JNF Advisors, Inc. and Northern Lights Variable Trust; Notice of Application, 57359-57361 [E7-19753]

Download as PDF Federal Register / Vol. 72, No. 194 / Tuesday, October 9, 2007 / Notices A. General The Privacy Act (5 U.S.C. 552a), as amended, establishes the conditions under which computer matching involving the Federal government could be performed and adding certain protections for individuals applying for and receiving Federal benefits. Section 7201 of the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101– 508) further amended the Privacy Act regarding protections for such individuals. The Privacy Act, as amended, regulates the use of computer matching by Federal agencies when records in a system of records are matched with other Federal, State, or local government records. Among other things, it requires Federal agencies involved in computer matching programs to: (1) Negotiate written agreements with the other agency for agencies participating in the matching programs; (2) Obtain the approval of the match agreement by the Data Integrity Boards (DIB) of the participating Federal agencies; (3) Furnish detailed reports about matching programs to Congress and OMB; (4) Notify applicants and beneficiaries that their records are subject to matching; (5) Verify match findings before reducing, suspending, termination or denying an individual’s benefits or payments. B. OPM Computer Matches Subject to the Privacy Act We have taken action to ensure that all of OPM’s computer matching programs comply with the requirements of the Privacy Act, as amended. Notice of Computer Matching Program, Office of Personnel Management (OPM) With the Social Security Administration (SSA) A. Participating Agencies OPM and SSA. mstockstill on PROD1PC66 with NOTICES B. Purpose of the Matching Program The purpose of this agreement is to establish the conditions under which SSA agrees to disclose tax return and/ or Social Security benefit information to OPM. The SSA records will be used in redetermining and recomputing the benefits of certain annuitants and survivors whose computations are based, in part, on military service performed after December 1956 under the Civil Service Retirement System (CSRS) and certain annuitants and survivors whose annuity computation under the Federal Employees VerDate Aug<31>2005 17:07 Oct 05, 2007 Jkt 214001 Retirement System (FERS) have a CSRS component. C. Authority for Conducting the Matching Program Chapters 83 and 84 of title 5 of the United States Code provide the basis for computing annuities under CSRS and FERS, respectively, and require release of information by SSA to OPM in order to administer data exchanges involving military service performed by an individual after December 31, 1956. The CSRS requirement is codified at section 8332(j) of title 5 of the United States Code; the FERS requirement is codified at section 8422(e)(4) of title 5 of the United States Code. The responsibilities of SSA and OPM with respect to information obtained pursuant to this agreement are also in accordance with the following: The Privacy Act (5 U.S.C. 552a), as amended; section 307 of the Omnibus Budget Reconciliation Act of 1982 (Pub. L. 97–253), codified at section 8332 Note of title 5 of the United States Code; section 1306(a) of title 42 of the United States Code; and section 6103(1)(11) of title 26 of the United States Code. D. Categories of Records and Individuals Covered by the Match SSA will disclose data from its MBR file (60–0090, Master Beneficiary Record, SSA/OEEAS) and MEF file (60– 0059, Earnings Recording and SelfEmployment Income System, SSA/ OEEAS) and manually-extracted military wage information from SSA’s ‘‘1086’’ microfilm file when required (71 FR 1796, January 11, 2006). OPM will provide SSA with an electronic finder file from the OPM system of records published as OPM/Central-1 (Civil Service Retirement and Insurance Records) on October 8, 1999 (64 FR 54930), as amended on May 3, 2000 (65 FR 25775). The system of records involved have routine uses permitting the disclosures needed to conduct this match. E. Privacy Safeguards and Security The Privacy Act (5 U.S.C. 552a(o)(1)(G)) requires that each matching agreement specify procedures for ensuring the administrative, technical and physical security of the records matched and the results of such programs. All Federal agencies are subject to: The Federal Information Security Management Act of 2002 (FISMA) (44 U.S.C. 3541 et seq.); related OMB circulars and memorandum (e.g., OMB Circular A–130 and OMB M–06–16); National Institute of Science and Technology (NIST) directives; and the PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 57359 Federal Acquisition Regulations (FAR). These laws, circulars, memoranda, directives and regulations include requirements for safeguarding Federal information systems and personally identifiable information used in Federal agency business processes, as well as related reporting requirements. OPM and SSA recognize that all laws, circulars, memoranda, directives and regulations relating to the subject of this agreement and published subsequent to the effective date of this agreement must also be implemented if mandated. FISMA requirements apply to all Federal contractors and organizations or sources that possess or use Federal information, or that operate, use, or have access to Federal information systems on behalf of an agency. OPM will be responsible for oversight and compliance of their contractors and agents. Both OPM and SSA reserve the right to conduct onsite inspection to monitor compliance with FISMA regulations. F. Inclusive Dates of the Match The matching program shall become effective upon the signing of the agreement by both parties to the agreement and approval of the agreement by the Data Integrity Boards of the respective agencies, but no sooner than 40 days after notice of this matching program is sent to Congress and the Office of Management and Budget or 30 days after publication of this notice in the Federal Register, whichever is later. The matching program will continue for 18 months from the effective date and may be extended for an additional 12 months thereafter, if certain conditions are met. U.S. Office of Personnel Management. Linda M. Springer, Director. [FR Doc. E7–19792 Filed 10–5–07; 8:45 am] BILLING CODE 6325–38–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 28010; 812–13419] JNF Advisors, Inc. and Northern Lights Variable Trust; Notice of Application October 2, 2007. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order 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 AGENCY: E:\FR\FM\09OCN1.SGM 09OCN1 57360 Federal Register / Vol. 72, No. 194 / Tuesday, October 9, 2007 / Notices the Act, as well as from certain disclosure requirements. SUMMARY OF THE APPLICATION: Applicants request an order permitting them to enter into and materially amend subadvisory agreements without shareholder approval and granting relief from certain disclosure requirements. APPLICANTS: JNF Advisors, Inc. (‘‘JNF Advisors’’) and Northern Lights Variable Trust (‘‘Trust’’). FILING DATES: The application was filed on August 24, 2007, and amended on October 1, 2007. 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 October 29, 2007 and should be accompanied by proof of service on 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 who wish to be notified of a hearing may request by writing to the Commission’s Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549– 1090. Applicants, c/o JoAnn Strasser, Esq., Thompson Hine, 312 Walnut Street, Cincinnati, Ohio 45202. FOR FURTHER INFORMATION CONTACT: Donna Tumminio, Law Clerk, at (202) 551–6826, or Nadya B. Roytblat, Assistant Director, at (202) 551–6821 (Office of Investment Company Regulation, Division of Investment Management). The following is a summary of the application. The complete application may be obtained for a fee at the Commission’s Public Reference Branch, 100 F Street, NE., Washington, DC 20549–0102 (telephone (202) 551–5850). SUPPLEMENTARY INFORMATION: mstockstill on PROD1PC66 with NOTICES Applicants’ Representations 1. The Trust is organized as a Delaware statutory trust and is registered under the Act as an open-end management investment company. JNF Advisors, a Delaware corporation, is registered as an investment adviser under the Investment Advisers Act of 1940 (‘‘Advisers Act’’). 2. The Trust currently offers 5 separate series, each with its own investment objective(s), policies and VerDate Aug<31>2005 17:07 Oct 05, 2007 Jkt 214001 restrictions. JNF Advisors serves as the investment adviser to two of the series of the Trust (each, a ‘‘Fund,’’ and collectively, the ‘‘Funds’’). JNF Advisors has entered into an investment advisory agreement with the Trust for each Fund (each, an ‘‘Advisory Agreement,’’ and collectively, the ‘‘Advisory Agreements’’) approved by the board of trustees of the Trust (the ‘‘Board’’), including a majority of the trustees who are not ‘‘interested persons,’’ as defined in section 2(a)(19) of the Act (the ‘‘Independent Trustees’’), and the shareholders of each Fund.1 3. The Advisory Agreements permit JNF Advisors to enter into separate advisory agreements (‘‘Sub-Advisory Agreements’’) with sub-advisers (‘‘SubAdvisers’’). Each Sub-Adviser will be registered under the Advisers Act. Under the terms of each Sub-Advisory Agreement, the Sub-Adviser will be responsible for the day-to-day decisionmaking with respect to the Fund’s investment program and will determine which securities will be purchased and sold. JNF Advisors will select SubAdvisers based on an evaluation of their skills and proven abilities in managing assets pursuant to a specific investment style. JNF Advisors will monitor and evaluate the performance of SubAdvisers and recommend to the Board their hiring, termination and replacement. In return for providing overall investment management services, including Sub-Adviser monitoring and evaluation, JNF Advisors will receive a fee under its Advisory Agreement from each Fund. JNF Advisors will compensate a SubAdviser out of the management fee paid to JNF Advisers by the Fund. 4. Applicants request an order to permit JNF Advisors, subject to Board approval, to enter into and materially amend Sub-Advisory Agreements without obtaining shareholder approval. 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 a Fund or JNF Advisors, 1 Applicants also request relief with respect to any future series of the Trust and any other existing or future registered open-end management investment company or series thereof that: (a) Is advised by JNF Advisors or any entity controlling, controlled by, or under common control with JNF Advisors; (b) uses the multi-manager structure described in the application; and (c) complies with the terms and conditions contained in the application (included in the term ‘‘Funds’’). The Trust is the only existing investment company that currently intends to rely on the requested order. If the name of any Fund contains the name of a SubAdviser (as defined below), the name JNF Advisors or the name of the entity controlling, controlled by, or under common control with JNF Advisors that serves as the primary adviser to such Fund will precede the name of the Sub-Adviser. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 other than by reason of serving as a SubAdviser to one or more of the Funds (‘‘Affiliated Sub-Adviser’’). 5. Applicants also request an exemption from the various disclosure provisions described below that may require each Fund to disclose fees paid by JNF Advisors to the Sub-Advisers. An exemption is requested to permit each Fund to disclose (both as a dollar amount and as a percentage of the Fund’s net assets) the: (a) Aggregate fees paid to JNF Advisors and any Affiliated Sub-Advisers; and (b) aggregate fees paid to Sub-Advisers other than Affiliated Sub-Advisers (collectively, ‘‘Aggregate Fee Disclosure’’). If a Fund employs an Affiliated Sub-Adviser, the Fund will provide separate disclosure of any fees paid to the Affiliated SubAdviser. 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 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 company affected by a matter must approve the 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 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 (‘‘Exchange 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 E:\FR\FM\09OCN1.SGM 09OCN1 Federal Register / Vol. 72, No. 194 / Tuesday, October 9, 2007 / Notices mstockstill on PROD1PC66 with NOTICES required to be included as part of investment company registration statements and shareholders 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 and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policies and provisions of the Act. Applicants state that the requested relief meets this standard for the reasons discussed below. 7. Applicants assert that the Funds’ shareholders rely on JNF Advisors to select and monitor the Sub-Advisers best suited to achieve a Fund’s investment objectives. Applicants contend that, from the perspective of the investor, the role of the Sub-Advisers is comparable to that of individual portfolio managers employed by traditional investment advisory firms. Applicants state that requiring shareholder approval of each SubAdvisory Agreement would impose unnecessary costs and delays on the Funds and may preclude JNF Advisors from acting promptly in a manner considered advisable by the Board. Applicants note that the Advisory Agreement will remain subject to section 15(a) of the Act and rule 18f–2 under the Act. 8. Applicants assert that many SubAdvisers use a ‘‘posted’’ rate schedule to set their fees. Applicants state that, while Sub-Advisers are willing to negotiate fees lower than those posted in the schedule, they are reluctant to do so when the fees are disclosed to other prospective and existing customers. Applicants submit that the requested relief will encourage potential SubAdvisers to negotiate lower SubAdvisory fees with JNF Advisors, the benefits of which may be passed on to the Funds’ shareholders. Applicants’ Conditions Applicants agree that any order granting the requested relief will be subject to the following conditions: 1. JNF Advisors will provide general investment management services to each Fund, including overall supervisory responsibility for the general management and investment of VerDate Aug<31>2005 17:07 Oct 05, 2007 Jkt 214001 the Fund’s assets, and subject to review and approval of the Board, will: (a) Set the Fund’s overall investment strategies; (b) evaluate, select and recommend SubAdvisers to manage all or a portion of the Fund’s assets; (c) allocate and, when appropriate, reallocate the Fund’s assets among multiple Sub-Advisers; (d) monitor and evaluate Sub-Advisers’ performance; and (e) implement procedures reasonably designed to ensure that the Sub-Advisers comply with the relevant Fund’s investment objective, policies, and restrictions. 2. Before a Fund may rely on the requested order herein, the operation of the Fund in the manner described in the application 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 whose public shareholders purchase shares on the basis of a prospectus containing the disclosure contemplated by condition 3 below, by the initial shareholder before such Fund’s shares are offered to the public. 3. 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 manager of managers structure described in the Application. The prospectus will prominently disclose that JNF Advisors has ultimate responsibility, subject to oversight by the Board, to oversee the Sub-Advisers and recommend their hiring, termination, and replacement. 4. Within 90 days of the hiring of any new Sub-Adviser, shareholders of the relevant Fund will be furnished 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 a new Sub-Adviser. To meet this obligation, JNF Advisors will provide shareholders of the applicable 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 Exchange Act, except as modified by the order to permit Aggregate Fee Disclosure. 5. No trustee or officer of the Trust or a Fund or director or officer of JNF Advisors 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, except for: (a) Ownership of interests in JNF Advisors or any entity that controls, is controlled by, or is under common PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 57361 control with JNF Advisors; or (b) ownership of less than 1% of the outstanding securities of any class of equity or debt of a publicly traded company that is either a Sub-Adviser or an entity that controls, is controlled by, or is under common control with a SubAdviser. 6. At all times, at least a majority of the Board will be Independent Trustees, and the nomination of new or additional Independent Trustees will be placed within the discretion of the thenexisting Independent Trustees. 7. Whenever a Sub-Adviser change is proposed for a Fund with an Affiliated Sub-Adviser, the Fund’s Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the 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 JNF Advisors or the Affiliated Sub-Adviser derives an inappropriate advantage. 8. Each Fund will disclose in its registration statement the Aggregate Fee Disclosure. 9. 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. 10. JNF Advisors will provide the Board, no less frequently than quarterly, with information about JNF Advisors’ profitability on a per Fund basis. This information will reflect the impact on profitability of the hiring or termination of any Sub-Adviser during the applicable quarter. 11. Whenever a Sub-Adviser is hired or terminated, JNF Advisors will provide the Board with information showing the expected impact on JNF Advisors’ profitability. 12. JNF Advisors will not enter into a Sub-Advisory Agreement with any Affiliated Sub-Adviser, without such agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Fund. 13. The requested order will expire on the effective date of rule 15a–5 under the Act, if adopted. For the Commission, by the Division of Investment Management, under delegated authority. Nancy M. Morris, Secretary. [FR Doc. E7–19753 Filed 10–5–07; 8:45 am] BILLING CODE 8011–01–P E:\FR\FM\09OCN1.SGM 09OCN1

Agencies

[Federal Register Volume 72, Number 194 (Tuesday, October 9, 2007)]
[Notices]
[Pages 57359-57361]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-19753]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28010; 812-13419]


JNF Advisors, Inc. and Northern Lights Variable Trust; Notice of 
Application

October 2, 2007.
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 (``Act'') for an exemption from section 
15(a) of the Act and rule 18f-2 under

[[Page 57360]]

the Act, as well as from certain disclosure requirements.

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Summary of the Application: Applicants request an order permitting them 
to enter into and materially amend subadvisory agreements without 
shareholder approval and granting relief from certain disclosure 
requirements.

Applicants: JNF Advisors, Inc. (``JNF Advisors'') and Northern Lights 
Variable Trust (``Trust'').

Filing Dates: The application was filed on August 24, 2007, and amended 
on October 1, 2007.

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 October 
29, 2007 and should be accompanied by proof of service on 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 who wish to 
be notified of a hearing may request by writing to the Commission's 
Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants, c/o JoAnn Strasser, 
Esq., Thompson Hine, 312 Walnut Street, Cincinnati, Ohio 45202.

FOR FURTHER INFORMATION CONTACT: Donna Tumminio, Law Clerk, at (202) 
551-6826, or Nadya B. Roytblat, Assistant Director, 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 for a fee at the 
Commission's Public Reference Branch, 100 F Street, NE., Washington, DC 
20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. The Trust is organized as a Delaware statutory trust and is 
registered under the Act as an open-end management investment company. 
JNF Advisors, a Delaware corporation, is registered as an investment 
adviser under the Investment Advisers Act of 1940 (``Advisers Act'').
    2. The Trust currently offers 5 separate series, each with its own 
investment objective(s), policies and restrictions. JNF Advisors serves 
as the investment adviser to two of the series of the Trust (each, a 
``Fund,'' and collectively, the ``Funds''). JNF Advisors has entered 
into an investment advisory agreement with the Trust for each Fund 
(each, an ``Advisory Agreement,'' and collectively, the ``Advisory 
Agreements'') approved by the board of trustees of the Trust (the 
``Board''), including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act (the 
``Independent Trustees''), and the shareholders of each Fund.\1\
---------------------------------------------------------------------------

    \1\ Applicants also request relief with respect to any future 
series of the Trust and any other existing or future registered 
open-end management investment company or series thereof that: (a) 
Is advised by JNF Advisors or any entity controlling, controlled by, 
or under common control with JNF Advisors; (b) uses the multi-
manager structure described in the application; and (c) complies 
with the terms and conditions contained in the application (included 
in the term ``Funds''). The Trust is the only existing investment 
company that currently intends to rely on the requested order. If 
the name of any Fund contains the name of a Sub-Adviser (as defined 
below), the name JNF Advisors or the name of the entity controlling, 
controlled by, or under common control with JNF Advisors that serves 
as the primary adviser to such Fund will precede the name of the 
Sub-Adviser.
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    3. The Advisory Agreements permit JNF Advisors to enter into 
separate advisory agreements (``Sub-Advisory Agreements'') with sub-
advisers (``Sub-Advisers''). Each Sub-Adviser will be registered under 
the Advisers Act. Under the terms of each Sub-Advisory Agreement, the 
Sub-Adviser will be responsible for the day-to-day decision-making with 
respect to the Fund's investment program and will determine which 
securities will be purchased and sold. JNF Advisors will select Sub-
Advisers based on an evaluation of their skills and proven abilities in 
managing assets pursuant to a specific investment style. JNF Advisors 
will monitor and evaluate the performance of Sub-Advisers and recommend 
to the Board their hiring, termination and replacement. In return for 
providing overall investment management services, including Sub-Adviser 
monitoring and evaluation, JNF Advisors will receive a fee under its 
Advisory Agreement from each Fund. JNF Advisors will compensate a Sub-
Adviser out of the management fee paid to JNF Advisers by the Fund.
    4. Applicants request an order to permit JNF Advisors, subject to 
Board approval, to enter into and materially amend Sub-Advisory 
Agreements without obtaining shareholder approval. 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 a Fund or JNF Advisors, other 
than by reason of serving as a Sub-Adviser to one or more of the Funds 
(``Affiliated Sub-Adviser'').
    5. Applicants also request an exemption from the various disclosure 
provisions described below that may require each Fund to disclose fees 
paid by JNF Advisors to the Sub-Advisers. An exemption is requested to 
permit each Fund to disclose (both as a dollar amount and as a 
percentage of the Fund's net assets) the: (a) Aggregate fees paid to 
JNF Advisors and any Affiliated Sub-Advisers; and (b) aggregate fees 
paid to Sub-Advisers other than Affiliated Sub-Advisers (collectively, 
``Aggregate Fee Disclosure''). If a Fund 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 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 company affected by a matter must approve the 
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 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 (``Exchange 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

[[Page 57361]]

required to be included as part of investment company registration 
statements and shareholders 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 and to the extent that such exemption is 
necessary or appropriate in the public interest and consistent with the 
protection of investors and the purposes fairly intended by the 
policies and provisions of the Act. Applicants state that the requested 
relief meets this standard for the reasons discussed below.
    7. Applicants assert that the Funds' shareholders rely on JNF 
Advisors to select and monitor the Sub-Advisers best suited to achieve 
a Fund's investment objectives. Applicants contend that, from the 
perspective of the investor, the role of the Sub-Advisers is comparable 
to that of individual portfolio managers employed by traditional 
investment advisory firms. Applicants state that requiring shareholder 
approval of each Sub-Advisory Agreement would impose unnecessary costs 
and delays on the Funds and may preclude JNF Advisors from acting 
promptly in a manner considered advisable by the Board. Applicants note 
that the Advisory Agreement will remain subject to section 15(a) of the 
Act and rule 18f-2 under the Act.
    8. Applicants assert that many Sub-Advisers use a ``posted'' rate 
schedule to set their fees. Applicants state that, while Sub-Advisers 
are willing to negotiate fees lower than those posted in the schedule, 
they are reluctant to do so when the fees are disclosed to other 
prospective and existing customers. Applicants submit that the 
requested relief will encourage potential Sub-Advisers to negotiate 
lower Sub-Advisory fees with JNF Advisors, the benefits of which may be 
passed on to the Funds' shareholders.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. JNF Advisors will provide general investment 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, will: (a) Set the Fund's overall 
investment strategies; (b) evaluate, select and recommend Sub-Advisers 
to manage all or a portion of the Fund's assets; (c) allocate and, when 
appropriate, reallocate the Fund's assets among multiple Sub-Advisers; 
(d) monitor and evaluate Sub-Advisers' performance; and (e) implement 
procedures reasonably designed to ensure that the Sub-Advisers comply 
with the relevant Fund's investment objective, policies, and 
restrictions.
    2. Before a Fund may rely on the requested order herein, the 
operation of the Fund in the manner described in the application 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 whose public 
shareholders purchase shares on the basis of a prospectus containing 
the disclosure contemplated by condition 3 below, by the initial 
shareholder before such Fund's shares are offered to the public.
    3. 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 manager of managers structure described in the Application. The 
prospectus will prominently disclose that JNF Advisors has ultimate 
responsibility, subject to oversight by the Board, to oversee the Sub-
Advisers and recommend their hiring, termination, and replacement.
    4. Within 90 days of the hiring of any new Sub-Adviser, 
shareholders of the relevant Fund will be furnished 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 a new Sub-Adviser. To meet this obligation, 
JNF Advisors will provide shareholders of the applicable 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 Exchange Act, except as modified by 
the order to permit Aggregate Fee Disclosure.
    5. No trustee or officer of the Trust or a Fund or director or 
officer of JNF Advisors 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, except for: (a) Ownership of 
interests in JNF Advisors or any entity that controls, is controlled 
by, or is under common control with JNF Advisors; or (b) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of a 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.
    6. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    7. Whenever a Sub-Adviser change is proposed for a Fund with an 
Affiliated Sub-Adviser, the Fund's Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
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 JNF Advisors or the Affiliated Sub-Adviser derives an 
inappropriate advantage.
    8. Each Fund will disclose in its registration statement the 
Aggregate Fee Disclosure.
    9. 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.
    10. JNF Advisors will provide the Board, no less frequently than 
quarterly, with information about JNF Advisors' profitability on a per 
Fund basis. This information will reflect the impact on profitability 
of the hiring or termination of any Sub-Adviser during the applicable 
quarter.
    11. Whenever a Sub-Adviser is hired or terminated, JNF Advisors 
will provide the Board with information showing the expected impact on 
JNF Advisors' profitability.
    12. JNF Advisors will not enter into a Sub-Advisory Agreement with 
any Affiliated Sub-Adviser, without such agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    13. The requested order will expire on the effective date of rule 
15a-5 under the Act, if adopted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E7-19753 Filed 10-5-07; 8:45 am]
BILLING CODE 8011-01-P