Forward Funds and Forward Management, LLC; Notice of Application, 57693-57695 [E8-23365]
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Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices
(a) That the Interfund Loan Rate will
be higher than the Repo Rate, but lower
than the Bank Loan Rate;
(b) Compliance with the collateral
requirements as set forth in the
application;
(c) Compliance with the percentage
limitations on interfund borrowing and
lending;
(d) Allocation of interfund borrowing
and lending demand in an equitable
manner and in accordance with
procedures established by the Fund
Board; and
(e) That the interest rate on any
Interfund Loan does not exceed the
interest rate on any third-party
borrowings of a borrowing Fund at the
time of the Interfund Loan.
After the final report is filed, each
Fund’s independent auditors, in
connection with their audit
examinations of the Fund, will continue
to review the operation of the proposed
credit facility for compliance with the
conditions of the application and their
review will form the basis, in part, of
the auditor’s report on internal
accounting controls in Form N–SAR.
18. No Fund will participate in the
proposed credit facility upon receipt of
requisite regulatory approval unless it
has fully disclosed in its prospectus
and/or SAI all material facts about its
intended participation.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–23343 Filed 10–2–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28420; 812–13533]
Forward Funds and Forward
Management, LLC; Notice of
Application
September 29, 2008.
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.
mstockstill on PROD1PC66 with NOTICES
AGENCY:
Applicants
request an order that would supersede
an existing order that permits them to
enter into and materially amend
subadvisory agreements without
SUMMARY OF APPLICATION:
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23:33 Oct 02, 2008
Jkt 217001
shareholder approval (‘‘Existing
Order’’).1
APPLICANTS: Forward Funds (the
‘‘Trust’’) and Forward Management, LLC
(‘‘Forward Management’’).
DATES: Filing Dates: The application was
filed on May 19, 2008 and amended on
September 25, 2008.
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 October 24, 2008, 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
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F St.,
NE., Washington, DC 20549–1090;
Applicants, 433 California Street, 11th
Floor, San Francisco, CA 94104.
FOR FURTHER INFORMATION CONTACT:
Mary Kay Frech, Branch Chief, or
Michael W. Mundt, 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 St., NE., Washington, DC 20549–
1520 (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. The
Trust currently offers sixteen series (the
‘‘Funds’’), each with its own investment
objectives, policies, and restrictions.
Applicants request that the order apply
to: (a) The Funds; and (b) any future
series of the Trust and any other
registered open-end management
investment companies or series thereof
that (1) use the ‘‘manager-of-managers’’
arrangement described in the
application, (2) comply with the terms
and conditions of the application, and
1 Forward Funds, et al., Investment Company Act
Release Nos. 27777 (April 5, 2007) (notice) and
27814 (May 1, 2007) (order).
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
57693
(3) are advised by a Manager (as defined
below) (the investment companies and
their series, as well as the Funds, the
‘‘Sub-Advised Funds’’).2
2. Forward Management is registered
as an investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’) and serves as
investment adviser to the Funds
pursuant to an investment advisory
agreement with the Trust, on behalf of
the Funds (‘‘Advisory Agreement’’). The
Advisory Agreement has been approved
by the Trust’s board of trustees
(‘‘Board’’), including a majority of the
trustees who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act, of the Trust (the
‘‘Independent Trustees’’), as well as by
the shareholders of the Funds. The term
‘‘Manager’’ refers to Forward
Management and any existing or future
entity controlling, controlled by, or
under common control with Forward
Management that is an investment
adviser registered under the Advisers
Act and any successor in interest
thereto.3
3. Under the terms of the Advisory
Agreement, the Manager provides
investment advisory services to each
Sub-Advised Fund and has the
authority, subject to Board approval, to
enter into investment subadvisory
agreements (‘‘Sub-Advisory
Agreements’’) with one or more
subadvisers (‘‘Sub-Advisers’’). Each
Sub-Adviser is registered under the
Advisers Act. The Manager will monitor
and evaluate the Sub-Advisers and
recommend to the Board their hiring,
retention or termination. Sub-Advisers
recommended to the Board by the
Manager are selected and approved by
the Board, including a majority of the
Independent Trustees. Each SubAdviser has discretionary authority to
invest the assets or a portion of the
assets of the relevant Sub-Advised
Fund. For its services, the Manager
receives a fee from the Sub-Advised
Fund computed as a percentage of the
Sub-Advised Fund’s net assets.
4. Applicants request an order that
would permit the Manager to hire SubAdvisers and materially amend SubAdvisory Agreements without obtaining
2 All existing entities that currently intend to rely
on the order are named as applicants. Any entity
that relies on the order in the future will do so only
in accordance with the terms and conditions of the
application. If the name of any Sub-Advised Fund
contains the name of a Sub-Adviser (as defined
below), the name of the Manager that serves as the
primary adviser to the Sub-Advised Fund will
precede the name of the Sub-Adviser.
3 A successor in interest is limited to entities that
result from a reorganization into another
jurisdiction or a change in the type of business
organization.
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57694
Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices
mstockstill on PROD1PC66 with NOTICES
shareholder approval. The requested
order would supersede the Existing
Order to allow a Sub-Adviser to be
compensated either (a) by the Manager
out of the advisory fees it receives from
the Sub-Advised Fund, or (b) directly by
the Sub-Advised Fund out of its assets.4
The conditions of the requested order
are identical to the conditions in the
Existing Order, except for the addition
of condition 10, which addresses SubAdviser compensation paid directly by
a Sub-Advised Fund. The requested
relief will not extend to any SubAdviser that is an affiliated person, as
defined in section 2(a)(3) of the Act, of
a Sub-Advised Fund or the Manager,
other than by reason of serving as a SubAdviser to one or more of the SubAdvised Funds (‘‘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 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. 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 under the Act, 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.
3. Applicants assert that the SubAdvised Funds’ shareholders are relying
on the Manager’s experience to select
one or more Sub-Advisers best suited to
achieve a Sub-Advised Fund’s
investment objectives. Applicants assert
that, from the perspective of an investor
in the Sub-Advised Fund, 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
4 Under the Existing Order, the Manager
compensates each Sub-Adviser out of the fees paid
to the Manager under the Advisory Agreement.
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23:33 Oct 02, 2008
Jkt 217001
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 Advisory
Agreement and any Sub-Advisory
Agreement with an Affiliated SubAdviser will remain subject to section
15(a) of the Act and rule 18f-2 under the
Act.
4. Applicants state that for tax or
other reasons as may be determined by
the Board and the Manager to be
relevant from time to time, certain SubAdvised Funds may pay fees directly to
the Sub-Adviser rather than having the
Manager pay the Sub-Adviser out of its
advisory fees. With respect to the SubAdvised Funds that pay Sub-Advisers
directly, any change to a Sub-Advisory
Agreement that results in an increase in
the total management and advisory fees
payable by a Sub-Advised Fund will be
required to be approved by the
shareholders of the Sub-Advised Fund.
5. Applicants note that the
Commission has proposed rule 15a–5
under the Act and agree that the
requested order will expire on the
effective date of rule 15a–5 under the
Act, if adopted.5
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
the basis of a prospectus containing the
disclosure contemplated by condition 2
below, by the initial shareholder(s)
before offering shares of that SubAdvised Fund to the public.
2. Each Sub-Advised Fund will
disclose in its prospectus the existence,
substance and effect of the order. 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 the Manager
has ultimate responsibility (subject to
oversight by the Board) to oversee SubAdvisers and to recommend their
hiring, termination, and replacement.
3. Within 90 days of the hiring of a
new Sub-Adviser, the Manager will
5 Investment Company Act Release No. 26230
(Oct. 23, 2003).
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
furnish shareholders of the applicable
Sub-Advised Fund all information about
the new Sub-Adviser that would be
included in a proxy statement. To meet
this condition, the Manager will provide
shareholders of the applicable SubAdvised Fund with an information
statement meeting the requirements of
Regulation 14C, Schedule 14C and Item
22 of Schedule 14A under the Securities
Exchange Act of 1934.
4. The Manager will not enter into a
Sub-Advisory Agreement with any
Affiliated Sub-Adviser unless such
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 Trustees,
and the nomination of new or additional
Independent Trustees will be placed
within the discretion of the thenexisting Independent Trustees.
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
Trustees, will make a separate finding,
reflected in the Board minutes, that
such change is in the best interests of
such 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
investment 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: (a) Set the Sub-Advised
Fund’s overall investment strategies; (b)
evaluate, select, and recommend SubAdvisers 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 SubAdviser(s) with the Sub-Advised Fund’s
investment objectives, policies and
restrictions.
8. No trustee or officer of the Trust,
or director or officer of the Manager,
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
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
E:\FR\FM\03OCN1.SGM
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Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices
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.
9. The requested order will expire on
the effective date of rule 15a-5 under the
Act, if adopted.
10. For Sub-Advised Funds that pay
a Sub-Adviser’s fees directly from Fund
assets, any changes to a Sub-Advisory
Agreement that would result in an
increase in the total management and
advisory fees payable by a Sub-Advised
Fund will be required to be approved by
the shareholders of the Sub-Advised
Fund.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–23365 Filed 10–2–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28411; 812–13491]
Invesco PowerShares Capital
Management LLC, et al.; Notice of
Application
September 29, 2008.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application to
amend a prior order under section 6(c)
of the Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
2(a)(32), 5(a)(1), 22(d) and 22(e) of the
Act and rule 22c–1 under the Act, and
under sections 6(c) and 17(b) of the Act
for an exemption from sections 17(a)(1)
and (a)(2) of the Act.
AGENCY:
Applicants
request an order to amend a prior order
(‘‘Prior Order’’) 1 that permits (a) Openend management investment companies
whose portfolio securities include
equity and/or fixed-income securities of
U.S. issuers to issue shares (‘‘Shares’’)
that can be redeemed only in large
aggregations (‘‘Creation Units’’); (b)
secondary market transactions in Shares
to occur at negotiated prices; (c) certain
affiliated persons of the series to deposit
securities into, and receive securities
from, the series in connection with the
purchase and redemption of Creation
Units; and (d) certain registered
mstockstill on PROD1PC66 with NOTICES
SUMMARY OF APPLICATION:
1 PowerShares Capital Management, et al.,
Investment Company Act Release Nos. 28140 (Feb.
1, 2008) (notice) and 28171 (Feb. 27, 2008) (order).
VerDate Aug<31>2005
23:33 Oct 02, 2008
Jkt 217001
management investment companies and
unit investment trusts outside of the
same group of investment companies as
the series to acquire Shares. Applicants
seek to amend the Prior Order in order
to offer two new series (the ‘‘Additional
Funds’’) and future series (‘‘Future
Foreign Funds,’’ together with the
Additional Funds, the ‘‘Foreign Funds’’)
investing in foreign equity and fixedincome securities.
APPLICANTS: Invesco PowerShares
Capital Management LLC, formerly
known as PowerShares Capital
Management LLC (the ‘‘Adviser’’),
Invesco Aim Distributors, Inc., formerly
known as AIM Distributors, Inc. (the
‘‘Distributor’’), and PowerShares
Actively Managed Exchange-Traded
Fund Trust (the ‘‘Trust’’).
FILING DATES: The application was filed
on February 12, 2008, and amended on
July 22, 2008. 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 October 24, 2008, 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
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090; Applicants: Adviser and Trust,
301 West Roosevelt Road, Wheaton,
Illinois 60187, and Distributor, 11
Greenway Plaza, Houston, Texas 77046–
1173
FOR FURTHER INFORMATION CONTACT: Jaea
F. Hahn, Senior Counsel, at (202) 551–
6870, or Marilyn Mann, Branch Chief, at
(202) 551–6821 (Division of Investment
Management, Office of Investment
Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the Public
Reference Room, U.S. Securities and
Exchange Commission, 100 F Street,
NE., Washington DC 20549–1520
(telephone (202) 551–5850).
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
57695
Applicants’ Representations
1. The Trust is an open-end
management investment company
registered under the Act and organized
as a Delaware business trust. The Trust
currently offers four series under the
Prior Order (the ‘‘Initial Funds,’’
together with the Foreign Funds, the
‘‘Funds’’).2 The Adviser, which is
registered as an investment adviser
under the Investment Advisers Act of
1940 (‘‘Advisers Act’’), or an entity
controlling, controlled by or under
common control with the Adviser
(included in the term ‘‘Adviser’’), will
serve as investment adviser to each
Fund. The Adviser may in the future
retain one or more sub-advisers (‘‘SubAdvisers’’) to manage particular Funds’
portfolios. Any Sub-Adviser will be
registered under the Advisers Act. The
Distributor, a broker-dealer registered
under the Securities Exchange Act of
1934 (‘‘Exchange Act’’), serves as the
principal underwriter and distributor
for the Funds.
2. The Trust is currently permitted to
offer actively-managed exchange-traded
funds investing in U.S. equity and fixedincome securities in reliance on the
Prior Order. Applicants seek to amend
the Prior Order to permit the Trusts to
offer Foreign Funds that will invest in
foreign equity and fixed-income
securities.3
3. Applicants state that all discussions
contained in the application for the
Prior Order are equally applicable to the
Foreign Funds, except as specifically
noted by applicants (as summarized in
this notice). Applicants assert that the
Foreign Funds will operate in a manner
identical to the Initial Funds and will
comply with all of the terms, provisions
and conditions of the Prior Order, as
amended by the present application.
Applicants believe that the requested
relief meets the necessary exemptive
standards.
Applicants’ Legal Analysis
1. In connection with applicants’
request for relief to permit the
operations of Foreign Funds, applicants
seek to amend the Prior Order to add
relief from section 22(e) of the Act.
Section 22(e) generally prohibits a
registered investment company from
2 The Initial Funds are the PowerShares Active
AlphaQ Portfolio, PowerShares Active Alpha MultiCap Portfolio, PowerShares Active Mega-Cap
Portfolio and PowerShares Active Low Duration
Portfolio.
3 The Additional Funds consist of the
PowerShares Active International Equity Portfolio
which will invest in equity securities of foreign
issuers, and the PowerShares Active Sovereign Debt
Portfolio which will invest in foreign government
debt securities.
E:\FR\FM\03OCN1.SGM
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]]>Agencies
[Federal Register Volume 73, Number 193 (Friday, October 3, 2008)]
[Notices]
[Pages 57693-57695]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23365]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28420; 812-13533]
Forward Funds and Forward Management, LLC; Notice of Application
September 29, 2008.
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.
-----------------------------------------------------------------------
Summary of Application: Applicants request an order that would
supersede an existing order that permits them to enter into and
materially amend subadvisory agreements without shareholder approval
(``Existing Order'').\1\
---------------------------------------------------------------------------
\1\ Forward Funds, et al., Investment Company Act Release Nos.
27777 (April 5, 2007) (notice) and 27814 (May 1, 2007) (order).
Applicants: Forward Funds (the ``Trust'') and Forward Management, LLC
---------------------------------------------------------------------------
(``Forward Management'').
DATES: Filing Dates: The application was filed on May 19, 2008 and
amended on September 25, 2008.
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 October 24, 2008, 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
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
St., NE., Washington, DC 20549-1090; Applicants, 433 California Street,
11th Floor, San Francisco, CA 94104.
FOR FURTHER INFORMATION CONTACT: Mary Kay Frech, Branch Chief, or
Michael W. Mundt, 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 St., NE., Washington, DC
20549-1520 (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.
The Trust currently offers sixteen series (the ``Funds''), each with
its own investment objectives, policies, and restrictions. Applicants
request that the order apply to: (a) The Funds; and (b) any future
series of the Trust and any other registered open-end management
investment companies or series thereof that (1) use the ``manager-of-
managers'' arrangement described in the application, (2) comply with
the terms and conditions of the application, and (3) are advised by a
Manager (as defined below) (the investment companies and their series,
as well as the Funds, the ``Sub-Advised Funds'').\2\
---------------------------------------------------------------------------
\2\ All existing entities that currently intend to rely on the
order are named as applicants. Any entity that relies on the order
in the future will do so only in accordance with the terms and
conditions of the application. If the name of any Sub-Advised Fund
contains the name of a Sub-Adviser (as defined below), the name of
the Manager that serves as the primary adviser to the Sub-Advised
Fund will precede the name of the Sub-Adviser.
---------------------------------------------------------------------------
2. Forward Management is registered as an investment adviser under
the Investment Advisers Act of 1940 (the ``Advisers Act'') and serves
as investment adviser to the Funds pursuant to an investment advisory
agreement with the Trust, on behalf of the Funds (``Advisory
Agreement''). The Advisory Agreement has been approved by the Trust's
board of trustees (``Board''), including a majority of the trustees who
are not ``interested persons,'' as defined in section 2(a)(19) of the
Act, of the Trust (the ``Independent Trustees''), as well as by the
shareholders of the Funds. The term ``Manager'' refers to Forward
Management and any existing or future entity controlling, controlled
by, or under common control with Forward Management that is an
investment adviser registered under the Advisers Act and any successor
in interest thereto.\3\
---------------------------------------------------------------------------
\3\ A successor in interest is limited to entities that result
from a reorganization into another jurisdiction or a change in the
type of business organization.
---------------------------------------------------------------------------
3. Under the terms of the Advisory Agreement, the Manager provides
investment advisory services to each Sub-Advised Fund and has the
authority, subject to Board approval, to enter into investment
subadvisory agreements (``Sub-Advisory Agreements'') with one or more
subadvisers (``Sub-Advisers''). Each Sub-Adviser is registered under
the Advisers Act. The Manager will monitor and evaluate the Sub-
Advisers and recommend to the Board their hiring, retention or
termination. Sub-Advisers recommended to the Board by the Manager are
selected and approved by the Board, including a majority of the
Independent Trustees. Each Sub-Adviser has discretionary authority to
invest the assets or a portion of the assets of the relevant Sub-
Advised Fund. For its services, the Manager receives a fee from the
Sub-Advised Fund computed as a percentage of the Sub-Advised Fund's net
assets.
4. Applicants request an order that would permit the Manager to
hire Sub-Advisers and materially amend Sub-Advisory Agreements without
obtaining
[[Page 57694]]
shareholder approval. The requested order would supersede the Existing
Order to allow a Sub-Adviser to be compensated either (a) by the
Manager out of the advisory fees it receives from the Sub-Advised Fund,
or (b) directly by the Sub-Advised Fund out of its assets.\4\ The
conditions of the requested order are identical to the conditions in
the Existing Order, except for the addition of condition 10, which
addresses Sub-Adviser compensation paid directly by a Sub-Advised Fund.
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 Sub-
Advised Fund or the Manager, other than by reason of serving as a Sub-
Adviser to one or more of the Sub-Advised Funds (``Affiliated Sub-
Adviser'').
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\4\ Under the Existing Order, the Manager compensates each Sub-
Adviser out of the fees paid to the Manager under the Advisory
Agreement.
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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. 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 under the Act, 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.
3. Applicants assert that the Sub-Advised Funds' shareholders are
relying on the Manager's experience to select one or more Sub-Advisers
best suited to achieve a Sub-Advised Fund's investment objectives.
Applicants assert that, from the perspective of an investor in the Sub-
Advised Fund, 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 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.
4. Applicants state that for tax or other reasons as may be
determined by the Board and the Manager to be relevant from time to
time, certain Sub-Advised Funds may pay fees directly to the Sub-
Adviser rather than having the Manager pay the Sub-Adviser out of its
advisory fees. With respect to the Sub-Advised Funds that pay Sub-
Advisers directly, any change to a Sub-Advisory Agreement that results
in an increase in the total management and advisory fees payable by a
Sub-Advised Fund will be required to be approved by the shareholders of
the Sub-Advised Fund.
5. Applicants note that the Commission has proposed rule 15a-5
under the Act and agree that the requested order will expire on the
effective date of rule 15a-5 under the Act, if adopted.\5\
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\5\ Investment Company Act Release No. 26230 (Oct. 23, 2003).
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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 the
basis of a prospectus containing the disclosure contemplated by
condition 2 below, by the initial shareholder(s) before offering shares
of that Sub-Advised Fund to the public.
2. Each Sub-Advised Fund will disclose in its prospectus the
existence, substance and effect of the order. 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 the Manager has ultimate responsibility (subject to oversight by
the Board) to oversee Sub-Advisers and to recommend their hiring,
termination, and replacement.
3. Within 90 days of the hiring of a new Sub-Adviser, the Manager
will furnish shareholders of the applicable Sub-Advised Fund all
information about the new Sub-Adviser that would be included in a proxy
statement. To meet this condition, the Manager will provide
shareholders of the applicable Sub-Advised Fund with an information
statement meeting the requirements of Regulation 14C, Schedule 14C and
Item 22 of Schedule 14A under the Securities Exchange Act of 1934.
4. The Manager will not enter into a Sub-Advisory Agreement with
any Affiliated Sub-Adviser unless such 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 Trustees, and the nomination of new or additional
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
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 Trustees, will make a separate finding, reflected in the
Board minutes, that such change is in the best interests of such 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 investment 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: (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-Adviser(s) with the Sub-Advised Fund's investment objectives,
policies and restrictions.
8. No trustee or officer of the Trust, or director or officer of
the Manager, 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 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
[[Page 57695]]
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.
9. The requested order will expire on the effective date of rule
15a-5 under the Act, if adopted.
10. For Sub-Advised Funds that pay a Sub-Adviser's fees directly
from Fund assets, any changes to a Sub-Advisory Agreement that would
result in an increase in the total management and advisory fees payable
by a Sub-Advised Fund will be required to be approved by the
shareholders of the Sub-Advised Fund.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-23365 Filed 10-2-08; 8:45 am]
BILLING CODE 8011-01-P
