available for purchase only by Member Organizations that have entered into program services agreements ("Services Agreements") with Hewitt. The Services Agreements provide for payment by each such Member Organization (a "Program Participant") of a single fee directly to Hewitt to obtain the services offered as part of the AHA Program. Pursuant to the Services Agreements, Hewitt assists Program Participants in defining appropriate investment objectives and desired investment returns and in allocating assets among different investment strategies in a manner consistent with their investment goals. Program Participants may invest in one or more of the Portfolios to gain access to Hewitt's investment manager selection services and to obtain multi-manager diversification within particular investment strategies.

D. The Transaction.

Hewitt and CCMA have entered into an asset purchase agreement pursuant to which CCMA will purchase the assets of Hewitt relating to the operations of theAHA Program and the Fund (the "Transaction"). Consummation of the Transaction is subject to various conditions, including a condition that shareholders of each Portfolio approve a new corporate management agreement between the Fund and CCMA (the "New Management Agreement"). Assuming satisfaction of all closing conditions, it is expected that the Transaction will be consummated on or about March 8, 2001.

The New Management Agreement is the same in all material respects as the Management Agreement and was unanimously approved by the Board of Directors of the Fund, including the vote of each of the Independent Directors, at a meeting held in person on December 15, 2000, which was called for the purpose of considering the New Management Agreement. A special meeting of shareholders of the Fund was held on February 28, 2001 (the "Shareholders Meeting") to enable shareholders of the Fund to vote on various matters, including a proposal to approve the New Management Agreement. At the Shareholders Meeting, the New Management Agreement was approved by "the vote of a majority of the outstanding voting securities" (as defined in Section 2(a)(42) of the 1940 Act) of each Portfolio. The New Management Agreement will become effective upon consummation of the Transaction.

Hewitt has agreed to assign the Services Agreements to CCMA in connection with the Transaction, subject in each case to the written consent of the Program Participant that is a party to the agreement. As a consequence of these assignments, CCMA will be responsible to provide to Program Participants the same investment consulting services as are currently provided to them by Hewitt.

CCMA has agreed that, to the extent within its control, it will cause the two conditions set forth in Section 15(f) of the 1940 Act to be complied with. At the Shareholders Meeting, eight individuals were elected to serve as directors of the Fund. Only two of these individuals are persons who are "interested persons," as defined by Section 2(a)(19) of the 1940 Act, of Hewitt or of CCMA. In addition, CCMA has represented that it does not have and that it is not aware of any express or implied term, condition, arrangement or understanding that would impose an "unfair burden" on the Fund as a result of the Transaction.

CCMA, which is registered as an investment adviser under the Investment Advisers Act of 1940, is a majority-owned subsidiary of Convergent Capital Management Inc. ("CCM"). CCM also owns and maintains interests (including majority ownership interests) in other investment adviser affiliates that provide investment advisory services to both institutional investors and individuals. As of December 31, 2000, assets under management by affiliates of CCM were in excess of $ 12 billion.

Based on meetings with CCMA and its review and consideration of written materials provided by CCMA, the Fund's Board of Directors concluded that CCMA has the capability, the commitment and the resources to provide the Fund and participants in theAHA Program with the full range of services now being provided by Hewitt. Additionally, the Board believes that the retention of CCMA by the Fund has the potential to expand the scope of investment opportunities offered by the Fund and available through theAHA Program. The Board concluded that the business plans of COMA may also result in the growth of assets of the Fund from investment of new participants in the AHA Program, which would over time be likely to enable the Fund to achieve lower operating expenses. Additionally, in determining whether to approve the Management Agreement, the Board considered the fact that CCMA is a newly formed organization. However, Timothy G. Solberg, a director of the Fund and an employee of Hewitt who has been extensively involved in theAHA Program for over 10 years, will become an owner and Managing Director of CCMA. Thus, there will be some degree of continuity in the personnel providing services to the Fund.

II. Discussion.

The issuance of the Order was based, in part, on the nature of theAHA Program and, in particular, the nature of the services provided by Hewitt. Thus, CCMA's assumption of the various responsibilities of Hewitt relating to the Fund and theAHA Program may possibly raise a question as to the appropriateness of the Fund's continued reliance on the Order after the Transaction.

In this regard, we believe it is relevant that the Transaction itself will not alter the nature of theAHA Program or result in any change in the nature or scope of services provided to Program Participants or to the Fund. The only change will be in the identity of the company providing those services. By assuming Hewitt's responsibilities under the Services Agreements and entering into the New Management Agreement, CCMA will simply be stepping into Hewitt's shoes. We believe that, under these circumstances, it would be appropriate for the Fund to continue to rely on the Order after consummation of the Transaction.

The Fund will continue to and CCMA will comply with all of the terms and conditions of the Order. Moreover, the representations made by the Fund in its application for the Order will continue to be true. In this respect, the Fund represents, consistent with the intent of the statement made in its application regarding the retention of Investment Managers whose securities are beneficially owned by Hewitt or by certain affiliated persons of the Fund, that neither CCMA (or any person controlling, controlled by or under common control with CCMA), nor any director, officer or employee of the Fund, knowingly has or will have any direct or indirect beneficial interest in any security issued by an Investment Manager or by a person controlling, controlled by, or under common control with an Investment Manager or stand to profit or benefit in any manner from transactions in an Investment Manager's securities, and that no Investment Manager will be an "affiliated person" (as defined in Section 2(a)(3) of the 1940 Act) of the Fund or CCMA or an affiliated person of such a person, other than by reason of serving as an Investment Manager to a Portfolio.

III. Conclusion.

Based on the foregoing, we respectfully request that the Staff confirm that it will not recommend to the Commission that it take any enforcement action against the Fund under Section 15(a) of the 1940 Act, Rule 18f-2 under the 1940 Act, and certain disclosure requirements if the Fund continues to rely on the Order after consummation of the Transaction, provided that: (i) the nature and scope of the services furnished to the Fund and Program Participants by CCMA are the same in all material respects as those that have been furnished by Hewitt; and (ii) neither CCMA (or any person controlling, controlled by, or under common control with CCMA) nor any director, officer or employee of the Fund will knowingly have any direct or indirect beneficial interest in any security issued by an Investment Manager or by a person controlling, controlled by, or under common control with an Investment Manager or stand to profit or benefit in any manner from transactions in an Investment Manager's securities, and that no Investment Manager will be an "affiliated person" (as defined in Section 2(a)(3) of the 1940 Act) of the Fund or CCM, other than by reason of serving as an Investment Manager to a Portfolio.

Thank you for your consideration of this request. We request the opportunity to discuss these matters further with you in the event that the Staff proposes to withhold all or any part of the assurances requested in this letter. If you have any questions, or require any further information, please call the undersigned at (212) 756-2533 or Evelyn Grant at (212) 756-2513.

Very truly yours,

Kenneth S. Gerstein

http://www.sec.gov/divisions/investment/noaction/aha030801.htm