AdvisorOne Funds and CLS Investments, LLC; Notice of Application, 46252-46254 [E9-21494]

Download as PDF 46252 Federal Register / Vol. 74, No. 172 / Tuesday, September 8, 2009 / Notices staff estimates compliance with rule 2a– 7 costs the fund industry approximately $72.4 million per year.10 Based on responses from individuals in the money market fund industry, the staff estimates that some of the largest fund complexes have created computer programs for maintaining and preserving compliance records for rule 2a–7. Based on a cost of $0.0000132 per dollar of assets under management for large funds, the staff estimates that total annualized capital/startup costs range from $0 for small funds to $48.8 million for all large funds. Commission staff further estimates that, even absent the requirements of rule 2a–7, money market funds would spend at least half of the amount for capital costs ($24.4 million) and for record preservation ($36.2 million) to establish and maintain these records and the systems for preserving them as a part of sound business practices to ensure diversification and minimal credit risk in a portfolio for a fund that seeks to maintain a stable price per share. The collections of information required by rule 2a–7 are necessary to obtain the benefits described above. Notices to the Commission will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Please direct general comments regarding the above information to the following persons: (i) Desk Officer for the Securities and Exchange Commission, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or send an e-mail to Shagufta Ahmed at Shagufta_Ahmed@omb.eop.gov; and (ii) Charles Boucher, Director/CIO, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or send an e-mail to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Florence E. Harmon, Deputy Secretary. [FR Doc. E9–21618 Filed 9–4–09; 8:45 am] jlentini on DSKJ8SOYB1PROD with NOTICES BILLING CODE 8010–01–P 10 The staff estimated the annual cost of preserving the required books and records by identifying the annual costs incurred by several funds and then relating this total cost to the average net assets of these funds during the year. With a total of $1 billion under management in small funds, $126.8 billion under management in medium funds and $3.7 trillion under management in large funds, the costs of preservation were estimated as follows: ((0.0051295 x $1 billion) + (0.0005041 x $126.8 billion) + (0.0000009 x $3.7 trillion) = $72.38 million. VerDate Nov<24>2008 17:32 Sep 04, 2009 Jkt 217001 Web site by searching for the file number or an applicant using the Company name box, at https:// [Investment Company Act Release No. www.sec.gov/search/search.htm or by 28894; File No. 812–13643] calling (202) 551–8090. Applicants’ Representations: AdvisorOne Funds and CLS 1. The Trust, a Delaware statutory Investments, LLC; Notice of trust, is registered under the Act as an Application open-end management investment company and currently consists of six August 31, 2009. separate funds: The Amerigo Fund, AGENCY: Securities and Exchange Clermont Fund, Berolina Fund, Commission (‘‘Commission’’). Reservoir Fund, Descartes Fund, and ACTION: Notice of an application under 1 section 6(c) of the Investment Company Liahona Fund. Each Fund has its own investment objective, policies, and Act of 1940 (the ‘‘Act’’) for an exemption from section 15(a) of the Act restrictions. The Adviser, a limited liability and rule 18f-2 under the Act. company organized under the laws of the State of Nebraska, is an investment Summary of Application: The adviser registered under the Investment requested order would permit certain Advisers Act of 1940 (‘‘Advisers Act’’). registered open-end management investment companies to enter into and The Adviser serves as the investment adviser of each Fund and will serve as materially amend subadvisory the investment adviser of each of the agreements without shareholder New Funds. The Adviser’s primary approval. business activity is providing Applicants: AdvisorOne Funds (the ‘‘Trust’’) and CLS Investments, LLC (the investment management services to the ‘‘Adviser’’) (collectively, ‘‘Applicants’’). Funds pursuant to an investment advisory agreement with the Trust (the Filing Dates: The application was ‘‘Advisory Agreement’’). The Advisory filed on March 16, 2009, and amended Agreement was approved by the board on August 26, 2009. Hearing or Notification of Hearing: An of trustees of the Trust (‘‘Board’’), including a majority of the trustees who order granting the application will be are not ‘‘interested persons,’’ as defined issued unless the Commission orders a hearing. Interested persons may request in section 2(a)(19) of the Act, of the Trust or the Adviser (the ‘‘Independent a hearing by writing to the Trustees’’) and, except with respect to Commission’s Secretary and serving the New Funds, was approved by the applicants with a copy of the request, initial shareholder of each Fund. With personally or by mail. Hearing requests respect to the New Funds, the Advisory should be received by the Commission by 5:30 p.m. on September 25, 2009 and Agreement will be approved by the initial shareholder of the Fund. should be accompanied by proof of 2. Under the terms of the Advisory service on applicants, in the form of an Agreement, the Adviser is responsible affidavit or, for lawyers, a certificate of for formulating each Fund’s investment service. Hearing requests should state program and for making day-to-day the nature of the writer’s interest, the investment decisions and engaging in reasons for the request, and the issues portfolio transactions. For the contested. Persons who wish to be investment management services that it notified of a hearing may request provides to each Fund, the Adviser notification by writing to the Commission’s Secretary. 1 Applicants also request relief with respect to ADDRESSES: Secretary, U.S. Securities future series of the Trust and any other existing or and Exchange Commission, 100 F future registered open-end management investment Street, NE., Washington, DC 20549– company or series thereof that: (a) Is advised by the Adviser or any entity controlling, controlled by or 1090. Applicants, Gemini Fund under common control with the Adviser; (b) uses Services, LLC, 450 Wireless Boulevard, the manager of managers structure described in the Hauppauge, New York 11788–0132. application; and (c) complies with the terms and conditions of the application (collectively, the FOR FURTHER INFORMATION CONTACT: ‘‘Funds’’ and each, a ‘‘Fund’’). A Post-Effective Barbara T. Heussler, Senior Counsel at Amendment to the Trust’s registration statement (202) 551–6990, or Jennifer L. Sawin, relating to the CLS Risk-Managed Enhanced Income Branch Chief, at (202) 551–6821 Fund, the CLS Fixed Income Fund and the CLS Concentrated Allocation Fund (the ‘‘New Funds’’) (Division of Investment Management, has been filed with the Commission and is not yet Office of Investment Company effective. The only existing registered open-end Regulation). management investment company that currently SECURITIES AND EXCHANGE COMMISSION The following is a summary of the application. The complete application may be obtained via the Commission’s SUPPLEMENTARY INFORMATION: PO 00000 Frm 00173 Fmt 4703 Sfmt 4703 intends to rely on the requested order is named as an Applicant. If the name of any Fund contains the name of a Subadviser (as defined below), the name of the Adviser that serves as the primary adviser to the Fund will precede the name of the Subadviser. E:\FR\FM\08SEN1.SGM 08SEN1 jlentini on DSKJ8SOYB1PROD with NOTICES Federal Register / Vol. 74, No. 172 / Tuesday, September 8, 2009 / Notices receives the fee specified in the Advisory Agreement from each Fund based on the Fund’s average daily net assets. The Advisory Agreement permits the Adviser to retain one or more unaffiliated subadvisers (‘‘Subadvisers’’), at the Adviser’s own cost and expense, for the purpose of managing the investment of the assets of one or more Funds of the Trust. The Adviser intends to enter into subadvisory agreements with various Subadvisers (‘‘Subadvisory Agreements’’) to provide investment advisory services to one or more of the Funds.2 Each Subadviser currently is or will be registered as an investment adviser under the Advisers Act. The Adviser will monitor and evaluate each Subadviser’s investment programs and will recommend to the Board whether Subadvisory Agreements should be renewed, modified or terminated. The Subadvisory Agreement with each Subadviser will be initially approved by the Board, including a majority of the Independent Trustees. Each Subadviser will have discretionary authority to invest that portion of a Fund’s assets assigned to it. The Adviser will compensate each Subadviser out of the fees that are paid to the Adviser under the Advisory Agreement. 3. Applicants request an order to permit the Adviser, subject to Board approval, to select certain Subadvisers to manage all or a portion of the assets of a Fund, pursuant to a Subadvisory Agreement and enter into and materially amend Subadvisory Agreements without shareholder approval (the ‘‘Manager of Managers Structure’’). The Applicants will not enter into a Subadvisory Agreement with any Subadviser that is an affiliated person, as defined in section 2(a)(3) of the Act, of the Trust, a Fund or of the Adviser, other than by reason of serving as Subadviser to one or more Funds (‘‘Affiliated Subadviser’’), unless shareholder approval of the Subadvisory Agreement with that Affiliated Subadviser is obtained. The requested relief will not apply with respect to Affiliated Subadvisers. 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 pursuant to a written contract that has been approved by the 2 Currently, the Reservoir Fund is sub-advised by Horizon Investment, LLC, a limited liability company organized under the laws of the State of North Carolina and registered an investment adviser under the Investment Advisers Act of 1940. The Reservoir Fund’s Subadvisory Agreement received shareholder approval. VerDate Nov<24>2008 17:32 Sep 04, 2009 Jkt 217001 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 provision 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 policy and provisions of the Act. Applicants believe that their requested relief meets this standard. 3. Applicants state that the shareholders expect the Adviser and the Board to select the Subadviser for a Fund that is best suited to achieve the Fund’s investment objective. Applicants assert that, from the perspective of the investor, the role of the Subadvisers with respect to the Funds utilizing the Manager of Managers Structure is substantially equivalent to the role of the individual portfolio managers employed by traditional investment company advisory firms. Applicants believe that permitting the Adviser to perform those duties for which shareholders of the Funds are paying the Adviser without incurring unnecessary delay or expense will be appropriate in the interests of Fund shareholders and will allow each Fund to operate more efficiently. Applicants also note that the Advisory Agreement will remain fully subject to the shareholder approval requirements in section 15(a) of the Act and rule 18f–2 under the Act, including the requirement for shareholder voting. Applicants’ Conditions: Applicants agree that any order granting the requested relief will be subject to the following conditions: 1. Before a Fund may rely on the order requested in the application, 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 2 below, by the initial shareholder(s) before offering shares of that sub-advised Fund to the public. 2. The prospectus for each Fund relying on the order requested in this application will disclose the existence, substance, and effect of any order PO 00000 Frm 00174 Fmt 4703 Sfmt 4703 46253 granted pursuant to this application. Each Fund relying on the order requested in this application will hold itself out to the public as utilizing the Manager of Managers Structure described in this application. The prospectus will prominently disclose that the Adviser has ultimate responsibility (subject to oversight by the Board) to oversee the Subadvisers and recommend their hiring, termination and replacement. 3. Within 90 days of the hiring of a new Subadviser, the affected Fund shareholders will be furnished all information about the new Subadviser that would be included in a proxy statement. To meet this obligation, the Fund will provide shareholders 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 Adviser will not enter into a Subadvisory Agreement with any Affiliated Subadviser without such agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Fund. 5. At all times, at least a majority of the Boards 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. Whenever a subadviser change is proposed for a Fund with an Affiliated Subadviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the applicable 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 the Adviser or the Affiliated Subadviser derives an inappropriate advantage. 7. The Adviser will provide general management services to each Fund that is sub-advised, including overall supervisory responsibility for the general management and investment of the Fund’s assets, and, subject to review and approval by the Board, will: (i) Set each Fund’s overall investment strategies; (ii) evaluate, select and recommend Subadvisers to manage all or a part of a Fund’s assets; (iii) allocate and, when appropriate, reallocate a Fund’s assets among one or more Subadvisers; (iv) monitor and evaluate the performance of Subadvisers; and (v) implement procedures reasonably designed to ensure that the Subadvisers comply with the relevant Fund’s investment objective, policies and restrictions. E:\FR\FM\08SEN1.SGM 08SEN1 46254 Federal Register / Vol. 74, No. 172 / Tuesday, September 8, 2009 / Notices 8. No trustee or officer of the Trust or a Fund, or director, manager or officer of the Adviser, will own, directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person), any interest in a Subadviser, except for (i) ownership of interests in the Adviser or any entity that controls, is controlled by, or is under common control with the Adviser, or (ii) 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 Subadviser. 9. In the event the Commission adopts a rule under the Act providing substantially similar relief to that in the order requested in the Application, the requested order will expire on the effective date of that rule. For the Commission, by the Division of Investment Management, under delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E9–21494 Filed 9–4–09; 8:45 am] jlentini on DSKJ8SOYB1PROD with NOTICES SECURITIES AND EXCHANGE COMMISSION AGENCY: Securities and Exchange Commission. ACTION: Notice to establish a system of records. Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Thursday, September 10, 2009 at 2 p.m. Commissioners, Counsel 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 also may 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 Paredes, as duty officer, voted to consider the items listed for the Closed Meeting in a closed session. The subject matter of the Closed Meeting scheduled for Thursday, September 10, 2009 will be: Institution and settlement of injunctive actions; Jkt 217001 BILLING CODE P Privacy Act of 1974: Establishment of a System of Records SECURITIES AND EXCHANGE COMMISSION 17:32 Sep 04, 2009 Dated: September 3, 2009. Elizabeth M. Murphy, Secretary. [FR Doc. E9–21716 Filed 9–3–09; 4:15 pm] [Release No. PA–40; File No. S7–19–09] BILLING CODE 8010–01–P VerDate Nov<24>2008 Institution and settlement of administrative proceedings; 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. SUMMARY: In accordance with the requirements of the Privacy Act of 1974, as amended, 5 U.S.C. 552a, the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) gives notice of a proposed Privacy Act system of records: ‘‘Ethics Conduct Rules Files (SEC–60).’’ This system will contain information related to applicable SEC Ethics Conduct Rules (currently found at 17 CFR Part 200 Subpart M), including outside employment and activities, and covered securities transactions, securities holdings and securities accounts. DATES: The proposed system will become effective October 13, 2009, unless further notice is given. The Commission will publish a new notice if the effective date is delayed to review comments or if changes are made based on comments received. To be assured of consideration, comments should be received on or before October 8, 2009. ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/other.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number S7–19–09 on the subject line. PO 00000 Frm 00175 Fmt 4703 Sfmt 4703 Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number S7–19–09. This file number should be included on the subject line if e-mail is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/rules/other.shtml). Comments are also available for public inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: Barbara A. Stance, Chief Privacy Officer, Office of Information Technology, 202– 551–7209. SUPPLEMENTARY INFORMATION: The Commission gives notice of the proposed establishment of a system of records, entitled ‘‘Ethics Conduct Rules Files (SEC–60).’’ The system will contain information related to the SEC’s ‘‘Regulation Concerning Conduct of Members and Employees and Former Members and Employees of the Commission’’ (‘‘Ethics Conduct Rules’’), currently located at 17 CFR Part 200 Subpart M, including outside employment and activities, and covered securities transactions, securities holdings and securities accounts. On May 22, 2009, to consolidate related responsibilities, the Commission transferred all the Commission’s Ethics Rules responsibilities that resided in the Office of Human Resources (consisting particularly of the administration of all of the SEC Ethics Conduct Rules files) to the Commission’s Ethics Office. Consistent with the transfer of responsibilities, the Commission is establishing a system of records in the Ethics Office to maintain records related to the Ethics Conduct Rules applicable to Commission Members and employees, including reports on securities transactions, holdings, and accounts required by applicable Federal securities laws and regulations. The Commission has submitted a report of the system of records to the Senate Committee on Homeland Security and Government Affairs, the E:\FR\FM\08SEN1.SGM 08SEN1

Agencies

[Federal Register Volume 74, Number 172 (Tuesday, September 8, 2009)]
[Notices]
[Pages 46252-46254]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21494]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28894; File No. 812-13643]


AdvisorOne Funds and CLS Investments, LLC; Notice of Application

August 31, 2009.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 15(a) 
of the Act and rule 18f-2 under the Act.

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    Summary of Application: The requested order would permit certain 
registered open-end management investment companies to enter into and 
materially amend subadvisory agreements without shareholder approval.
    Applicants: AdvisorOne Funds (the ``Trust'') and CLS Investments, 
LLC (the ``Adviser'') (collectively, ``Applicants'').
    Filing Dates: The application was filed on March 16, 2009, and 
amended on August 26, 2009.
    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 September 25, 2009 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 reasons 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, Gemini Fund 
Services, LLC, 450 Wireless Boulevard, Hauppauge, New York 11788-0132.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel at 
(202) 551-6990, or Jennifer L. Sawin, 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 via the 
Commission's Web site by searching for the file number or an applicant 
using the Company name box, at https://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.
    Applicants' Representations:
    1. The Trust, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company and currently consists 
of six separate funds: The Amerigo Fund, Clermont Fund, Berolina Fund, 
Reservoir Fund, Descartes Fund, and Liahona Fund.\1\ Each Fund has its 
own investment objective, policies, and restrictions.
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    \1\ Applicants also request relief with respect to 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 the Adviser or any entity controlling, controlled by or under 
common control with the Adviser; (b) uses the manager of managers 
structure described in the application; and (c) complies with the 
terms and conditions of the application (collectively, the ``Funds'' 
and each, a ``Fund''). A Post-Effective Amendment to the Trust's 
registration statement relating to the CLS Risk-Managed Enhanced 
Income Fund, the CLS Fixed Income Fund and the CLS Concentrated 
Allocation Fund (the ``New Funds'') has been filed with the 
Commission and is not yet effective. The only existing registered 
open-end management investment company that currently intends to 
rely on the requested order is named as an Applicant. If the name of 
any Fund contains the name of a Subadviser (as defined below), the 
name of the Adviser that serves as the primary adviser to the Fund 
will precede the name of the Subadviser.
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    The Adviser, a limited liability company organized under the laws 
of the State of Nebraska, is an investment adviser registered under the 
Investment Advisers Act of 1940 (``Advisers Act''). The Adviser serves 
as the investment adviser of each Fund and will serve as the investment 
adviser of each of the New Funds. The Adviser's primary business 
activity is providing investment management services to the Funds 
pursuant to an investment advisory agreement with the Trust (the 
``Advisory Agreement''). The Advisory Agreement was approved by the 
board of trustees of the Trust (``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 or the Adviser (the ``Independent 
Trustees'') and, except with respect to the New Funds, was approved by 
the initial shareholder of each Fund. With respect to the New Funds, 
the Advisory Agreement will be approved by the initial shareholder of 
the Fund.
    2. Under the terms of the Advisory Agreement, the Adviser is 
responsible for formulating each Fund's investment program and for 
making day-to-day investment decisions and engaging in portfolio 
transactions. For the investment management services that it provides 
to each Fund, the Adviser

[[Page 46253]]

receives the fee specified in the Advisory Agreement from each Fund 
based on the Fund's average daily net assets. The Advisory Agreement 
permits the Adviser to retain one or more unaffiliated subadvisers 
(``Subadvisers''), at the Adviser's own cost and expense, for the 
purpose of managing the investment of the assets of one or more Funds 
of the Trust. The Adviser intends to enter into subadvisory agreements 
with various Subadvisers (``Subadvisory Agreements'') to provide 
investment advisory services to one or more of the Funds.\2\ Each 
Subadviser currently is or will be registered as an investment adviser 
under the Advisers Act. The Adviser will monitor and evaluate each 
Subadviser's investment programs and will recommend to the Board 
whether Subadvisory Agreements should be renewed, modified or 
terminated. The Subadvisory Agreement with each Subadviser will be 
initially approved by the Board, including a majority of the 
Independent Trustees. Each Subadviser will have discretionary authority 
to invest that portion of a Fund's assets assigned to it. The Adviser 
will compensate each Subadviser out of the fees that are paid to the 
Adviser under the Advisory Agreement.
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    \2\ Currently, the Reservoir Fund is sub-advised by Horizon 
Investment, LLC, a limited liability company organized under the 
laws of the State of North Carolina and registered an investment 
adviser under the Investment Advisers Act of 1940. The Reservoir 
Fund's Subadvisory Agreement received shareholder approval.
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    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to select certain Subadvisers to manage all or a 
portion of the assets of a Fund, pursuant to a Subadvisory Agreement 
and enter into and materially amend Subadvisory Agreements without 
shareholder approval (the ``Manager of Managers Structure''). The 
Applicants will not enter into a Subadvisory Agreement with any 
Subadviser that is an affiliated person, as defined in section 2(a)(3) 
of the Act, of the Trust, a Fund or of the Adviser, other than by 
reason of serving as Subadviser to one or more Funds (``Affiliated 
Subadviser''), unless shareholder approval of the Subadvisory Agreement 
with that Affiliated Subadviser is obtained. The requested relief will 
not apply with respect to Affiliated Subadvisers.
    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 pursuant to 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 provision 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 policy 
and provisions of the Act. Applicants believe that their requested 
relief meets this standard.
    3. Applicants state that the shareholders expect the Adviser and 
the Board to select the Subadviser for a Fund that is best suited to 
achieve the Fund's investment objective. Applicants assert that, from 
the perspective of the investor, the role of the Subadvisers with 
respect to the Funds utilizing the Manager of Managers Structure is 
substantially equivalent to the role of the individual portfolio 
managers employed by traditional investment company advisory firms. 
Applicants believe that permitting the Adviser to perform those duties 
for which shareholders of the Funds are paying the Adviser without 
incurring unnecessary delay or expense will be appropriate in the 
interests of Fund shareholders and will allow each Fund to operate more 
efficiently. Applicants also note that the Advisory Agreement will 
remain fully subject to the shareholder approval requirements in 
section 15(a) of the Act and rule 18f-2 under the Act, including the 
requirement for shareholder voting.
    Applicants' Conditions:
    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the order requested in the 
application, 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 2 below, by the 
initial shareholder(s) before offering shares of that sub-advised Fund 
to the public.
    2. The prospectus for each Fund relying on the order requested in 
this application will disclose the existence, substance, and effect of 
any order granted pursuant to this application. Each Fund relying on 
the order requested in this application will hold itself out to the 
public as utilizing the Manager of Managers Structure described in this 
application. The prospectus will prominently disclose that the Adviser 
has ultimate responsibility (subject to oversight by the Board) to 
oversee the Subadvisers and recommend their hiring, termination and 
replacement.
    3. Within 90 days of the hiring of a new Subadviser, the affected 
Fund shareholders will be furnished all information about the new 
Subadviser that would be included in a proxy statement. To meet this 
obligation, the Fund will provide shareholders 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 Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without such agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. At all times, at least a majority of the Boards 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. Whenever a subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
applicable 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 the Adviser or the Affiliated Subadviser derives an 
inappropriate advantage.
    7. The Adviser will provide general management services to each 
Fund that is sub-advised, including overall supervisory responsibility 
for the general management and investment of the Fund's assets, and, 
subject to review and approval by the Board, will: (i) Set each Fund's 
overall investment strategies; (ii) evaluate, select and recommend 
Subadvisers to manage all or a part of a Fund's assets; (iii) allocate 
and, when appropriate, reallocate a Fund's assets among one or more 
Subadvisers; (iv) monitor and evaluate the performance of Subadvisers; 
and (v) implement procedures reasonably designed to ensure that the 
Subadvisers comply with the relevant Fund's investment objective, 
policies and restrictions.

[[Page 46254]]

    8. No trustee or officer of the Trust or a Fund, or director, 
manager or officer of the Adviser, will own, directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person), any interest in a Subadviser, except for (i) ownership 
of interests in the Adviser or any entity that controls, is controlled 
by, or is under common control with the Adviser, or (ii) 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 Subadviser.
    9. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the Application, the requested order will expire on the effective 
date of that rule.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21494 Filed 9-4-09; 8:45 am]
BILLING CODE 8010-01-P
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