American Fidelity Dual Strategy Fund, Inc. and American Fidelity Assurance Company; Notice of Application, 60838-60840 [2010-24655]
Download as PDF
<![CDATA[
emcdonald on DSK2BSOYB1PROD with NOTICES
60838
Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices
conditions of the order and agree to
fulfill their responsibilities under the
order. At the time of its investment in
shares of an Unaffiliated Investment
Company in excess of the limit set forth
in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Unaffiliated
Investment Company of the investment.
At such time, the Fund of Funds will
also transmit to the Unaffiliated
Investment Company a list of the names
of each Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated
Investment Company of any changes to
the list as soon as reasonably practicable
after a change occurs. The Unaffiliated
Investment Company and the Fund of
Funds will maintain and preserve a
copy of the order, the Participation
Agreement and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
9. Before approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Independent Trustees,
shall find that the advisory fees charged
under the advisory contract are based on
services provided that are in addition to,
rather than duplicative of, services
provided under the advisory contract(s)
of any Underlying Fund in which the
Fund of Funds may invest. Such
finding, and the basis upon which the
finding was made, will be recorded fully
in the minute books of the appropriate
Fund of Funds.
10. The Manager will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated Fund by
the Manager, or an affiliated person of
the Manager, other than any advisory
fees paid to the Manager or its affiliated
person by an Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund. Any Subadviser will
waive fees otherwise payable to the
Subadviser, directly or indirectly, by the
Fund of Funds in an amount at least
equal to any compensation received by
the Subadviser, or an affiliated person of
the Subadviser, from an Unaffiliated
Fund, other than any advisory fees paid
to the Subadviser or an affiliated person
of the Subadviser by the Unaffiliated
Investment Company, in connection
with the investment by the Fund of
Funds in the Unaffiliated Fund made at
the direction of the Subadviser. In the
event that the Subadviser waives fees,
VerDate Mar<15>2010
17:34 Sep 30, 2010
Jkt 220001
the benefit of the waiver will be passed
through to the Fund of Funds.
11. With respect to Registered
Separate Accounts that invest in a Fund
of Funds, no sales load will be charged
at the Fund of Funds level or at the
Underlying Fund level. Other sales
charges and service fees, as defined in
NASD Conduct Rule 2830, if any, will
only be charged at the Fund of Funds
level or at the Underlying Fund level,
not both. With respect to other
investments in a Fund of Funds, any
sales charges and/or service fees
charged with respect to shares of a Fund
of Funds will not exceed the limits
applicable to funds of funds set forth in
NASD Conduct Rule 2830.
12. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A) of the Act, except to the
extent that such Underlying Fund (a)
Acquires such securities in compliance
with section 12(d)(1)(E) of the Act; (b)
receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(1)
of the Act); or (c) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to: (i)
acquire securities of one or more
investment companies for short-term
cash management purposes, or (ii)
engage in interfund borrowing and
lending transactions.
Other Investments by Same Group
Funds of Funds
13. The Applicants will comply with
all provisions of rule 12d1–2 under the
Act, except for paragraph (a)(2) to the
extent that it restricts any Same Group
Fund of Funds from investing in Other
Investments as described in the
application.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–24654 Filed 9–30–10; 8:45 am]
BILLING CODE 8010–01–P
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
29444; File No. 812–13708]
American Fidelity Dual Strategy Fund,
Inc. and American Fidelity Assurance
Company; Notice of Application
September 27, 2010.
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, as well as
from certain disclosure requirements.
AGENCY:
Applicants
request an order that would permit them
to enter into and materially amend
subadvisory agreements without
shareholder approval and would grant
relief from certain disclosure
requirements.
APPLICANTS: American Fidelity Dual
Strategy Fund, Inc. (the ‘‘Fund’’) and
American Fidelity Assurance Company
(the ‘‘Advisor’’).
FILING DATES: The application was filed
on October 1, 2009, and amended on
March 15, 2010, and September 24,
2010.
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 22, 2010, and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit or, for lawyers, a certificate
of service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons 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, 2000 N. Classen
Boulevard, Oklahoma City, OK 73106.
FOR FURTHER INFORMATION CONTACT:
Lewis Reich, Senior Counsel, at (202)
551–6919, or Jennifer 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
SUMMARY OF APPLICATION:
E:\FR\FM\01OCN1.SGM
01OCN1
Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices
emcdonald on DSK2BSOYB1PROD with NOTICES
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 Fund, a Maryland corporation,
is registered under the Act as an openend management investment company.
The Advisor is registered as an
investment adviser under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’) and serves as the
investment adviser of the Fund
pursuant to an investment advisory
agreement (‘‘Advisory Agreement’’) with
the Fund. The Advisory Agreement was
approved by the Fund’s board of
directors (‘‘Board’’), including a majority
of the directors who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act, of the Fund (‘‘Independent
Directors’’) and by the shareholders of
the Fund. Under the terms of the
Advisory Agreement, the Advisor is
responsible for providing a wide variety
of services to the Fund including
selecting and trading portfolio
securities, and will have overall
responsibility for the management and
investment of the Fund’s assets. For the
management and investment advisory
services that it provides to the Fund, the
Advisor receives the fee specified in the
Advisory Agreement. The Advisory
Agreement also permits the Advisor to
operate the Fund with one or more
subadvisers (‘‘Sub-Advisors’’), and the
Advisor’s investment management
services include selection of the Fund’s
Sub-Advisors. Pursuant to this
authority, the Advisor has entered into
investment subadvisory agreements
(‘‘Investment Subadvisory Agreements’’)
with four Sub-Advisors 1 to provide
investment advisory services to the
Fund subject to the supervision of the
Advisor and the Board. Each current
Sub-Advisor is and each future SubAdvisor will be an investment adviser
as defined in section 2(a)(20) of the Act
and registered as an investment adviser
under the Advisers Act. The Advisor
will evaluate, allocate assets to, and
oversee the Sub-Advisors, and make
recommendations to the Board about
their hiring, retention or release, at all
times subject to the authority of the
Board. The Advisor will compensate the
Sub-Advisors out of the fees paid to the
Advisor under the Advisory Agreement.
2. Applicants request an order to
permit the Advisor, subject to Board
1 Quest Investment Management, Inc., The
Renaissance Group, LLC, Beck, Mack & Oliver LLC
and WEDGE Capital Management LLP.
VerDate Mar<15>2010
17:34 Sep 30, 2010
Jkt 220001
approval, to enter into and materially
amend Investment Subadvisory
Agreements without obtaining
shareholder approval. The requested
relief will not extend to any SubAdvisor that is an affiliated person, as
defined in section 2(a)(3) of the Act, of
the Fund or the Advisor, other than by
reason of serving as a Sub-Advisor to
the Fund (‘‘Affiliated Sub-Advisor’’).
3. Applicants also request an
exemption from the various disclosure
provisions described below that may
require the Fund to disclose fees paid by
the Advisor to the Sub-Advisors. An
exemption is requested to permit a Fund
to disclose (as both a dollar amount and
as a percentage of its net assets): (a) the
aggregate fees paid to the Advisor and
any Affiliated Sub-Advisors; and (b) the
aggregate fees paid to Sub-Advisors
other than Affiliated Sub-Advisors
(collectively, ‘‘Aggregate Fee
Disclosure’’). If the Fund employs an
Affiliated Sub-Advisor, the Fund will
provide separate disclosure of any fees
paid to the Affiliated Sub-Advisor.
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.
2. Form N–1A is the registration
statement used by open-end investment
companies. Item 19(a)(3) of Form N–1A
requires disclosure of the method of
computing, 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 (‘‘1934 Act’’).
Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8)
and 22(c)(9) of Schedule 14A, taken
together, require a proxy statement for a
shareholder meeting at which the
advisory contract will be voted upon to
include the ‘‘rate of compensation of the
investment adviser,’’ the ‘‘aggregate
amount of the investment adviser’s
fees,’’ a description of the ‘‘terms of the
contract to be acted upon,’’ and, if a
change in the advisory fee is proposed,
the existing and proposed fees and the
difference between the two fees.
4. Regulation S–X sets forth the
requirements for financial statements
required to be included as part of
investment company registration
statements and shareholder reports filed
with the Commission. Sections 6–
07(2)(a), (b) and (c) of Regulation S–X
require that investment companies
PO 00000
Frm 00129
Fmt 4703
Sfmt 4703
60839
include in their financial statements
information about investment advisory
fees.
5. Section 6(c) of the Act provides that
the Commission may exempt any
person, security, or transaction or any
class or classes of persons, securities, or
transactions from any provisions of the
Act, or from any rule thereunder, if such
exemption is necessary or appropriate
in the public interest and consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of the Act. Applicants
state that the requested relief meets this
standard for the reasons discussed
below.
6. Applicants assert that shareholders
of the Fund expect the Advisor to select
Sub-Advisors who have the appropriate
skills and experience to manage the
Fund’s assets allocated to them.
Applicants assert that, from the
perspective of the investor, the role of
the Sub-Advisors is substantially
equivalent to that of the individual
portfolio managers employed in a
traditional investment advisory
structure. Applicants state that requiring
shareholder approval of each
Investment Subadvisory Agreement
would impose costs and unnecessary
delays on the Fund; the requested relief
may enable the Fund to act more
quickly when the Board and the Advisor
feel that a change would benefit the
Fund and its shareholders. Applicants
note that the Advisory Agreement and
any Investment Subadvisory Agreement
with an Affiliated Sub-Advisor will
remain subject to section 15(a) of the
Act.
7. Applicants assert that many
advisers use a ‘‘posted’’ rate schedule to
set their fees. Applicants state that,
while advisers are willing to negotiate
fees lower than those posted in the
schedule, they are reluctant to do so
where the fees are disclosed to other
prospective and existing customers.
Applicants submit that the requested
relief will allow the Advisor to negotiate
more effectively with each Sub-Advisor.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Before the 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.
2. The prospectus for the Fund will
disclose the existence, substance, and
effect of any order granted pursuant to
the application. The Fund will hold
E:\FR\FM\01OCN1.SGM
01OCN1
emcdonald on DSK2BSOYB1PROD with NOTICES
60840
Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices
itself out to the public as employing the
manager of managers structure
described in the application. The
prospectus will prominently disclose
that the Advisor has ultimate
responsibility (subject to oversight by
the Board) to oversee the Sub-Advisors
and recommend their hiring,
termination, and replacement.
3. Within 90 days of the hiring of a
new Sub-Advisor, the Fund’s
shareholders will be furnished all
information about the new Sub-Advisor
that would be included in a proxy
statement, except as modified by the
order to permit Aggregate Fee
Disclosure. This information will
include Aggregate Fee Disclosure and
any change in such disclosure caused by
the addition of the new Sub-Advisor. To
meet this obligation, the Fund will
provide shareholders, within 90 days of
the hiring of a new Sub-Advisor, with
an information statement meeting the
requirements of Regulation 14C,
Schedule 14C and Item 22 of Schedule
14A under the 1934 Act, except as
modified by the order to permit
Aggregate Fee Disclosure.
4. The Advisor will not enter into an
Investment Subadvisory Agreement
with any Affiliated Sub-Advisor without
that agreement, including the
compensation to be paid thereunder,
being approved by Fund shareholders.
5. At all times, at least a majority of
the Board will be Independent
Directors, and the nomination of new or
additional Independent Directors will
be placed within the discretion of the
then existing Independent Directors.
6. When a Sub-Advisor change is
proposed for the Fund with an
Affiliated Sub-Advisor, the Board,
including a majority of the Independent
Directors, 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
Advisor or the Affiliated Sub-Advisor
derives an inappropriate advantage.
7. Independent legal counsel, as
defined in rule 0–1(a)(6) under the Act,
will be engaged to represent the
Independent Directors. The selection of
such counsel will be within the
discretion of the then existing
Independent Directors.
8. Whenever a Sub-Advisor is hired or
terminated, the Advisor will provide the
Board with information showing the
expected impact on the profitability of
the Advisor.
9. The Advisor will provide general
management services to the Fund,
including overall supervisory
responsibility for the general
VerDate Mar<15>2010
17:34 Sep 30, 2010
Jkt 220001
management and investment of the
Fund’s assets and, subject to review and
approval of the Board, will: (i) Set the
Fund’s overall investment strategies, (ii)
evaluate, select and recommend SubAdvisors to manage all or a part of the
Fund’s assets, (iii) when appropriate,
allocate and reallocate the Fund’s assets
among multiple Sub-Advisors, (iv)
monitor and evaluate the performance
of Sub-Advisors, and (v) implement
procedures reasonably designed to
ensure that the Sub-Advisors comply
with the Fund’s investment objective,
policies and restrictions.
10. No director or officer of the Fund,
or director or officer of the Advisor, will
own directly or indirectly (other than
through a pooled investment vehicle
that is not controlled by such person)
any interest in a Sub-Advisor, except for
(a) ownership of interests in the Advisor
or any entity that controls, is controlled
by, or is under common control with the
Advisor, 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 SubAdvisor or an entity that controls, is
controlled by or is under common
control with a Sub-Advisor.
11. The Fund will disclose in its
registration statement the Aggregate Fee
Disclosure.
12. 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.
13. The Advisor will provide the
Board, no less frequently than quarterly,
with information about the profitability
of the Advisor with respect to the Fund.
The information will reflect the impact
on profitability of the hiring or
termination of any Sub-Advisor during
the applicable quarter.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–24655 Filed 9–30–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
29445; 812–13770]
Highland Capital Management, L.P.
and Highland Funds I; Notice of
Application
September 27, 2010.
Securities and Exchange
Commission (‘‘Commission’’).
AGENCY:
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from section 15(a) of the Act and rule
18f–2 under the Act, as well as from
certain disclosure requirements.
ACTION:
Applicants
request an order that would permit them
to enter into and materially amend
subadvisory agreements without
shareholder approval and would grant
relief from certain disclosure
requirements.
APPLICANTS: Highland Capital
Management, L.P. (the ‘‘Adviser’’) and
Highland Funds I (the ‘‘Trust’’ and
collectively, ‘‘Applicants’’).
FILING DATES: The application was filed
on May 7, 2010, and amended on
September 10, 2010, September 24,
2010, and September 27, 2010.
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 25, 2010, and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit or, for lawyers, a certificate
of service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons 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: The Trust and the
Adviser, NexBank Tower, 13455 Noel
Road, Suite 800, Dallas, TX 75240.
FOR FURTHER INFORMATION CONTACT: Jean
E. Minarick, Senior Counsel, at (202)
551–6811, or Julia Kim Gilmer, 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.
SUMMARY OF APPLICATION:
Applicants’ Representations
1. The Trust, a Delaware statutory
trust, is registered under the Act as an
open-end management investment
E:\FR\FM\01OCN1.SGM
01OCN1
]]>Agencies
[Federal Register Volume 75, Number 190 (Friday, October 1, 2010)]
[Notices]
[Pages 60838-60840]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-24655]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29444; File No. 812-13708]
American Fidelity Dual Strategy Fund, Inc. and American Fidelity
Assurance Company; Notice of Application
September 27, 2010.
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, as well as from certain disclosure requirements.
-----------------------------------------------------------------------
Summary of Application: Applicants request an order that would permit
them to enter into and materially amend subadvisory agreements without
shareholder approval and would grant relief from certain disclosure
requirements.
Applicants: American Fidelity Dual Strategy Fund, Inc. (the ``Fund'')
and American Fidelity Assurance Company (the ``Advisor'').
Filing Dates: The application was filed on October 1, 2009, and amended
on March 15, 2010, and September 24, 2010.
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 22, 2010, and should be accompanied by proof of service
on the applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons 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, 2000 N. Classen
Boulevard, Oklahoma City, OK 73106.
FOR FURTHER INFORMATION CONTACT: Lewis Reich, Senior Counsel, at (202)
551-6919, or Jennifer 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
[[Page 60839]]
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 Fund, a Maryland corporation, is registered under the Act as
an open-end management investment company. The Advisor is registered as
an investment adviser under the Investment Advisers Act of 1940
(``Advisers Act'') and serves as the investment adviser of the Fund
pursuant to an investment advisory agreement (``Advisory Agreement'')
with the Fund. The Advisory Agreement was approved by the Fund's board
of directors (``Board''), including a majority of the directors who are
not ``interested persons,'' as defined in section 2(a)(19) of the Act,
of the Fund (``Independent Directors'') and by the shareholders of the
Fund. Under the terms of the Advisory Agreement, the Advisor is
responsible for providing a wide variety of services to the Fund
including selecting and trading portfolio securities, and will have
overall responsibility for the management and investment of the Fund's
assets. For the management and investment advisory services that it
provides to the Fund, the Advisor receives the fee specified in the
Advisory Agreement. The Advisory Agreement also permits the Advisor to
operate the Fund with one or more subadvisers (``Sub-Advisors''), and
the Advisor's investment management services include selection of the
Fund's Sub-Advisors. Pursuant to this authority, the Advisor has
entered into investment subadvisory agreements (``Investment
Subadvisory Agreements'') with four Sub-Advisors \1\ to provide
investment advisory services to the Fund subject to the supervision of
the Advisor and the Board. Each current Sub-Advisor is and each future
Sub-Advisor will be an investment adviser as defined in section
2(a)(20) of the Act and registered as an investment adviser under the
Advisers Act. The Advisor will evaluate, allocate assets to, and
oversee the Sub-Advisors, and make recommendations to the Board about
their hiring, retention or release, at all times subject to the
authority of the Board. The Advisor will compensate the Sub-Advisors
out of the fees paid to the Advisor under the Advisory Agreement.
---------------------------------------------------------------------------
\1\ Quest Investment Management, Inc., The Renaissance Group,
LLC, Beck, Mack & Oliver LLC and WEDGE Capital Management LLP.
---------------------------------------------------------------------------
2. Applicants request an order to permit the Advisor, subject to
Board approval, to enter into and materially amend Investment
Subadvisory Agreements without obtaining shareholder approval. The
requested relief will not extend to any Sub-Advisor that is an
affiliated person, as defined in section 2(a)(3) of the Act, of the
Fund or the Advisor, other than by reason of serving as a Sub-Advisor
to the Fund (``Affiliated Sub-Advisor'').
3. Applicants also request an exemption from the various disclosure
provisions described below that may require the Fund to disclose fees
paid by the Advisor to the Sub-Advisors. An exemption is requested to
permit a Fund to disclose (as both a dollar amount and as a percentage
of its net assets): (a) the aggregate fees paid to the Advisor and any
Affiliated Sub-Advisors; and (b) the aggregate fees paid to Sub-
Advisors other than Affiliated Sub-Advisors (collectively, ``Aggregate
Fee Disclosure''). If the Fund employs an Affiliated Sub-Advisor, the
Fund will provide separate disclosure of any fees paid to the
Affiliated Sub-Advisor.
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.
2. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of
the method of computing, 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 (``1934 Act''). Items 22(c)(1)(ii),
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together,
require a proxy statement for a shareholder meeting at which the
advisory contract will be voted upon to include the ``rate of
compensation of the investment adviser,'' the ``aggregate amount of the
investment adviser's fees,'' a description of the ``terms of the
contract to be acted upon,'' and, if a change in the advisory fee is
proposed, the existing and proposed fees and the difference between the
two fees.
4. Regulation S-X sets forth the requirements for financial
statements required to be included as part of investment company
registration statements and shareholder reports filed with the
Commission. Sections 6-07(2)(a), (b) and (c) of Regulation S-X require
that investment companies include in their financial statements
information about investment advisory fees.
5. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction or any class or classes of
persons, securities, or transactions from any provisions of the Act, or
from any rule thereunder, if such exemption is necessary or appropriate
in the public interest and consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act. Applicants state that the requested relief meets this standard for
the reasons discussed below.
6. Applicants assert that shareholders of the Fund expect the
Advisor to select Sub-Advisors who have the appropriate skills and
experience to manage the Fund's assets allocated to them. Applicants
assert that, from the perspective of the investor, the role of the Sub-
Advisors is substantially equivalent to that of the individual
portfolio managers employed in a traditional investment advisory
structure. Applicants state that requiring shareholder approval of each
Investment Subadvisory Agreement would impose costs and unnecessary
delays on the Fund; the requested relief may enable the Fund to act
more quickly when the Board and the Advisor feel that a change would
benefit the Fund and its shareholders. Applicants note that the
Advisory Agreement and any Investment Subadvisory Agreement with an
Affiliated Sub-Advisor will remain subject to section 15(a) of the Act.
7. Applicants assert that many advisers use a ``posted'' rate
schedule to set their fees. Applicants state that, while advisers are
willing to negotiate fees lower than those posted in the schedule, they
are reluctant to do so where the fees are disclosed to other
prospective and existing customers. Applicants submit that the
requested relief will allow the Advisor to negotiate more effectively
with each Sub-Advisor.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Before the 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.
2. The prospectus for the Fund will disclose the existence,
substance, and effect of any order granted pursuant to the application.
The Fund will hold
[[Page 60840]]
itself out to the public as employing the manager of managers structure
described in the application. The prospectus will prominently disclose
that the Advisor has ultimate responsibility (subject to oversight by
the Board) to oversee the Sub-Advisors and recommend their hiring,
termination, and replacement.
3. Within 90 days of the hiring of a new Sub-Advisor, the Fund's
shareholders will be furnished all information about the new Sub-
Advisor that would be included in a proxy statement, except as modified
by the order to permit Aggregate Fee Disclosure. This information will
include Aggregate Fee Disclosure and any change in such disclosure
caused by the addition of the new Sub-Advisor. To meet this obligation,
the Fund will provide shareholders, within 90 days of the hiring of a
new Sub-Advisor, with an information statement meeting the requirements
of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the
1934 Act, except as modified by the order to permit Aggregate Fee
Disclosure.
4. The Advisor will not enter into an Investment Subadvisory
Agreement with any Affiliated Sub-Advisor without that agreement,
including the compensation to be paid thereunder, being approved by
Fund shareholders.
5. At all times, at least a majority of the Board will be
Independent Directors, and the nomination of new or additional
Independent Directors will be placed within the discretion of the then
existing Independent Directors.
6. When a Sub-Advisor change is proposed for the Fund with an
Affiliated Sub-Advisor, the Board, including a majority of the
Independent Directors, 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 Advisor or the Affiliated Sub-Advisor derives
an inappropriate advantage.
7. Independent legal counsel, as defined in rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Directors. The
selection of such counsel will be within the discretion of the then
existing Independent Directors.
8. Whenever a Sub-Advisor is hired or terminated, the Advisor will
provide the Board with information showing the expected impact on the
profitability of the Advisor.
9. The Advisor will provide general management services to the
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: (i) Set the Fund's overall investment
strategies, (ii) evaluate, select and recommend Sub-Advisors to manage
all or a part of the Fund's assets, (iii) when appropriate, allocate
and reallocate the Fund's assets among multiple Sub-Advisors, (iv)
monitor and evaluate the performance of Sub-Advisors, and (v) implement
procedures reasonably designed to ensure that the Sub-Advisors comply
with the Fund's investment objective, policies and restrictions.
10. No director or officer of the Fund, or director or officer of
the Advisor, will own directly or indirectly (other than through a
pooled investment vehicle that is not controlled by such person) any
interest in a Sub-Advisor, except for (a) ownership of interests in the
Advisor or any entity that controls, is controlled by, or is under
common control with the Advisor, 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-Advisor or an entity that controls,
is controlled by or is under common control with a Sub-Advisor.
11. The Fund will disclose in its registration statement the
Aggregate Fee Disclosure.
12. 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.
13. The Advisor will provide the Board, no less frequently than
quarterly, with information about the profitability of the Advisor with
respect to the Fund. The information will reflect the impact on
profitability of the hiring or termination of any Sub-Advisor during
the applicable quarter.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-24655 Filed 9-30-10; 8:45 am]
BILLING CODE 8010-01-P
