The MainStay Funds, et al.; Notice of Application, 75589-75591 [E6-21342]
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Federal Register / Vol. 71, No. 241 / Friday, December 15, 2006 / Notices
under part 4281 apply to valuation dates
occurring in January 2007.
FOR FURTHER INFORMATION CONTACT:
Catherine B. Klion, Manager, Regulatory
and Policy Division, Legislative and
Regulatory Department, Pension Benefit
Guaranty Corporation, 1200 K Street,
NW., Washington, DC 20005, 202–326–
4024. (TTY/TDD users may call the
Federal relay service toll-free at 1–800–
877–8339 and ask to be connected to
202–326–4024.)
SUPPLEMENTARY INFORMATION:
Variable-Rate Premiums
Section 4006(a)(3)(E)(iii)(II) of the
Employee Retirement Income Security
Act of 1974 (ERISA) and § 4006.4(b)(1)
of the PBGC’s regulation on Premium
Rates (29 CFR part 4006) prescribe use
of an assumed interest rate (the
‘‘required interest rate’’) in determining
a single-employer plan’s variable-rate
premium. Pursuant to the Pension
Protection Act of 2006, for premium
payment years beginning in 2006 or
2007, the required interest rate is the
‘‘applicable percentage’’ (currently 85
percent) of the annual rate of interest
determined by the Secretary of the
Treasury on amounts invested
conservatively in long-term investment
grade corporate bonds for the month
preceding the beginning of the plan year
for which premiums are being paid (the
‘‘premium payment year’’). Thus, the
required interest rate to be used in
determining variable-rate premiums for
premium payment years beginning in
December 2006 is 4.90 percent (i.e., 85
percent of the 5.77 percent composite
corporate bond rate for November 2006
as determined by the Treasury).
The following table lists the required
interest rates to be used in determining
variable-rate premiums for premium
payment years beginning between
January 2006 and December 2006.
The required interest
rate is:
January 2006 ............
February 2006 ..........
March 2006 ...............
April 2006 .................
May 2006 ..................
June 2006 .................
July 2006 ..................
August 2006 .............
September 2006 .......
October 2006 ............
November 2006 ........
December 2006 ........
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For premium payment
years beginning in:
4.86
4.80
4.87
5.01
5.25
5.35
5.36
5.36
5.19
5.06
5.05
4.90
Multiemployer Plan Valuations
Following Mass Withdrawal
The PBGC’s regulation on Duties of
Plan Sponsor Following Mass
Withdrawal (29 CFR part 4281)
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prescribes the use of interest
assumptions under the PBGC’s
regulation on Allocation of Assets in
Single-Employer Plans (29 CFR part
4044). The interest assumptions
applicable to valuation dates in January
2007 under part 4044 are contained in
an amendment to part 4044 published
elsewhere in today’s Federal Register.
Tables showing the assumptions
applicable to prior periods are codified
in appendix B to 29 CFR part 4044.
Issued in Washington, DC, on this 12th day
of December 2006.
Vincent K. Snowbarger,
Interim Director, Pension Benefit Guaranty
Corporation.
[FR Doc. E6–21441 Filed 12–14–06; 8:45 am]
BILLING CODE 7709–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
27595; 812–13257]
75589
by 5:30 p.m. on January, 5, 2007 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 may request
notification of a hearing by writing to
the Commission’s Secretary.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090.
Applicants, c/o Marguerite E.H.
Morrison, Esq., New York Life
Investment Management LLC, 169
Lackawanna Ave., 3rd Floor,
Parsippany, NJ 07054.
FOR FURTHER INFORMATION CONTACT:
Laura L. Solomon, Senior Counsel, at
(202) 551–6915, or Nadya B. Roytblat,
Assistant Director, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Desk,
100 F Street, NE., Washington, DC
20549–0102 (telephone (202) 551–5850).
SUPPLEMENTARY INFORMATION:
The MainStay Funds, et al.; Notice of
Application
December 11, 2006.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from section 15(a) of the Act and rule
18f–2 under the Act, as well as certain
disclosure requirements.
AGENCY:
Summary of 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: The MainStay Funds and
MainStay VP Series Fund, Inc. (each a
‘‘Registrant’’ and together, the
‘‘Registrants’’) and New York Life
Investment Management LLC (‘‘NYLIM’’
or the ‘‘Manager’’).
Filing Dates: The application was
filed on February 1, 2006, and amended
on May 2, 2006 and November 15, 2006.
Applicants have 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
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
PO 00000
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Applicants’ Representations
1. The MainStay Funds is organized
as a Massachusetts business trust and is
registered under the Act as an open-end
management investment company. Each
Registrant currently offers multiple
series (each a ‘‘Fund’’) with its own
investment objectives, policies and
restrictions.1 MainStay VP Series Fund,
Inc. is organized as a Maryland
corporation and is registered under the
Act as an open-end management
investment company. The Manager is a
Delaware limited liability company and
is registered as an investment adviser
1 Applicants also request relief with respect to: (a)
All of the Funds; and (b) any other existing and
future series of the Registrants and any other
existing or future registered open-end management
investment company or series thereof that wishes
to rely on the relief and: (1) Uses the ‘‘manager-ofmanagers’’ arrangement described in the
application; (2) complies with the terms and
conditions of the application; and (3) is advised by
a Manager (together with the Funds, the ‘‘SubAdvised Funds’’). All references to the term
‘‘Manager’’ herein include (a) NYLIM, and (b) any
entity controlling, controlled by, or under common
control with NYLIM. All existing registered openend management investment companies that
currently intend to rely on the requested order are
named as applicants. If the name of any SubAdvised Fund contains the name of a Sub-Adviser
(as defined below), the name of the Manager,
including the legal name of the Manager and/or any
‘‘doing business as’’ or business unit names used by
the Manager, will precede the name of the SubAdviser.
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75590
Federal Register / Vol. 71, No. 241 / Friday, December 15, 2006 / Notices
under the Investment Advisers Act of
1940 (‘‘Advisers Act’’) and provides
investment management services to the
Sub-Advised Funds pursuant to an
investment advisory agreement with
each Sub-Advised Fund (‘‘Investment
Advisory Agreement’’). Each Investment
Advisory Agreement has been approved
by the Registrants’ board of trustees or
directors (the ‘‘Board’’), including a
majority of the members of the Board
who are not ‘‘interested persons,’’ as
defined in section 2(a)(19) of the Act, of
the Sub-Advised Fund (‘‘Independent
Board Members’’) and the shareholders
of the Sub-Advised Fund at the time
and in the manner required by sections
15(a) and (c) of the Act and Rule 18f–
2 under the Act.
2. Under the terms of the Investment
Advisory Agreement, the Manager is
responsible for providing a program of
continuous investment management to
each Sub-Advised Fund in accordance
with the investment objective, policies
and limitations of the Sub-Advised
Fund. The Investment Advisory
Agreement also authorizes the Manager,
subject to Board approval, to enter into
investment sub-advisory agreements
(‘‘Sub-Advisory Agreements’’) with one
or more subadvisers (‘‘Sub-Advisers’’).
Each Sub-Adviser is, and will be,
registered as an investment adviser
under the Advisers Act. The Manager
monitors and evaluates the SubAdvisers and recommends to the Board
their hiring, retention or termination.
Sub-Advisers recommended to the
Board by the Manager have been, or will
be, selected and approved by the Board,
including a majority of the Independent
Board Members. In return for providing
Sub-Adviser selection, monitoring and
asset allocation services, and overall
management services, the Manager will
receive a fee from the Sub-Advised
Fund (‘‘Advisory Fee’’). The SubAdviser’s fees will be paid out of the
Advisory Fee that a Sub-Advised Fund
pays to its Manager.
3. Applicants request an order to
permit the Manager, subject to approval
of the applicable Board, including a
majority of the Independent Board
Members, and without obtaining
shareholder approval to enter into and
materially amend Sub-Advisory
Agreements. The requested relief will
not extend to any Sub-Adviser that is an
affiliated person, as defined in section
2(a)(3) of the Act, of the Sub-Advised
Fund or of a Manager, other than by
reason of serving as a Sub-Adviser to
one or more of the Sub-Advised Funds
(‘‘Affiliated Sub-Adviser’’).
4. Applicants also request an
exemption from the various disclosure
provisions described below that may
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require a Sub-Advised Fund to disclose
fees paid by the Manager to each SubAdviser. An exemption is requested to
permit each Sub-Advised Fund to
disclose (as both a dollar amount and as
a percentage of the Sub-Advised Fund’s
net assets): (a) the aggregate fees paid to
the Manager and any Affiliated SubAdvisers; and (b) the aggregate fees paid
to Sub-Advisers other than Affiliated
Sub-Advisers (collectively, ‘‘Aggregate
Fee Disclosure’’). For any Sub-Advised
Fund that employs an Affiliated SubAdviser, the Fund will provide separate
disclosure of any fees paid to the
Affiliated Sub-Adviser.
Applicants’ Legal Analysis
1. Section 15(a) of the Act provides,
in relevant part, that it is unlawful for
any person to act as an investment
adviser to a registered investment
company except under a written
contract that has been approved by the
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
company affected by a matter must
approve such matter if the Act requires
shareholder approval.
2. Form N–1A is the registration
statement used by open-end investment
companies. Item 14(a)(3) of Form N–1A
requires disclosure of the method and
amount of an 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. Form N–SAR is the semi-annual
report filed with the Commission by
registered investment companies. Item
48 of Form N–SAR requires investment
companies to disclose the rate schedule
for fees paid to their investment
advisers, including the Sub-Advisers.
5. Regulation S–X sets forth the
requirements for financial statements
required to be included as part of
investment company registration
statements and shareholder reports filed
with the Commission. Sections 6–
07(2)(a), (b), and (c) of Regulation S–X
PO 00000
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Fmt 4703
Sfmt 4703
require that investment companies
include in their financial statements
information about investment advisory
fees.
6. 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 their requested relief meets
this standard for the reasons discussed
below.
7. Applicants assert that the
shareholders of a Sub-Advised Fund are
relying on the Manager’s experience to
select one or more Sub-Advisers best
suited to achieve the Sub-Advised
Fund’s investment objectives.
Applicants assert that, from the
perspective of the investor, the role of
the Sub-Advisers is comparable to that
of the individual portfolio managers
employed by traditional investment
company advisory firms. Applicants
state that requiring shareholder
approval of each Sub-Advisory
Agreement would impose costs and
unnecessary delays on the Sub-Advised
Funds, and may preclude the Manager
from acting promptly in a manner
considered advisable by the Board.
Applicants note that the Investment
Advisory Agreement and any SubAdvisory Agreement with an Affiliated
Sub-Adviser will remain subject to
section 15(a) of the Act and rule 18f–2
under the Act.
8. Applicants assert that some SubAdvisers use a ‘‘posted’’ rate schedule to
set their fees. Applicants state that
while Sub-Advisers are willing to
negotiate fees that are lower than those
posted on the schedule, they are
reluctant to do so where the fees are
disclosed to other prospective and
existing customers. Applicants submit
that the requested relief will allow the
Manager to negotiate more effectively
with each Sub-Adviser.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Before a Sub-Advised Fund may
rely on the requested order, the
operation of the Sub-Advised Fund in
the manner described in the application
will be approved by a majority of the
Sub-Advised Fund’s outstanding voting
securities, as defined in the Act, or, in
the case of a Sub-Advised Fund whose
public shareholders purchase shares on
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Federal Register / Vol. 71, No. 241 / Friday, December 15, 2006 / Notices
the basis of a prospectus containing the
disclosure contemplated by condition 2
below, by the sole initial shareholder
before offering the Sub-Advised Fund’s
shares to the public.
2. Each Sub-Advised Fund will
disclose in its prospectus the existence,
substance, and effect of any order
granted pursuant to the application. In
addition, each Sub-Advised Fund will
hold itself out to the public as
employing the manager of managers
arrangement described in the
application. The prospectus relating to
each Sub-Advised Fund will
prominently disclose that its Manager
has ultimate responsibility (subject to
oversight by the Board) to oversee the
Sub-Advisers and recommend their
hiring, termination, and replacement.
3. Within 90 days of the hiring of a
new Sub-Adviser, the applicable
Manager will furnish shareholders all
information about the new Sub-Adviser
that would be included in a proxy
statement, except as modified to permit
Aggregate Fee Disclosure. This
information will include Aggregate Fee
Disclosure and any change in such
disclosure caused by the addition of the
new Sub-Adviser. To meet this
condition, the Manager will provide
shareholders of the applicable SubAdvised Fund within 90 days of the
hiring of a new Sub-Adviser with an
information statement meeting the
requirements of Regulation 14C,
Schedule 14C, and Item 22 of Schedule
14A under the 1934 Act, except as
modified by the order to permit
Aggregate Fee Disclosure.
4. The Manager will not enter into a
Sub-Advisory Agreement with any
Affiliated Sub-Adviser unless that
agreement, including the compensation
to be paid thereunder, has been
approved by the shareholders of the
applicable Sub-Advised Fund.
5. At all times, at least a majority of
the Board will be Independent Board
Members and the nomination of new or
additional Independent Board Members
will be at the discretion of the then
existing Independent Board Members.
6. When a change of Sub-Adviser is
proposed for a Sub-Advised Fund with
an Affiliated Sub-Adviser, the Board,
including a majority of the Independent
Board Members, will make a separate
finding, reflected in the Board minutes,
that such change is in the best interests
of the Sub-Advised Fund and its
shareholders, and does not involve a
conflict of interest from which the
Manager or an Affiliated Sub-Adviser
derives an inappropriate advantage.
7. The Manager will provide general
management services to each SubAdvised Fund, including overall
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supervisory responsibility for the
general management and investment of
each Sub-Advised Fund’s assets, and,
subject to review and approval by the
Board, will, for each Sub-Advised Fund:
(a) Set the Sub-Advised Fund’s overall
investment strategies; (b) evaluate,
select and recommend Sub-Advisers to
manage all or a part of the Sub-Advised
Fund’s assets; (c) when appropriate,
allocate and reallocate the Sub-Advised
Fund’s assets among multiple SubAdvisers; (d) monitor and evaluate the
Sub-Advisers’ investment performance;
and (e) implement procedures
reasonably designed to ensure
compliance by the Sub-Advisers with
the Sub-Advised Fund’s investment
objective, policies and restrictions.
8. No director, trustee or officer of a
Sub-Advised Fund, or director or officer
of the Manager, will own, directly or
indirectly (other than through a pooled
investment vehicle over which such
person does not have control), any
interest in a Sub-Adviser, except for: (a)
ownership of interests in the Manager or
any entity that controls, is controlled by,
or is under common control with the
Manager, or (b) ownership of less than
1% of the outstanding securities of any
class of equity or debt of any publicly
traded company that is either a SubAdviser or an entity that controls, is
controlled by, or is under common
control with a Sub-Adviser.
9. Each Sub-Advised Fund will
disclose in its registration statement the
Aggregate Fee Disclosure.
10. Independent Legal Counsel, as
defined in rule 0–1(a)(6) under the Act,
will be engaged to represent the
Independent Board Members. The
selection of such counsel will be within
the discretion of the then existing
Independent Board Members.
11. The requested order will expire on
the effective date of rule 15a–5 under
the Act, if adopted.
12. The Manager will provide the
Boards, no less frequently than
quarterly, with information about the
profitability of the Manager on a perSub-Advised Fund basis. The
information will reflect the impact on
profitability of the hiring or termination
of any Sub-Adviser during the
applicable quarter.
13. Whenever a Sub-Adviser is hired
or terminated, the Manager will provide
the Board with information showing the
expected impact on the profitability of
the Manager.
PO 00000
For the Commission, by the Division of
Investment Management, under delegated
authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6–21342 Filed 12–14–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting Notice
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
will hold the following meeting during
the week of December 18, 2006:
A Closed Meeting will be held on
Tuesday, December 19, 2006 at 10 a.m.
Commissioners, Counsels to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters may also be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), (9)(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), (9)(ii),
and (10) permit consideration of the
scheduled matters at the Closed
Meeting.
Commissioner Casey, as duty officer,
voted to consider the items listed for the
closed meeting in closed session.
The subject matters of the Closed
Meeting scheduled for Tuesday,
December 19, 2006 will be: formal
orders of investigation; institution and
settlement of injunctive actions;
institution and settlement of
administrative proceedings of an
enforcement nature; a collection matter;
an adjudicatory matter; and other
matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Dated: December 12, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. 06–9739 Filed 12–12–06; 3:51 pm]
BILLING CODE 8011–01–P
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]]>Agencies
[Federal Register Volume 71, Number 241 (Friday, December 15, 2006)]
[Notices]
[Pages 75589-75591]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-21342]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27595; 812-13257]
The MainStay Funds, et al.; Notice of Application
December 11, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 15(a) of
the Act and rule 18f-2 under the Act, as well as certain disclosure
requirements.
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Summary of 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: The MainStay Funds and MainStay VP Series Fund, Inc.
(each a ``Registrant'' and together, the ``Registrants'') and New York
Life Investment Management LLC (``NYLIM'' or the ``Manager'').
Filing Dates: The application was filed on February 1, 2006, and
amended on May 2, 2006 and November 15, 2006. Applicants have 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 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 January, 5, 2007 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 may request notification of a hearing by writing to
the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090. Applicants, c/o Marguerite E.H.
Morrison, Esq., New York Life Investment Management LLC, 169 Lackawanna
Ave., 3rd Floor, Parsippany, NJ 07054.
FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at
(202) 551-6915, or Nadya B. Roytblat, Assistant Director, 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 Desk, 100 F Street, NE., Washington, DC
20549-0102 (telephone (202) 551-5850).
Applicants' Representations
1. The MainStay Funds is organized as a Massachusetts business
trust and is registered under the Act as an open-end management
investment company. Each Registrant currently offers multiple series
(each a ``Fund'') with its own investment objectives, policies and
restrictions.\1\ MainStay VP Series Fund, Inc. is organized as a
Maryland corporation and is registered under the Act as an open-end
management investment company. The Manager is a Delaware limited
liability company and is registered as an investment adviser
[[Page 75590]]
under the Investment Advisers Act of 1940 (``Advisers Act'') and
provides investment management services to the Sub-Advised Funds
pursuant to an investment advisory agreement with each Sub-Advised Fund
(``Investment Advisory Agreement''). Each Investment Advisory Agreement
has been approved by the Registrants' board of trustees or directors
(the ``Board''), including a majority of the members of the Board who
are not ``interested persons,'' as defined in section 2(a)(19) of the
Act, of the Sub-Advised Fund (``Independent Board Members'') and the
shareholders of the Sub-Advised Fund 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 also request relief with respect to: (a) All of
the Funds; and (b) any other existing and future series of the
Registrants and any other existing or future registered open-end
management investment company or series thereof that wishes to rely
on the relief and: (1) Uses the ``manager-of-managers'' arrangement
described in the application; (2) complies with the terms and
conditions of the application; and (3) is advised by a Manager
(together with the Funds, the ``Sub-Advised Funds''). All references
to the term ``Manager'' herein include (a) NYLIM, and (b) any entity
controlling, controlled by, or under common control with NYLIM. All
existing registered open-end management investment companies that
currently intend to rely on the requested order are named as
applicants. If the name of any Sub-Advised Fund contains the name of
a Sub-Adviser (as defined below), the name of the Manager, including
the legal name of the Manager and/or any ``doing business as'' or
business unit names used by the Manager, will precede the name of
the Sub-Adviser.
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2. Under the terms of the Investment Advisory Agreement, the
Manager is responsible for providing a program of continuous investment
management to each Sub-Advised Fund in accordance with the investment
objective, policies and limitations of the Sub-Advised Fund. The
Investment Advisory Agreement also authorizes the Manager, subject to
Board approval, to enter into investment sub-advisory agreements
(``Sub-Advisory Agreements'') with one or more subadvisers (``Sub-
Advisers''). Each Sub-Adviser is, and will be, registered as an
investment adviser under the Advisers Act. The Manager monitors and
evaluates the Sub-Advisers and recommends to the Board their hiring,
retention or termination. Sub-Advisers recommended to the Board by the
Manager have been, or will be, selected and approved by the Board,
including a majority of the Independent Board Members. In return for
providing Sub-Adviser selection, monitoring and asset allocation
services, and overall management services, the Manager will receive a
fee from the Sub-Advised Fund (``Advisory Fee''). The Sub-Adviser's
fees will be paid out of the Advisory Fee that a Sub-Advised Fund pays
to its Manager.
3. Applicants request an order to permit the Manager, subject to
approval of the applicable Board, including a majority of the
Independent Board Members, and without obtaining shareholder approval
to enter into and materially amend Sub-Advisory Agreements. The
requested relief will not extend to any Sub-Adviser that is an
affiliated person, as defined in section 2(a)(3) of the Act, of the
Sub-Advised Fund or of a Manager, other than by reason of serving as a
Sub-Adviser to one or more of the Sub-Advised Funds (``Affiliated Sub-
Adviser'').
4. Applicants also request an exemption from the various disclosure
provisions described below that may require a Sub-Advised Fund to
disclose fees paid by the Manager to each Sub-Adviser. An exemption is
requested to permit each Sub-Advised Fund to disclose (as both a dollar
amount and as a percentage of the Sub-Advised Fund's net assets): (a)
the aggregate fees paid to the Manager and any Affiliated Sub-Advisers;
and (b) the aggregate fees paid to Sub-Advisers other than Affiliated
Sub-Advisers (collectively, ``Aggregate Fee Disclosure''). For any Sub-
Advised Fund that employs an Affiliated Sub-Adviser, the Fund will
provide separate disclosure of any fees paid to the Affiliated Sub-
Adviser.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is
unlawful for any person to act as an investment adviser to a registered
investment company except under a written contract that has been
approved by the 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 company affected by a matter must approve such
matter if the Act requires shareholder approval.
2. Form N-1A is the registration statement used by open-end
investment companies. Item 14(a)(3) of Form N-1A requires disclosure of
the method and amount of an 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. Form N-SAR is the semi-annual report filed with the Commission
by registered investment companies. Item 48 of Form N-SAR requires
investment companies to disclose the rate schedule for fees paid to
their investment advisers, including the Sub-Advisers.
5. Regulation S-X sets forth the requirements for financial
statements required to be included as part of investment company
registration statements and shareholder reports filed with the
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require
that investment companies include in their financial statements
information about investment advisory fees.
6. 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 their requested relief meets this standard
for the reasons discussed below.
7. Applicants assert that the shareholders of a Sub-Advised Fund
are relying on the Manager's experience to select one or more Sub-
Advisers best suited to achieve the Sub-Advised Fund's investment
objectives. Applicants assert that, from the perspective of the
investor, the role of the Sub-Advisers is comparable to that of the
individual portfolio managers employed by traditional investment
company advisory firms. Applicants state that requiring shareholder
approval of each Sub-Advisory Agreement would impose costs and
unnecessary delays on the Sub-Advised Funds, and may preclude the
Manager from acting promptly in a manner considered advisable by the
Board. Applicants note that the Investment Advisory Agreement and any
Sub-Advisory Agreement with an Affiliated Sub-Adviser will remain
subject to section 15(a) of the Act and rule 18f-2 under the Act.
8. Applicants assert that some Sub-Advisers use a ``posted'' rate
schedule to set their fees. Applicants state that while Sub-Advisers
are willing to negotiate fees that are lower than those posted on the
schedule, they are reluctant to do so where the fees are disclosed to
other prospective and existing customers. Applicants submit that the
requested relief will allow the Manager to negotiate more effectively
with each Sub-Adviser.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Before a Sub-Advised Fund may rely on the requested order, the
operation of the Sub-Advised Fund in the manner described in the
application will be approved by a majority of the Sub-Advised Fund's
outstanding voting securities, as defined in the Act, or, in the case
of a Sub-Advised Fund whose public shareholders purchase shares on
[[Page 75591]]
the basis of a prospectus containing the disclosure contemplated by
condition 2 below, by the sole initial shareholder before offering the
Sub-Advised Fund's shares to the public.
2. Each Sub-Advised Fund will disclose in its prospectus the
existence, substance, and effect of any order granted pursuant to the
application. In addition, each Sub-Advised Fund will hold itself out to
the public as employing the manager of managers arrangement described
in the application. The prospectus relating to each Sub-Advised Fund
will prominently disclose that its Manager has ultimate responsibility
(subject to oversight by the Board) to oversee the Sub-Advisers and
recommend their hiring, termination, and replacement.
3. Within 90 days of the hiring of a new Sub-Adviser, the
applicable Manager will furnish shareholders all information about the
new Sub-Adviser that would be included in a proxy statement, except as
modified to permit Aggregate Fee Disclosure. This information will
include Aggregate Fee Disclosure and any change in such disclosure
caused by the addition of the new Sub-Adviser. To meet this condition,
the Manager will provide shareholders of the applicable Sub-Advised
Fund within 90 days of the hiring of a new Sub-Adviser with an
information statement meeting the requirements of Regulation 14C,
Schedule 14C, and Item 22 of Schedule 14A under the 1934 Act, except as
modified by the order to permit Aggregate Fee Disclosure.
4. The Manager will not enter into a Sub-Advisory Agreement with
any Affiliated Sub-Adviser unless that agreement, including the
compensation to be paid thereunder, has been approved by the
shareholders of the applicable Sub-Advised Fund.
5. At all times, at least a majority of the Board will be
Independent Board Members and the nomination of new or additional
Independent Board Members will be at the discretion of the then
existing Independent Board Members.
6. When a change of Sub-Adviser is proposed for a Sub-Advised Fund
with an Affiliated Sub-Adviser, the Board, including a majority of the
Independent Board Members, will make a separate finding, reflected in
the Board minutes, that such change is in the best interests of the
Sub-Advised Fund and its shareholders, and does not involve a conflict
of interest from which the Manager or an Affiliated Sub-Adviser derives
an inappropriate advantage.
7. The Manager will provide general management services to each
Sub-Advised Fund, including overall supervisory responsibility for the
general management and investment of each Sub-Advised Fund's assets,
and, subject to review and approval by the Board, will, for each Sub-
Advised Fund: (a) Set the Sub-Advised Fund's overall investment
strategies; (b) evaluate, select and recommend Sub-Advisers to manage
all or a part of the Sub-Advised Fund's assets; (c) when appropriate,
allocate and reallocate the Sub-Advised Fund's assets among multiple
Sub-Advisers; (d) monitor and evaluate the Sub-Advisers' investment
performance; and (e) implement procedures reasonably designed to ensure
compliance by the Sub-Advisers with the Sub-Advised Fund's investment
objective, policies and restrictions.
8. No director, trustee or officer of a Sub-Advised Fund, or
director or officer of the Manager, will own, directly or indirectly
(other than through a pooled investment vehicle over which such person
does not have control), any interest in a Sub-Adviser, except for: (a)
ownership of interests in the Manager or any entity that controls, is
controlled by, or is under common control with the Manager, or (b)
ownership of less than 1% of the outstanding securities of any class of
equity or debt of any publicly traded company that is either a Sub-
Adviser or an entity that controls, is controlled by, or is under
common control with a Sub-Adviser.
9. Each Sub-Advised Fund will disclose in its registration
statement the Aggregate Fee Disclosure.
10. Independent Legal Counsel, as defined in rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Board Members.
The selection of such counsel will be within the discretion of the then
existing Independent Board Members.
11. The requested order will expire on the effective date of rule
15a-5 under the Act, if adopted.
12. The Manager will provide the Boards, no less frequently than
quarterly, with information about the profitability of the Manager on a
per-Sub-Advised Fund basis. The information will reflect the impact on
profitability of the hiring or termination of any Sub-Adviser during
the applicable quarter.
13. Whenever a Sub-Adviser is hired or terminated, the Manager will
provide the Board with information showing the expected impact on the
profitability of the Manager.
For the Commission, by the Division of Investment Management,
under delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6-21342 Filed 12-14-06; 8:45 am]
BILLING CODE 8011-01-P
