HighMark Funds and HighMark Capital Management, Inc.; Notice of Application, 42141-42143 [2011-17956]
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Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Notices
srobinson on DSK4SPTVN1PROD with NOTICES
volumes qualified as an ‘‘extraordinary
or exceptional’’ circumstance. Id. at 50.
However, it ruled that the Postal Service
had failed to demonstrate that the
proposed rate adjustments were ‘‘due
to’’ the ‘‘extraordinary or exceptional’’
circumstance, as required by section
3622(d)(1)(E), because it did not show
how the rate increases related to exigent
circumstances that purportedly gave rise
to them. Id. at 53, 60. Accordingly, the
Commission denied the requested
exigent rate adjustment. Id. at 87.
The court’s opinion. On appeal, the
court affirmed the Commission’s
conclusion that the plain meaning of the
words ‘‘due to’’ in section 3622(d)(1)(E)
requires a causal relationship between
the amount of the requested adjustment
and the impact of the extraordinary or
exceptional circumstances.4 The court
confirmed that, ‘‘under the plain
meaning of [section 3622(d)(1)(E)], a rate
may be ‘adjusted on an expedited basis’
only because of ‘extraordinary or
exceptional circumstances.’ ’’ Id.
(emphasis in original).
The court nevertheless concluded that
the plain meaning of the ‘‘due to’’
phrase does not adequately express how
close the relationship between the
proposed adjustment and the exigent
circumstance must be.5 In the court’s
view, the ‘‘due to’’ phrase in section
3622(d)(1)(E) is ambiguous because the
phrase can mean ‘‘due in part to’’ as
well as ‘‘due only to.’’ Id. (emphasis in
original).
Because the phrase ‘‘due to’’ is
ambiguous as a standard of causation,
the court held that the Commission
could not properly reject the Exigent
Request based on a plain meaning
interpretation of the phrase.6 Thus, it
granted the Postal Service’s petition in
part and remanded the case to the
Commission to satisfy its obligation ‘‘to
fill the statutory gap by determining
how closely the amount of the
adjustments must match the amount of
the revenue lost as a result of the
exigent circumstances.’’ Id.
The Commission’s response. As
directed by the court, the Commission
will proceed to apply its expertise and
4 640 F.3d at 1267 (‘‘[W]e agree with the
Commission that the plain meaning of ‘due to’
mandates a causal relationship between the amount
of a requested adjustment and the exigent
circumstances’ impact on the Postal Service.’’).
5 Id. at 1268 (‘‘[A]lthough [‘due to’] has a plain
meaning regarding causal connection vel non,
* * * it has no similar plain meaning regarding the
closeness of the causal connection.’’).
6 Id. The court rejected the Commission’s plain
meaning interpretation as ‘‘requiring that the Postal
Service match the amount of the proposed
adjustments precisely to the amount of revenue lost
as a result of the exigent circumstances.’’ Id.
(emphasis in original).
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interpret the phrase ‘‘due to’’ to
determine how closely the amount of an
exigent rate adjustment must match the
amount of revenue lost as a result of an
exigent circumstance. Id.; see Chevron,
U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837,
842–43 (1984).
The Commission establishes Docket
No. R2010–4R to consider issues on
remand. Docket Nos. R2010–4 and
R2010–4R are part of the same
proceeding. The Commission shall
consider all documents filed to date in
Docket No. R2010–4 as part of the
record in Docket No. R2010–4R.
To ensure that the Postal Service and
other interested persons have an
opportunity to make their views known
regarding the proper interpretation of
‘‘due to’’ as the standard of causation in
39 U.S.C. 3622(d)(1)(E), the Commission
hereby provides for submission of initial
and reply comments on this topic.
Initial comments are due no later than
July 25, 2011. Reply comments are due
no later than August 1, 2011. All
comments and other documents related
to issues on remand must be filed under
Docket No. R2010–4R.
It is ordered:
1. The Commission establishes Docket
No. R2010–4R to consider issues on
remand.
2. James Waclawski will continue to
serve as officer of the Commission
(Public Representative) to represent the
interests of the general public in this
proceeding.
3. Initial comments addressing the
proper interpretation of ‘‘due to’’ as a
standard of causation in 39 U.S.C.
3622(d)(1)(E) are due no later than July
25, 2011.
4. Reply comments addressing matters
raised in initial comments are due no
later than August 1, 2011.
5. All comments and other documents
related to issues on remand must be
filed under Docket No. R2010–4R.
6. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Ruth Ann Abrams,
Acting Secretary.
[FR Doc. 2011–17924 Filed 7–15–11; 8:45 am]
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42141
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
29723; File No. 812–13143]
HighMark Funds and HighMark Capital
Management, Inc.; Notice of
Application
July 12, 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.
AGENCY:
SUMMARY OF THE APPLICATION:
Applicants request an order that would
permit them to enter into and materially
amend sub-advisory agreements without
shareholder approval.
APPLICANTS: HighMark Funds and
HighMark Capital Management, Inc.
(‘‘HMCM’’).
Filing Dates: The application
was filed on December 14, 2004, and
amended on February 17, 2010, and
January 14, 2011. Applicants have
agreed to file an amendment during the
notice period, the substance of which is
reflected in this notice.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on August 5, 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 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: HighMark Funds, 350
California Street, Suite 1600, San
Francisco, California 94104; HMCM,
350 California Street, San Francisco,
California 94104.
FOR FURTHER INFORMATION CONTACT:
Lewis B. Reich, Senior Counsel, at (202)
551–6919, or Jennifer L. Sawin, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Office of
Investment Company Regulation).
DATES:
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42142
Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Notices
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.
SUPPLEMENTARY INFORMATION:
srobinson on DSK4SPTVN1PROD with NOTICES
Applicants’ Representations
1. HighMark Funds is a registered
open-end management investment
company organized as a Massachusetts
business trust and currently offers 29
series (each, a ‘‘Fund’’), each with its
own investment objective, restrictions
and policies.1
2. HMCM, a California corporation
with its principal office in San
Francisco, is registered as an investment
adviser under the Investment Advisers
Act of 1940 (‘‘Advisers Act’’). HMCM is
a subsidiary of Union Bank, N.A., which
is a subsidiary of UnionBanCal
Corporation, which is wholly owned by
The Bank of Tokyo-Mitsubishi UFJ Ltd.,
which is a wholly-owned subsidiary of
Mitsubishi UFJ Financial Group, Inc.
HMCM serves as the investment adviser
to the currently existing Funds pursuant
to an investment advisory agreement
with HighMark Funds (an ‘‘Advisory
Agreement’’) approved by board of
trustees of the HighMark Funds (the
‘‘Board’’), including a majority of the
trustees who are not ‘‘interested
persons’’ of HighMark Funds as defined
in section 2(a)(19) of the Act (the
‘‘Independent Trustees’’), and by the
shareholders of each Fund in
accordance sections 15(a) and (c) of the
Act and rule 18f–2 thereunder.2
3. Under the Advisory Agreement, the
Adviser is responsible for providing a
continuous investment program for each
1 Applicants request that any relief granted
pursuant to the application apply also to any
existing or future registered open-end management
investment company or series thereof that (a) Is
advised by HMCM or any entity controlling,
controlled by or under common control with
HMCM or its successors (HMCM and each such
entity an ‘‘Adviser’’); (b) uses the manager of
managers structure described in the application;
and (c) complies with the terms and conditions in
the application (any such registered open-end
management investment company or series thereof,
a ‘‘Multi-Manager Fund’’). HighMark Funds is the
only existing investment company that currently
intends to rely on the requested order. All MultiManager Funds that currently intend to rely on the
requested order are named in the Application. If the
name of any Multi-Manager Fund contains the
name of any Sub-Adviser (as defined below), the
name of the Adviser that serves as the primary
adviser to that Multi-Manager Fund will precede
the name of the Sub-Adviser.
2 The term ‘‘Advisory Agreement’’ also refers to
any other agreement pursuant to which an Adviser
serves as the investment adviser to a Multi-Manager
Fund. The term ‘‘Board’’ includes the board of
trustees or directors of any Multi-Manager Fund.
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Multi-Manager Fund and determining
what securities and other investments
will be purchased, retained or sold by
each Multi-Manager Fund, consistent
with the Multi-Manager Fund’s
objectives, policies, and restrictions. As
compensation for its investment
management services, the Adviser
receives the fee specified in the
Advisory Agreement with respect to
each Multi-Manager Fund based on the
Multi-Manager Fund’s average daily net
assets. The Advisory Agreement permits
the Adviser to retain one or more subadvisers (each a ‘‘Sub-Adviser’’)
pursuant to investment sub-advisory
agreements at the Adviser’s own
expense, for the purpose of managing all
or a portion of the assets of a MultiManager Fund. Each Sub-Adviser is, or
will be, an investment adviser registered
under the Advisers Act. Each SubAdviser is and will be responsible,
subject to the general supervision of the
Adviser and the Board, for supervising
and administering the Multi-Manager
Fund’s investment program with respect
to the portion of the Multi-Manager
Fund’s assets assigned to it. The Adviser
will evaluate and recommend SubAdvisers to the Board and will monitor
and evaluate each Sub-Adviser’s
investment programs, performance and
compliance. The Adviser will
recommend to the Board whether subadvisory agreements should be renewed,
modified or terminated.
4. Applicants request an order to
permit the Adviser, subject to Board
approval, to enter into and materially
amend sub-advisory agreements for
Multi-Manager Funds without
shareholder approval. The requested
relief will not apply with respect to any
Sub-Adviser that is an affiliated person,
as defined in section 2(a)(3) of the Act,
of a Multi-Manager Fund or of the
Adviser, other than by reason of serving
as Sub-Adviser to one or more MultiManager Funds (‘‘Affiliated SubAdviser’’).
Applicants’ Legal Analysis
1. Section 15(a) of the Act provides,
in relevant part, that it is unlawful for
any person to act as an investment
adviser to a registered investment
company except pursuant to a written
contract that has been approved by a
vote of a majority of the company’s
outstanding voting securities. Rule 18f2 under the Act provides that each
series or class of stock in a series
investment company affected by a
matter must approve the 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
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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
believe that the requested relief satisfies
this standard for the reasons below.
3. Applicants state that the
shareholders of a Multi-Manager Fund
expect the Adviser, under the overall
supervision of the Board and the
Independent Trustees, to take
responsibility for overseeing the SubAdvisers and recommending their
hiring, termination, and replacement.
Applicants assert that, from the
perspective of the investor, the role of
the Sub-Advisers with respect to the
Multi-Manager Funds is substantially
equivalent to the role of the individual
portfolio managers employed by
traditional investment company
advisory firms. In the absence of
exemptive relief from Section 15(a) of
the Act, when a new Sub-Adviser is
proposed for retention by a MultiManager Fund, shareholders would be
required to approve the sub-advisory
agreement with that Sub-Adviser.
Similarly, approval by the shareholders
of the affected Multi-Manager Fund
would be required in order to amend an
existing sub-advisory agreement in any
material respect or in order to continue
to retain an existing Sub-Adviser whose
sub-advisory agreement is ‘‘assigned’’ as
a result of a change of control.
Applicants state that obtaining
shareholder approval is costly and slow,
so the relief requested would benefit the
Multi-Manager Funds and their
shareholders by reducing these
expenses and enabling the MultiManager Funds to operate more
efficiently. Applicants also note that
each Advisory Agreement will remain
fully subject to the requirements in
sections 15(a) and 15(c) of the Act and
rule 18f–2 under the Act, including the
requirement for shareholder approval.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Before a Multi-Manager Fund may
rely on the order requested in the
application, the operation of the MultiManager Fund in the manner described
in the application will be approved by
a majority of the Multi-Manager Fund’s
outstanding voting securities, as defined
in the Act, or, in the case of a MultiManager Fund whose public
shareholders purchase shares on the
basis of a prospectus containing the
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Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Notices
disclosure contemplated by condition 2
below, by the initial shareholder(s)
before offering shares of the MultiManager Fund to the public.
2. Each Multi-Manager Fund relying
on the requested order will disclose in
its prospectus the existence, substance,
and effect of any order granted pursuant
to the application. In addition, each
Multi-Manager Fund will hold itself out
to the public as employing the manager
of managers structure described in the
application. The prospectus will
prominently disclose that the Adviser
has ultimate responsibility (subject to
oversight by the Board) to oversee SubAdvisers and recommend their hiring,
termination and replacement.
3. Within 90 days of the hiring of any
new Sub-Adviser, shareholders of the
affected Multi-Manager Fund will be
furnished all of the information about
the new Sub-Adviser that would be
included in a proxy statement. To meet
this obligation the Multi-Manager Fund
will, within 90 days of hiring a new
Sub-Adviser, provide shareholders of
the affected Multi-Manager Fund with
an information statement meeting the
requirements of Regulation 14C,
Schedule 14C and Item 22 of Schedule
14A under the Securities Exchange Act
of 1934, as amended.
4. The Adviser will not enter into a
sub-advisory agreement with any
Affiliated Sub-Adviser without such
agreement, including the compensation
to be paid thereunder, being approved
by the shareholders of the applicable
Multi-Manager Fund.
5. At all times, at least a majority of
the Board will be Independent Trustees,
and the nomination of new or additional
Independent Trustees will be at the
discretion of the then existing
Independent Trustees.
6. When a change of Sub-Adviser is
proposed for a Multi-Manager Fund
with an Affiliated Sub-Adviser, the
Board, including a majority of the
Independent Trustees, will make a
separate finding, reflected in the Board
minutes, that such change is in the best
interests of the Multi-Manager Fund and
its shareholders and does not involve a
conflict of interest from which the
Adviser or an Affiliated Sub-Adviser
derives an inappropriate advantage.
7. The Adviser will provide general
management services to each MultiManager Fund, including overall
supervisory responsibility for the
general management and investment of
the Multi-Manager Fund’s assets, and,
subject to review and approval by the
Board, will: (i) set the Multi-Manager
Fund’s overall investment strategies; (ii)
evaluate, select and recommend SubAdvisers to manage all or a part of the
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Multi-Manager Fund’s assets; (iii) when
appropriate, allocate and reallocate the
Multi-Manager Fund’s assets among
multiple Sub-Advisers; (iv) monitor and
evaluate the Sub-Advisers’ performance;
and (v) implement procedures
reasonably designed to ensure that the
Sub-Advisers comply with the MultiManager Fund’s investment objectives,
policies and restrictions.
8. No trustee or officer of a MultiManager Fund or director 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 a publiclytraded company that is either a SubAdviser or an entity that controls, is
controlled by, or is under common
control with a Sub-Adviser.
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.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–17956 Filed 7–15–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Federal Register Citation of Previous
Announcement: [76 FR 40948, July
12, 2011].
STATUS: Closed Meeting.
PLACE: 100 F Street, NW., Washington,
DC.
DATE AND TIME OF PREVIOUSLY ANNOUNCED
MEETING: July 14, 2011 at 2 p.m.
Deletion of
Items.
The following items will not be
considered during the Closed Meeting
on Thursday, July 14, 2011:
Adjudicatory Matters.
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.
CHANGE IN THE MEETING:
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42143
Dated: July 14, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–18067 Filed 7–14–11; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Federal Register Citation of Previous
Announcement: [76 FR 41534, July 14,
2011].
STATUS:
PLACE:
Open Meeting.
100 F Street, NE., Washington,
DC.
DATE AND TIME OF PREVIOUSLY ANNOUNCED
MEETING: Thursday, July 14, 2011.
Cancellation of
Meeting.
The Open Meeting scheduled for
Thursday, July 14, 2011 at 10 a.m. has
been cancelled.
For further information please contact
the Office of the Secretary at (202) 551–
5400.
CHANGE IN THE MEETING:
Dated: July 13, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–18051 Filed 7–14–11; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64863; File No. SR–Phlx–
2011–94]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NASDAQ
OMX PHLX LLC Relating to the
Options Floor Broker Subsidy
July 12, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 30,
2011, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
18JYN1
]]>Agencies
[Federal Register Volume 76, Number 137 (Monday, July 18, 2011)]
[Notices]
[Pages 42141-42143]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-17956]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29723; File No. 812-13143]
HighMark Funds and HighMark Capital Management, Inc.; Notice of
Application
July 12, 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.
-----------------------------------------------------------------------
Summary of the Application: Applicants request an order that would
permit them to enter into and materially amend sub-advisory agreements
without shareholder approval.
Applicants: HighMark Funds and HighMark Capital Management, Inc.
(``HMCM'').
DATES: Filing Dates: The application was filed on December 14, 2004,
and amended on February 17, 2010, and January 14, 2011. Applicants have
agreed to file an amendment during the notice period, the substance of
which is reflected in this notice.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on August 5, 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
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: HighMark Funds, 350
California Street, Suite 1600, San Francisco, California 94104; HMCM,
350 California Street, San Francisco, California 94104.
For Further Information Contact: Lewis B. Reich, Senior Counsel, at
(202) 551-6919, or Jennifer L. Sawin, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
[[Page 42142]]
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. HighMark Funds is a registered open-end management investment
company organized as a Massachusetts business trust and currently
offers 29 series (each, a ``Fund''), each with its own investment
objective, restrictions and policies.\1\
---------------------------------------------------------------------------
\1\ Applicants request that any relief granted pursuant to the
application apply also to any existing or future registered open-end
management investment company or series thereof that (a) Is advised
by HMCM or any entity controlling, controlled by or under common
control with HMCM or its successors (HMCM and each such entity an
``Adviser''); (b) uses the manager of managers structure described
in the application; and (c) complies with the terms and conditions
in the application (any such registered open-end management
investment company or series thereof, a ``Multi-Manager Fund'').
HighMark Funds is the only existing investment company that
currently intends to rely on the requested order. All Multi-Manager
Funds that currently intend to rely on the requested order are named
in the Application. If the name of any Multi-Manager Fund contains
the name of any Sub-Adviser (as defined below), the name of the
Adviser that serves as the primary adviser to that Multi-Manager
Fund will precede the name of the Sub-Adviser.
---------------------------------------------------------------------------
2. HMCM, a California corporation with its principal office in San
Francisco, is registered as an investment adviser under the Investment
Advisers Act of 1940 (``Advisers Act''). HMCM is a subsidiary of Union
Bank, N.A., which is a subsidiary of UnionBanCal Corporation, which is
wholly owned by The Bank of Tokyo-Mitsubishi UFJ Ltd., which is a
wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc. HMCM
serves as the investment adviser to the currently existing Funds
pursuant to an investment advisory agreement with HighMark Funds (an
``Advisory Agreement'') approved by board of trustees of the HighMark
Funds (the ``Board''), including a majority of the trustees who are not
``interested persons'' of HighMark Funds as defined in section 2(a)(19)
of the Act (the ``Independent Trustees''), and by the shareholders of
each Fund in accordance sections 15(a) and (c) of the Act and rule 18f-
2 thereunder.\2\
---------------------------------------------------------------------------
\2\ The term ``Advisory Agreement'' also refers to any other
agreement pursuant to which an Adviser serves as the investment
adviser to a Multi-Manager Fund. The term ``Board'' includes the
board of trustees or directors of any Multi-Manager Fund.
---------------------------------------------------------------------------
3. Under the Advisory Agreement, the Adviser is responsible for
providing a continuous investment program for each Multi-Manager Fund
and determining what securities and other investments will be
purchased, retained or sold by each Multi-Manager Fund, consistent with
the Multi-Manager Fund's objectives, policies, and restrictions. As
compensation for its investment management services, the Adviser
receives the fee specified in the Advisory Agreement with respect to
each Multi-Manager Fund based on the Multi-Manager Fund's average daily
net assets. The Advisory Agreement permits the Adviser to retain one or
more sub-advisers (each a ``Sub-Adviser'') pursuant to investment sub-
advisory agreements at the Adviser's own expense, for the purpose of
managing all or a portion of the assets of a Multi-Manager Fund. Each
Sub-Adviser is, or will be, an investment adviser registered under the
Advisers Act. Each Sub-Adviser is and will be responsible, subject to
the general supervision of the Adviser and the Board, for supervising
and administering the Multi-Manager Fund's investment program with
respect to the portion of the Multi-Manager Fund's assets assigned to
it. The Adviser will evaluate and recommend Sub-Advisers to the Board
and will monitor and evaluate each Sub-Adviser's investment programs,
performance and compliance. The Adviser will recommend to the Board
whether sub-advisory agreements should be renewed, modified or
terminated.
4. Applicants request an order to permit the Adviser, subject to
Board approval, to enter into and materially amend sub-advisory
agreements for Multi-Manager Funds without shareholder approval. The
requested relief will not apply with respect to any Sub-Adviser that is
an affiliated person, as defined in section 2(a)(3) of the Act, of a
Multi-Manager Fund or of the Adviser, other than by reason of serving
as Sub-Adviser to one or more Multi-Manager Funds (``Affiliated Sub-
Adviser'').
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is
unlawful for any person to act as an investment adviser to a registered
investment company except pursuant to a written contract that has been
approved by a vote of a majority of the company's outstanding voting
securities. Rule 18f-2 under the Act provides that each series or class
of stock in a series investment company affected by a matter must
approve the matter if the Act requires shareholder approval.
2. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction or any class or classes of
persons, securities, or transactions from any provisions of the Act, or
from any rule 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 believe that the requested relief satisfies this
standard for the reasons below.
3. Applicants state that the shareholders of a Multi-Manager Fund
expect the Adviser, under the overall supervision of the Board and the
Independent Trustees, to take responsibility for overseeing the Sub-
Advisers and recommending their hiring, termination, and replacement.
Applicants assert that, from the perspective of the investor, the role
of the Sub-Advisers with respect to the Multi-Manager Funds is
substantially equivalent to the role of the individual portfolio
managers employed by traditional investment company advisory firms. In
the absence of exemptive relief from Section 15(a) of the Act, when a
new Sub-Adviser is proposed for retention by a Multi-Manager Fund,
shareholders would be required to approve the sub-advisory agreement
with that Sub-Adviser. Similarly, approval by the shareholders of the
affected Multi-Manager Fund would be required in order to amend an
existing sub-advisory agreement in any material respect or in order to
continue to retain an existing Sub-Adviser whose sub-advisory agreement
is ``assigned'' as a result of a change of control. Applicants state
that obtaining shareholder approval is costly and slow, so the relief
requested would benefit the Multi-Manager Funds and their shareholders
by reducing these expenses and enabling the Multi-Manager Funds to
operate more efficiently. Applicants also note that each Advisory
Agreement will remain fully subject to the requirements in sections
15(a) and 15(c) of the Act and rule 18f-2 under the Act, including the
requirement for shareholder approval.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Before a Multi-Manager Fund may rely on the order requested in
the application, the operation of the Multi-Manager Fund in the manner
described in the application will be approved by a majority of the
Multi-Manager Fund's outstanding voting securities, as defined in the
Act, or, in the case of a Multi-Manager Fund whose public shareholders
purchase shares on the basis of a prospectus containing the
[[Page 42143]]
disclosure contemplated by condition 2 below, by the initial
shareholder(s) before offering shares of the Multi-Manager Fund to the
public.
2. Each Multi-Manager Fund relying on the requested order will
disclose in its prospectus the existence, substance, and effect of any
order granted pursuant to the application. In addition, each Multi-
Manager Fund will hold itself out to the public as employing the
manager of managers structure described in the application. The
prospectus will prominently disclose that the Adviser has ultimate
responsibility (subject to oversight by the Board) to oversee Sub-
Advisers and recommend their hiring, termination and replacement.
3. Within 90 days of the hiring of any new Sub-Adviser,
shareholders of the affected Multi-Manager Fund will be furnished all
of the information about the new Sub-Adviser that would be included in
a proxy statement. To meet this obligation the Multi-Manager Fund will,
within 90 days of hiring a new Sub-Adviser, provide shareholders of the
affected Multi-Manager Fund with an information statement meeting the
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule
14A under the Securities Exchange Act of 1934, as amended.
4. The Adviser will not enter into a sub-advisory agreement with
any Affiliated Sub-Adviser without such agreement, including the
compensation to be paid thereunder, being approved by the shareholders
of the applicable Multi-Manager Fund.
5. At all times, at least a majority of the Board will be
Independent Trustees, and the nomination of new or additional
Independent Trustees will be at the discretion of the then existing
Independent Trustees.
6. When a change of Sub-Adviser is proposed for a Multi-Manager
Fund with an Affiliated Sub-Adviser, the Board, including a majority of
the Independent Trustees, will make a separate finding, reflected in
the Board minutes, that such change is in the best interests of the
Multi-Manager Fund and its shareholders and does not involve a conflict
of interest from which the Adviser or an Affiliated Sub-Adviser derives
an inappropriate advantage.
7. The Adviser will provide general management services to each
Multi-Manager Fund, including overall supervisory responsibility for
the general management and investment of the Multi-Manager Fund's
assets, and, subject to review and approval by the Board, will: (i) set
the Multi-Manager Fund's overall investment strategies; (ii) evaluate,
select and recommend Sub-Advisers to manage all or a part of the Multi-
Manager Fund's assets; (iii) when appropriate, allocate and reallocate
the Multi-Manager Fund's assets among multiple Sub-Advisers; (iv)
monitor and evaluate the Sub-Advisers' performance; and (v) implement
procedures reasonably designed to ensure that the Sub-Advisers comply
with the Multi-Manager Fund's investment objectives, policies and
restrictions.
8. No trustee or officer of a Multi-Manager Fund or director 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 Sub-Adviser, 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
a publicly-traded company that is either a Sub-Adviser or an entity
that controls, is controlled by, or is under common control with a Sub-
Adviser.
9. 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. 2011-17956 Filed 7-15-11; 8:45 am]
BILLING CODE 8011-01-P
