Simple Alternatives, LLC and The RBB Fund, Inc.; Notice of Application, 17718-17720 [2011-7417]
Download as PDF
<![CDATA[
17718
Federal Register / Vol. 76, No. 61 / Wednesday, March 30, 2011 / Notices
PROCEDURAL SCHEDULE—Continued
April 26, 2011 ..........................................
May 16, 2011 ..........................................
May 31, 2011 ..........................................
June 7, 2011 ...........................................
July 14, 2011 ...........................................
Deadline for Petitioner’s Form 61 or initial brief in support of petition (see 39 CFR 3001.115(a) and
(b)).
Deadline for answering brief in support of Postal Service (see 39 CFR 3001.115(c)).
Deadline for reply briefs in response to answering briefs (see 39 CFR 3001.115(d)).
Deadline for motions by any party requesting oral argument; the Commission will schedule oral argument only when it is a necessary addition to the written filings (see 39 CFR 3001.116).
Expiration of the Commission’s 120-day decisional schedule (see 39 U.S.C. 404(d)(5)).
By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2011–7396 Filed 3–29–11; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
29616; 812–13801]
Simple Alternatives, LLC and The RBB
Fund, Inc.; Notice of Application
Date: March 24, 2011.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from section 15(a) of the Act and rule
18f–2 under the Act, as well as 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: Simple Alternatives, LLC
(‘‘Simple Alternatives’’) and The RBB
Fund, Inc. (the ‘‘Company’’).
FILING DATES: The application was filed
on July 23, 2010, and amended on
December 22, 2010 and March 11, 2011.
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 April 18, 2011, 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
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
SUMMARY OF APPLICATION:
VerDate Mar<15>2010
14:59 Mar 29, 2011
Jkt 223001
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: c\o Gilbert H. Davis,
Esq., Sims Moss Kline & Davis LLP,
Suite 1700, Three Ravinia Drive,
Atlanta, Georgia 30346.
FOR FURTHER INFORMATION CONTACT:
Emerson S. Davis, Sr., Senior Counsel,
at (202) 551–6868, or Janet M.
Grossnickle, 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 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 Company, a Maryland
corporation, is registered under the Act
as an open-end management investment
company and offers eighteen series,
including the S1 Fund (‘‘S1 Fund’’).1
Simple Alternatives is registered as an
investment adviser under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’) and serves as the
investment adviser to the S1 Fund. An
Adviser will serve as the investment
1 Applicants also request relief with respect to
existing and future series of the Company and any
other existing or future registered open-end
management investment company or series thereof
that: (a) Is advised by Simple Alternatives or any
entity controlling, controlled by or under common
control with Simple Alternatives (each, an
‘‘Adviser’’); (b) uses the manager of managers
structure described in the application (the ‘‘Manager
of Managers Structure’’) and (c) complies with the
terms and conditions of this application (together
with the S1 Fund, the ‘‘Funds’’ and each,
individually, a ‘‘Fund’’). 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.
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
adviser to each Fund pursuant to an
investment advisory agreement
(‘‘Advisory Agreement’’) with the Fund.
Each Advisory Agreement will be
approved by the Company’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 Company or the
Adviser (‘‘Independent Directors’’) and
by the initial shareholder of the Fund.
2. Under the terms of each Advisory
Agreement, the Adviser will be
responsible for the overall management
of the Fund’s business affairs and
selecting the Funds’ investments in
accordance with its investment
objectives, policies and restrictions. For
the investment management services
that it provides to the Fund, the Adviser
will receive the fee specified in the
Advisory Agreement. The Advisory
Agreement also permits the Adviser to
retain one or more subadvisers, at its
own cost and expense, for the purpose
of managing the investments of the
Funds. Pursuant to this authority, the
Adviser will enter into investment
subadvisory agreements (‘‘Subadvisory
Agreements’’) with certain unaffiliated
subadvisers (each, a ‘‘Subadviser’’) to
provide investment advisory services to
the Funds. Simple Alternatives
currently employs eight Subadvisers for
the S1 Fund. Each Subadviser is and
each future Subadviser will be
registered as an investment adviser
under the Advisers Act. The Adviser
will supervise, evaluate and allocate
assets to the Subadvisers, and make
recommendations to the Board about
their hiring, retention or termination, at
all times subject to the authority of the
Board.
3. Applicants request an order to
permit the Adviser, subject to Board
approval, to enter into and materially
amend Subadvisory Agreements
without obtaining shareholder approval.
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 the Company, a Fund or the
Adviser, other than by reason of serving
as a subadviser to the Fund (‘‘Affiliated
Subadviser’’).
E:\FR\FM\30MRN1.SGM
30MRN1
Federal Register / Vol. 76, No. 61 / Wednesday, March 30, 2011 / Notices
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
4. Applicants also request an
exemption from the various disclosure
provisions described below that may
require the Funds to disclose fees paid
by the Adviser to the Subadvisers. An
exemption is requested to permit the
each Fund to disclose (as both a dollar
amount and as a percentage of the
respective Fund’s net assets): (a) The
aggregate fees paid to the Adviser and
any Affiliated Subadvisers; and (b) the
aggregate fees paid to Subadvisers
(collectively, ‘‘Aggregate Fee
Disclosure’’). Any Fund that employs an
Affiliated Subadviser also will provide
separate disclosure of any fees paid to
any 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 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
investment company affected by a
matter must approve that matter if the
Act requires shareholder approval.
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 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
VerDate Mar<15>2010
14:59 Mar 29, 2011
Jkt 223001
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 the
shareholders are relying on the
Adviser’s expertise to select one or more
Subadvisers best suited to achieve a
Fund’s investment objectives.
Applicants assert that, from the
perspective of the shareholder, the role
of the Subadvisers is substantially
equivalent to that of the individual
portfolio managers employed by
traditional advisory firms. Applicants
state that requiring shareholder
approval of each Subadvisory
Agreement would subject a Fund to
expenses and delays and may preclude
the Adviser from acting promptly.
Applicants note that the Advisory
Agreement and any subadvisory
agreement with an Affiliated Subadviser
will remain subject to section 15(a) of
the Act and rule 18f–2 under the Act.
7. Applicants assert that Subadvisers
use a ‘‘posted’’ rate schedule to set their
fees. Applicants state that, while
Subadvisers are willing to negotiate fees
lower than those posted in the schedule,
they are reluctant to do so where the
fees are disclosed to the public and
other Subadvisers. Applicants submit
that the requested relief will allow the
Adviser to negotiate more effectively
with Subadvisers.
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
requested order, 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 Fund to the
public.
2. Each Fund relying on the requested
order will disclose in its prospectus the
existence, substance, and effect of any
order granted pursuant to this
application. Each Fund will hold itself
out to the public as utilizing the
Manager of Managers Structure. The
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
17719
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, Fund shareholders will
be furnished all information about the
new Subadviser that would be included
in a proxy statement, except as modified
to permit Aggregate Fee Disclosure. This
information will include Aggregate Fee
Disclosure and any change in disclosure
caused by the addition of the new
Subadviser. To meet this obligation,
each Fund will provide shareholders,
within 90 days of the hiring of a new
Subadviser, 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. An 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 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. Whenever a subadviser change is
proposed for a Fund with an Affiliated
Subadviser, 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 Adviser or the Affiliated
Subadviser 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. Each Adviser will provide the
Board, no less frequently than quarterly,
with information about the profitability
of the Adviser on a per-Fund basis. The
information will reflect the impact on
profitability of the hiring or termination
of any Subadviser during the applicable
quarter.
9. Whenever a Subadviser is hired or
terminated, the Adviser will provide the
Board with information showing the
expected impact on the profitability of
the Adviser.
E:\FR\FM\30MRN1.SGM
30MRN1
17720
Federal Register / Vol. 76, No. 61 / Wednesday, March 30, 2011 / Notices
10. An Adviser will provide general
management services to each Fund,
including overall supervisory
responsibility for the general
management and investment of each
Fund’s assets and, subject to review and
approval of the Board, will: (a) Set each
Fund’s overall investment strategies; (b)
evaluate, select and recommend
Subadvisers to manage all or a part of
each Fund’s assets; (c) allocate and,
when appropriate, reallocate each
Fund’s assets among one or more
Subadvisers; (d) monitor and evaluate
the performance of Subadvisers; and (e)
implement procedures reasonably
designed to ensure that the Subadvisers
comply with each Fund’s investment
objective, policies and restrictions.
11. No Director or officer of the
Company or a Fund, or director,
manager, or officer of an 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
(a) ownership of interests in the Adviser
or any entity that controls, is controlled
by, or is under common control with the
Adviser or (b) ownership of less than
1% of the outstanding securities of any
class of equity or debt of any publicly
traded company that is either a
Subadviser or an entity that controls, is
controlled by, or is under common
control with a Subadviser.
12. Each Fund will disclose in its
registration statement the Aggregate Fee
Disclosure.
13. 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.
American Family Life
Insurance Company (the ‘‘Company’’),
American Family Variable Account I
(the ‘‘Life Account’’), and American
Family Variable Account II (the
‘‘Annuity Account’’) (together, the
‘‘Applicants’’).
SUMMARY OF APPLICATION: Applicants
request an order of the Commission,
pursuant to Section 26(c) of the 1940
Act, approving the substitution of shares
of the Vanguard Capital Growth
Portfolio (‘‘Replacement Portfolio’’) of
the Vanguard Variable Insurance Fund
(‘‘Vanguard Fund’’) for Service Class 2
Shares of the Fidelity Variable
Insurance Products Growth Portfolio
(‘‘Replaced Portfolio’’) of the Fidelity
Variable Insurance Products Fund
(‘‘Fidelity Fund’’), currently held by the
Life Account and the Annuity Account
(each an ‘‘Account,’’ together, the
‘‘Accounts’’) to support variable life
insurance and annuity contracts issued
by the Company (collectively, the
‘‘Contracts’’).
APPLICANTS:
[FR Doc. 2011–7417 Filed 3–29–11; 8:45 am]
Filing Date: The application was
filed on November 10, 2010 and
amended and restated on February 28,
2011.
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 Secretary of
the Commission and serving Applicants
with a copy of the request, personally or
by mail. Hearing requests must be
received by the Commission by 5:30
p.m. on April 20, 2011, 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 requester’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 Secretary of the
Commission.
BILLING CODE 8011–01–P
ADDRESSES:
For the Commission, by the Division of
Investment Management, under delegated
authority.
Cathy H. Ahn,
Deputy Secretary.
SECURITIES AND EXCHANGE
COMMISSION
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
[Rel. No. IC–29617; File No. 812–13842]
American Family Life Insurance
Company, et al.
March 24, 2011.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under Section 26(c) of the
Investment Company Act of 1940, as
amended (the ‘‘1940 Act’’).
AGENCY:
VerDate Mar<15>2010
14:59 Mar 29, 2011
Jkt 223001
DATES:
Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090.
Applicants, c/o David C. Holman, Esq.,
American Family Life Insurance
Company, 6000 American Parkway,
Madison, Wisconsin 53783–0001. Copy
to Thomas E. Bisset, Esq., Sutherland
Asbill & Brennan LLP, 1275
Pennsylvania Ave., NW., Washington,
DC 20004–2415.
FOR FURTHER INFORMATION CONTACT:
Michael L. Kosoff, Branch Chief, at (202)
551–6754 or Harry Eisenstein, Senior
Special Counsel, Office of Insurance
Products, Division of Investment
Management, at (202) 551–6795.
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
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 for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
Applicants’ Representation
1. The Company is a stock life
insurance company organized under
Wisconsin law. The Company conducts
a conventional life insurance business
and is authorized to transact the
business of life insurance, including
annuities, in nineteen States. For
purposes of the 1940 Act, the Company
is the depositor and sponsor of each of
the Accounts as those terms have been
interpreted by the Commission with
respect to variable life insurance and
variable annuity separate accounts.
2. Under the insurance law of
Wisconsin, the assets of each Account
attributable to the Contracts issued
through that Account are owned by the
Company, but are held separately from
the other assets of the Company for the
benefit of the owners of, and the persons
entitled to payment under, those
Contracts. Each Account is a ‘‘separate
account’’ as defined by Rule 0–1(e)
under the 1940 Act, and is registered
with the Commission as a unit
investment trust.1 Each Account is
comprised of a number of subaccounts
and each subaccount invests exclusively
in one of the insurance dedicated
mutual fund portfolios made available
as investment vehicles underlying the
Contracts. Currently, the Replaced
Portfolio is available as an investment
option under the Company’s variable
life insurance and variable annuity
Contracts.
3. The Life Account is currently
divided into nine (9) subaccounts. The
assets of the Life Account support
variable life insurance contracts and
interests in the Account offered through
such contracts have been registered
under the Securities Act of 1933, as
amended (the ‘‘1933 Act’’), on Form N–
6 (File Nos. 333–44956 and 333–
147408).
4. The Annuity Account is currently
divided into nine (9) subaccounts. The
assets of the Annuity Account support
variable annuity contracts and interests
in the Account offered through such
contracts have been registered under the
1933 Act on Form N–4 (File No. 333–
45592).
1 File No. 811–10097 (the Life Account); File No.
811–10121 (the Annuity Account).
E:\FR\FM\30MRN1.SGM
30MRN1
]]>Agencies
[Federal Register Volume 76, Number 61 (Wednesday, March 30, 2011)]
[Notices]
[Pages 17718-17720]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7417]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29616; 812-13801]
Simple Alternatives, LLC and The RBB Fund, Inc.; Notice of
Application
Date: March 24, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 15(a) of
the Act and rule 18f-2 under the Act, as well as 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: Simple Alternatives, LLC (``Simple Alternatives'') and The
RBB Fund, Inc. (the ``Company'').
Filing Dates: The application was filed on July 23, 2010, and amended
on December 22, 2010 and March 11, 2011.
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 April 18, 2011, 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: c\o Gilbert H.
Davis, Esq., Sims Moss Kline & Davis LLP, Suite 1700, Three Ravinia
Drive, Atlanta, Georgia 30346.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel,
at (202) 551-6868, or Janet M. Grossnickle, 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 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 Company, a Maryland corporation, is registered under the Act
as an open-end management investment company and offers eighteen
series, including the S1 Fund (``S1 Fund'').\1\ Simple Alternatives is
registered as an investment adviser under the Investment Advisers Act
of 1940 (``Advisers Act'') and serves as the investment adviser to the
S1 Fund. An Adviser will serve as the investment adviser to each Fund
pursuant to an investment advisory agreement (``Advisory Agreement'')
with the Fund. Each Advisory Agreement will be approved by the
Company'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 Company or the Adviser (``Independent
Directors'') and by the initial shareholder of the Fund.
---------------------------------------------------------------------------
\1\ Applicants also request relief with respect to existing and
future series of the Company and any other existing or future
registered open-end management investment company or series thereof
that: (a) Is advised by Simple Alternatives or any entity
controlling, controlled by or under common control with Simple
Alternatives (each, an ``Adviser''); (b) uses the manager of
managers structure described in the application (the ``Manager of
Managers Structure'') and (c) complies with the terms and conditions
of this application (together with the S1 Fund, the ``Funds'' and
each, individually, a ``Fund''). 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.
---------------------------------------------------------------------------
2. Under the terms of each Advisory Agreement, the Adviser will be
responsible for the overall management of the Fund's business affairs
and selecting the Funds' investments in accordance with its investment
objectives, policies and restrictions. For the investment management
services that it provides to the Fund, the Adviser will receive the fee
specified in the Advisory Agreement. The Advisory Agreement also
permits the Adviser to retain one or more subadvisers, at its own cost
and expense, for the purpose of managing the investments of the Funds.
Pursuant to this authority, the Adviser will enter into investment
subadvisory agreements (``Subadvisory Agreements'') with certain
unaffiliated subadvisers (each, a ``Subadviser'') to provide investment
advisory services to the Funds. Simple Alternatives currently employs
eight Subadvisers for the S1 Fund. Each Subadviser is and each future
Subadviser will be registered as an investment adviser under the
Advisers Act. The Adviser will supervise, evaluate and allocate assets
to the Subadvisers, and make recommendations to the Board about their
hiring, retention or termination, at all times subject to the authority
of the Board.
3. Applicants request an order to permit the Adviser, subject to
Board approval, to enter into and materially amend Subadvisory
Agreements without obtaining shareholder approval. 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 the Company, a Fund or the
Adviser, other than by reason of serving as a subadviser to the Fund
(``Affiliated Subadviser'').
[[Page 17719]]
4. Applicants also request an exemption from the various disclosure
provisions described below that may require the Funds to disclose fees
paid by the Adviser to the Subadvisers. An exemption is requested to
permit the each Fund to disclose (as both a dollar amount and as a
percentage of the respective Fund's net assets): (a) The aggregate fees
paid to the Adviser and any Affiliated Subadvisers; and (b) the
aggregate fees paid to Subadvisers (collectively, ``Aggregate Fee
Disclosure''). Any Fund that employs an Affiliated Subadviser also will
provide separate disclosure of any fees paid to any 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 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 investment company affected by a matter must
approve that matter if the Act requires shareholder approval.
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 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 the shareholders are relying on the
Adviser's expertise to select one or more Subadvisers best suited to
achieve a Fund's investment objectives. Applicants assert that, from
the perspective of the shareholder, the role of the Subadvisers is
substantially equivalent to that of the individual portfolio managers
employed by traditional advisory firms. Applicants state that requiring
shareholder approval of each Subadvisory Agreement would subject a Fund
to expenses and delays and may preclude the Adviser from acting
promptly. Applicants note that the Advisory Agreement and any
subadvisory agreement with an Affiliated Subadviser will remain subject
to section 15(a) of the Act and rule 18f-2 under the Act.
7. Applicants assert that Subadvisers use a ``posted'' rate
schedule to set their fees. Applicants state that, while Subadvisers
are willing to negotiate fees lower than those posted in the schedule,
they are reluctant to do so where the fees are disclosed to the public
and other Subadvisers. Applicants submit that the requested relief will
allow the Adviser to negotiate more effectively with Subadvisers.
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 requested order, 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 Fund to the public.
2. Each Fund relying on the requested order will disclose in its
prospectus the existence, substance, and effect of any order granted
pursuant to this application. Each Fund will hold itself out to the
public as utilizing the Manager of Managers Structure. 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, Fund
shareholders will be furnished all information about the new Subadviser
that would be included in a proxy statement, except as modified to
permit Aggregate Fee Disclosure. This information will include
Aggregate Fee Disclosure and any change in disclosure caused by the
addition of the new Subadviser. To meet this obligation, each Fund will
provide shareholders, within 90 days of the hiring of a new Subadviser,
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. An 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 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. Whenever a subadviser change is proposed for a Fund with an
Affiliated Subadviser, 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 Adviser or the Affiliated Subadviser 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. Each Adviser will provide the Board, no less frequently than
quarterly, with information about the profitability of the Adviser on a
per-Fund basis. The information will reflect the impact on
profitability of the hiring or termination of any Subadviser during the
applicable quarter.
9. Whenever a Subadviser is hired or terminated, the Adviser will
provide the Board with information showing the expected impact on the
profitability of the Adviser.
[[Page 17720]]
10. An Adviser will provide general management services to each
Fund, including overall supervisory responsibility for the general
management and investment of each Fund's assets and, subject to review
and approval of the Board, will: (a) Set each Fund's overall investment
strategies; (b) evaluate, select and recommend Subadvisers to manage
all or a part of each Fund's assets; (c) allocate and, when
appropriate, reallocate each Fund's assets among one or more
Subadvisers; (d) monitor and evaluate the performance of Subadvisers;
and (e) implement procedures reasonably designed to ensure that the
Subadvisers comply with each Fund's investment objective, policies and
restrictions.
11. No Director or officer of the Company or a Fund, or director,
manager, or officer of an 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 (a) ownership
of interests in the Adviser or any entity that controls, is controlled
by, or is under common control with the Adviser or (b) ownership of
less than 1% of the outstanding securities of any class of equity or
debt of any publicly traded company that is either a Subadviser or an
entity that controls, is controlled by, or is under common control with
a Subadviser.
12. Each Fund will disclose in its registration statement the
Aggregate Fee Disclosure.
13. 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.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7417 Filed 3-29-11; 8:45 am]
BILLING CODE 8011-01-P
