The KP Funds and Callan Associates Inc., et al.;, 59735-59738 [2013-23541]

Download as PDF Federal Register / Vol. 78, No. 188 / Friday, September 27, 2013 / Notices Id. at 3. This information includes the price structure, underlying costs and assumptions, pricing formulas, information relevant to the customer’s mailing profile, and cost coverage projections. Id. The Postal Service asks the Commission to protect customeridentifying information from public disclosure indefinitely. Id. at 7. II. Notice of Filings The Commission establishes Docket Nos. MC2013–62 and CP2013–82 to consider the Request pertaining to the proposed Priority Mail Contract 64 product and the related contract, respectively. Interested persons may submit comments on whether the Postal Service’s filings in the captioned dockets are consistent with the policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR 3015.5, and 39 CFR part 3020, subpart B. Comments are due no later than September 30, 2013. The public portions of these filings can be accessed via the Commission’s Web site (https:// www.prc.gov). The Commission appoints Curtis E. Kidd to serve as Public Representative in these dockets. III. Ordering Paragraphs It is ordered: 1. The Commission establishes Docket Nos. MC2013–62 and CP2013–82 to consider the matters raised in each docket. 2. Pursuant to 39 U.S.C. 505, Curtis E. Kidd is appointed to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in these proceedings. 3. Comments by interested persons in these proceedings are due no later than September 30, 2013. 4. The Secretary shall arrange for publication of this order in the Federal Register. By the Commission. Ruth Ann Abrams, Acting Secretary. pmangrum on DSK3VPTVN1PROD with NOTICES SECURITIES AND EXCHANGE COMMISSION The KP Funds and Callan Associates Inc., et al.; Notice of Application VerDate Mar<15>2010 14:21 Sep 26, 2013 Jkt 229001 The application was filed on April 3, 2013, and amended on August 21, 2013 and September 19, 2013. FILING DATES: 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 18, 2013, 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. HEARING OR NOTIFICATION OF HEARING: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Applicants: The Trust, One Freedom Valley Drive, Oaks, PA 19456; and Callan, 101 California Street, Suite 3500, San Francisco, CA 94111. ADDRESSES: 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: [Investment Company Act Release No. 30693; File No. 812–14143] Securities and Exchange Commission (‘‘Commission’’). The KP Funds (the ‘‘Trust’’) and Callan Associates Inc. (‘‘Callan’’). APPLICANTS: Laura J. Riegel, Senior Counsel, at (202) 551–6873, or Mary Kay Frech, Branch Chief, at (202) 551–6821 (Division of Investment Management, Exemptive Applications Office). BILLING CODE P AGENCY: Applicants request an order that would permit them to enter into and materially amend subadvisory agreements with WhollyOwned Subadvisors (as defined below) and non-affiliated subadvisors without shareholder approval and would grant relief from certain disclosure requirements. SUMMARY OF APPLICATION: FOR FURTHER INFORMATION CONTACT: [FR Doc. 2013–23536 Filed 9–26–13; 8:45 am] September 23, 2013. 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: PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 59735 Applicants’ Representations 1. The Trust is organized as a Massachusetts business trust and is registered under the Act as an open-end management investment company. The Trust currently intends to offer 14 series (each, a ‘‘Fund’’ and collectively, the ‘‘Funds’’), each with its own distinct investment objectives, policies and restrictions.1 Callan is organized as a California corporation and is registered as an investment adviser under the Investment Advisers Act of 1940 (‘‘Advisers Act’’). Each Fund has, or will have, as its investment adviser, Callan or another entity controlling, controlled by or under common control with Callan or its successors (collectively, the ‘‘Advisor’’).2 Any future Advisor will be registered as an investment adviser under the Advisers Act.3 2. Each Fund will enter into an investment advisory agreement with the Advisor (the ‘‘Advisory Agreement’’). The Advisory Agreement with Callan has been approved by the board of trustees of the Trust (the ‘‘Board’’),4 including a majority of the members of the Board who are not ‘‘interested persons,’’ as defined in section 2(a)(19) of the Act, of the Trust, the relevant Fund, or the Advisor (‘‘Independent Trustees’’) and will be approved by the initial shareholder of the relevant Fund as required by sections 15(a) and 15(c) of the Act and rule 18f–2 thereunder. The terms of the Advisory Agreement will comply with section 15(a) of the Act. 3. Under the terms of the Advisory Agreement, the Advisor, subject to the authority of the Board, is responsible for the overall management of a Fund’s business affairs and selecting the Fund’s investments in accordance with the Fund’s investment objectives, policies, 1 The Funds that currently intend to rely on the requested order are KP Large Cap Equity Fund, KP Small Cap Equity Fund, KP International Equity Fund, and KP Fixed Income Fund. 2 For purposes of the requested order, ‘‘successor’’ is limited to any entity that results from a reorganization into another jurisdiction or a change in the type of business organization. 3 Applicants request that the relief apply to applicants, as well as to any existing or future series of the Trust and any other existing or future registered open-end management investment company or series thereof that: (a) Is advised by the Advisor; (b) uses the manager of managers structure (‘‘Manager of Managers Structure’’) described in the application, and (c) complies with the terms and conditions of the application (included in the term ‘‘Funds’’). 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 Subadvisor (as defined below), the name of the Advisor that serves as the primary adviser to the Fund will precede the name of the Subadvisor. 4 The term ‘‘Board’’ also includes the board of directors or trustees of a future Fund. E:\FR\FM\27SEN1.SGM 27SEN1 59736 Federal Register / Vol. 78, No. 188 / Friday, September 27, 2013 / Notices pmangrum on DSK3VPTVN1PROD with NOTICES and restrictions. For the investment advisory services that it provides to a Fund, the Advisor receives the fee specified in the Advisory Agreement based on the Fund’s average daily net assets. The Advisory Agreement also permits the Advisor to enter into investment subadvisory agreements (‘‘Subadvisory Agreements’’) with one or more subadvisors (each, a ‘‘Subadvisor’’) for the purpose of managing a Fund’s investments.5 Each Subadvisory Agreement will be approved by the Board, including by a majority of the Independent Trustees, and the initial shareholder of the Fund in accordance with sections 15(a) and 15(c) of the Act and rule 18f–2 under the Act. Each Subadvisor is or will be registered as an investment adviser under the Advisers Act or not subject to such registration. The Advisor will supervise, evaluate and allocate assets to the Subadvisors, and make recommendations to the Board about their hiring, retention or release. The Advisor will compensate each Subadvisor out of the fee paid to the Advisor under the Advisory Agreement or the Fund will be responsible for paying subadvisory fees directly to the Subadvisor.6 4. Applicants request an order to permit the Advisor, subject to the approval of the Board, including a majority of the Independent Trustees, to, without obtaining shareholder approval: (a) Select Subadvisors to manage all or a portion of the assets of a Fund and enter into Subadvisory Agreements with the Subadvisors; and (b) materially amend Subadvisory Agreements with the Subadvisors.7 The 5 A ‘‘Subadvisor’’ to a Fund is: (a) An indirect or direct ‘‘wholly-owned subsidiary’’ (as such term is defined in the Act) of the Advisor for that Fund; (b) a sister company of the Advisor for that Fund that is an indirect or direct ‘‘wholly-owned subsidiary’’ (as such term is defined in the Act) of the same company that, indirectly or directly, wholly owns the Advisor (each of (a) and (b), a ‘‘Wholly-Owned Subadvisor’’ and collectively, the ‘‘Wholly-Owned Subadvisors’’); or (c) an investment subadvisor for that Fund that is not an ‘‘affiliated person’’ (as such term is defined in section 2(a)(3) of the Act) of the Fund or the Advisor, except to the extent that an affiliation arises solely because the subadvisor serves as a subadvisor to a Fund (each, a ‘‘Non-Affiliated Subadvisor’’). 6 To the extent a Fund pays subadvisory fees directly from its assets, any changes to a Subadvisory Agreement that would result in an increase in the total management and advisory fees payable by the Fund will be required to be approved by the shareholders of that Fund. 7 Shareholder approval will continue to be required for any other subadvisor change (not otherwise permitted by rule or other action of the Commission or its staff) and material amendments to an existing Subadvisory Agreement with any subadvisor other than a Non-Affiliated Subadvisor or a Wholly-Owned Subadvisor (all such changes referred to as ‘‘Ineligible Subadvisor Changes’’). VerDate Mar<15>2010 14:21 Sep 26, 2013 Jkt 229001 requested relief will not extend to any subadvisor, other than a Wholly-Owned Subadvisor, who 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 subadvisor to one or more of the Funds (‘‘Affiliated Subadvisor’’). 5. Funds will inform shareholders of the hiring of a new Subadvisor pursuant to the following procedures (‘‘Modified Notice and Access Procedures’’): (a) Within 90 days after a new Subadvisor is hired for any Fund, that Fund will send its shareholders either a Multimanager Notice or a Multi-manager Notice and Multi-manager Information Statement; 8 and (b) the Fund will make the Multi-manager Information Statement available on the Web site identified in the Multi-manager Notice no later than when the Multi-manager Notice (or Multi-manager Notice and Multi-manager Information Statement) is first sent to shareholders, and will maintain it on that Web site for at least 90 days. 6. Applicants also request an order exempting the Funds from certain disclosure obligations that may require each Fund to disclose fees paid by the Advisor to each Subadvisor. Applicants seek relief to permit each Fund to disclose (both as a dollar amount and as a percentage of the Fund’s net assets): (a) The aggregate fees paid to the Advisor and any Wholly-Owned Subadvisors; and (b) the aggregate fees paid to Non-Affiliated Subadvisors (collectively, the ‘‘Aggregate Fee Disclosure’’). The Aggregate Fee Disclosure for a Fund also will include separate disclosure of any subadvisory fees paid to any Affiliated Subadvisor. Applicants’ Legal Analysis 1. Section 15(a) of the Act states, in part, that it is unlawful for any person 8 A ‘‘Multi-manager Notice’’ will be modeled on a Notice of Internet Availability as defined in rule 14a–16 under the Securities Exchange Act of 1934 (‘‘Exchange Act’’), and specifically will, among other things: (a) Summarize the relevant information regarding the new Subadvisor; (b) inform shareholders that the Multi-manager Information Statement is available on a Web site; (c) provide the Web site address; (d) state the time period during which the Multi-manager Information Statement will remain available on that Web site; (e) provide instructions for accessing and printing the Multi-manager Information Statement; and (f) instruct the shareholder that a paper or email copy of the Multi-manager Information Statement may be obtained, without charge, by contacting the Fund. A ‘‘Multi-manager Information Statement’’ will meet the requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the Exchange Act for an information statement, except as modified by the order to permit Aggregate Fee Disclosure (as defined below). Multi-manager Information Statements will be filed with the Commission via the EDGAR system. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 to act as an investment adviser to a registered investment company ‘‘except pursuant to a written contract, which contract, whether with such registered company or with an investment adviser of such registered company, has been approved by the vote of a majority of the outstanding voting securities of such registered company.’’ 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 management investment companies. Item 19(a)(3) of Form N–1A requires a registered open-end management investment company to disclose in its statement of additional information, with respect to each investment adviser, the method of calculating the advisory fee payable by the investment company, including the total dollar amounts paid to each adviser for the last three fiscal years. 3. Rule 20a–1 under the Act requires proxies solicited with respect to a registered investment company to comply with Schedule 14A under the Exchange 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 fee,’’ 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 a registered investment company’s registration statement and shareholder reports filed with the Commission. Sections 6–07(2)(a), (b), and (c) of Regulation S–X require a registered investment company to include in its financial statement information about the investment advisory fees. 5. Section 6(c) of the Act provides that the Commission by order upon application may conditionally or unconditionally 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 E:\FR\FM\27SEN1.SGM 27SEN1 pmangrum on DSK3VPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 188 / Friday, September 27, 2013 / Notices state that their requested relief meets this standard for the reasons discussed below. 6. Applicants assert that the shareholders expect the Advisor, subject to the review and approval of the Board, to select the Subadvisors who are in the best position to achieve the Fund’s investment objective. Applicants assert that, from the perspective of the shareholder, the role of the Subadvisor is substantially equivalent to the role of the individual portfolio managers employed by an investment adviser to a traditional investment company. Applicants believe that permitting the Advisor to perform the duties for which the shareholders of the Funds are paying the Advisor—the selection, supervision and evaluation of the Subadvisors—without incurring unnecessary delays or expenses is appropriate in the interest of the Fund’s shareholders and will allow such Funds to operate more efficiently. Applicants state that each Advisory Agreement will continue to be fully subject to section 15(a) of the Act and rule 18f–2 under the Act. 7. Applicants assert that disclosure of the individual fees that the Advisor would pay to the Subadvisors of Funds that operate under the Manager of Managers Structure would not serve any meaningful purpose. Applicants contend that the primary reasons for requiring disclosure of individual fees paid to Subadvisors are to inform shareholders of expenses to be charged by a particular Fund and to enable shareholders to compare the fees to those of other comparable investment companies. Applicants believe that the requested relief satisfies these objectives because the advisory fee paid to the Advisor will be fully disclosed and, therefore, shareholders will know what the Funds’ fees and expenses are and will be able to compare the advisory fees a Fund is charged to those of other investment companies. Applicants assert that the requested disclosure relief would benefit shareholders of the Funds because it would improve the Advisor’s ability to negotiate the fees paid to Subadvisors. Applicants state that the Advisor may be able to negotiate rates that are below a Subadvisor’s ‘‘posted’’ amounts if the Advisor is not required to disclose the Subadvisors’ fees to the public. Applicants submit that the relief requested to use Aggregate Fee Disclosure will encourage Subadvisors to negotiate lower subadvisory fees with the Advisor if the lower fees are not required to be made public. VerDate Mar<15>2010 14:21 Sep 26, 2013 Jkt 229001 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, including the hiring of Wholly-Owned Subadvisors, 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 that Fund’s shares 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 the application. Each Fund will hold itself out to the public as utilizing the Manager of Managers Structure. The prospectus will prominently disclose that the Advisor has ultimate responsibility (subject to oversight by the Board) to oversee the Subadvisors and recommend their hiring, termination, and replacement. 3. A Fund will inform shareholders of the hiring of a new Subadvisor within 90 days after the hiring of the new Subadvisor pursuant to the Modified Notice and Access Procedures. 4. A Fund will not make any Ineligible Subadvisor Changes without the approval of the shareholders of the applicable Fund. 5. At all times, at least a majority of the Board will be Independent Trustees, and the selection and nomination of new or additional Independent Trustees will be placed within the discretion of the then-existing Independent Trustees. 6. Whenever a subadvisor change is proposed for a Fund with an Affiliated Subadvisor or a Wholly-Owned Subadvisor, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the applicable Board minutes, that such change is in the best interests of the Fund and its shareholders, and does not involve a conflict of interest from which the Advisor or the Affiliated Subadvisor or Wholly-Owned Subadvisor 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 Trustees. The selection of such counsel will be within the discretion of the then-existing Independent Trustees. 8. The Advisor will provide general management services to a Fund, PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 59737 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: (a) Set a Fund’s overall investment strategies; (b) evaluate, select and recommend Subadvisors to manage all or a part of a Fund’s assets; (c) allocate and, when appropriate, reallocate a Fund’s assets among one or more Subadvisors; (d) monitor and evaluate the performance of Subadvisors; and (e) implement procedures reasonably designed to ensure that the Subadvisors comply with a Fund’s investment objective, policies and restrictions. 9. No trustee or officer of a Trust or of a Fund, or director, manager, 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 subadvisor to a Fund, 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 any publicly traded company that is either a Subadvisor or an entity that controls, is controlled by, or is under common control with a Subadvisor. 10. Each Fund will disclose in its registration statement the Aggregate Fee Disclosure. 11. 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. 12. For any Fund that pays subadvisory fees directly from its assets, any changes to a Subadvisory Agreement that would result in an increase in the total management and advisory fees payable by the Fund will be required to be approved by the shareholders of that Fund. 13. Whenever a subadvisor is hired or terminated, the Advisor will provide the Board with information showing the expected impact on the profitability of the Advisor. 14. The Advisor will provide the Board, no less frequently than quarterly, with information about the profitability of the Advisor on a per Fund basis. The information will reflect the impact on profitability of the hiring or termination of any subadvisor during the applicable quarter. E:\FR\FM\27SEN1.SGM 27SEN1 59738 Federal Register / Vol. 78, No. 188 / Friday, September 27, 2013 / Notices For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. [FR Doc. 2013–23541 Filed 9–26–13; 8:45 am] I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Left Behind Games, Inc., File No. 500– 1; Order of Suspension of Trading September 25, 2013. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Left Behind Games, Inc. (‘‘Left Behind’’) because it has not filed a periodic report since it filed its Form 10–Q for the period ending September 30, 2011, filed on November 21, 2011. The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of Left Behind. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of Left Behind is suspended for the period from 9:30 a.m. EDT, September 25, 2013 through 11:59 p.m. EDT, on October 8, 2013. By the Commission. Jill M. Peterson, Assistant Secretary. [FR Doc. 2013–23728 Filed 9–25–13; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70472; File No. SR–PHLX– 2013–93] Self-Regulatory Organizations; The NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make a Minor Modification To Pricing Incentive Programs pmangrum on DSK3VPTVN1PROD with NOTICES September 23, 2013. 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 September 10, 2013, 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 and II below, which Items 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 14:21 Sep 26, 2013 Jkt 229001 The Exchange proposes to make a minor modification to pricing incentive programs under PHLX’s schedule of fees and credits applicable to options trading on PHLX. Specifically, PHLX is proposing to exclude from volumebased pricing calculations any trading day on which PHLX is closed for trading due to early closing or a market-wide trading halt. This exclusion exists today for the trading of equities on PSX, the equities trading facility of PHLX. The text of the proposed rule change is available on the Exchange’s Web site at https:// nasdaqomxphlx.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose PSX, the PHLX facility for trading equities, offers pricing for the trading of equities that is based on average daily volume of trading. The applicable fee schedule for equities trading on PSX contains language excluding from such volume calculations any day on which the market is not open the entire trading day. PHLX Pricing Schedule, Section VIII, entitled ‘‘Order Routing and Execution,’’ footnote to subsection (a)(4) states that ‘‘For purposes of determining average daily volume hereunder, any day that the market is not open for the entire trading day will be excluded from such calculation.’’ As a result, when trading ends early, as for trading days PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 preceding certain federal holidays, or when there is a material market-wide disruption, PHLX excludes that day from the calculation of average daily volume. The PHLX pricing schedule for options also contains pricing programs based on average daily volume. PHLX has determined to make this practice uniform for both equities and options trading on PHLX by moving the relevant language to the preamble of the PHLX Fee Schedule. In other words, for purposes of calculating any pricing based on average daily volumes for both equities and options trading any day that the market is not open for the entire trading day should be excluded from such calculation. As it currently does for equities, this formulation would exclude days on which the market closes early for holiday observance. It would also exclude days where PHLX declares a trading halt in all securities or honors a market-wide trading halt declared by another market. This would apply to the market-wide trading halt of approximately three hours on August 22, 2013, which PHLX plans to exclude from Customer Rebate Tiers for the month of August. This change will affect several fees described in PHLX Pricing Schedule, Section B, which contains pricing incentive programs that are designed to encourage member participation in PHLX options trading by increasing rebates or reducing fees for firms that trade on PHLX in increasingly higher volumes. For example, PHLX currently has four Customer Rebate Tiers by which it determines the rebate per share for Customer 3 orders in Multiply Listed Options (including SPY) that are electronically-delivered and executed. The Customer Rebate Tier thresholds are based upon a percentage of national volume of Customer Orders in certain options on a monthly basis. The rebates range from $0.00 to $0.15 per contract for Simple Orders 4 and from $0.00 to 3 The term ‘‘Customer’’ applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Rule 1000(b)(14)). 4 These ‘‘Category A Rebates’’ are paid to members executing electronically-delivered Customer Simple Orders in Penny Pilot Options and Customer Simple Orders in Non-Penny Pilot Options in Section II symbols. Rebates are paid on Customer PIXL Orders in Section II symbols that execute against non-Initiating Order interest, except in the case of Customer PIXL Orders that are greater than 999 contracts. All Customer PIXL Orders that are greater than 999 contracts will be paid a rebate regardless of the contra-party to the transaction. E:\FR\FM\27SEN1.SGM 27SEN1

Agencies

[Federal Register Volume 78, Number 188 (Friday, September 27, 2013)]
[Notices]
[Pages 59735-59738]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-23541]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30693; File No. 812-14143]


The KP Funds and Callan Associates Inc., et al.; Notice of 
Application

September 23, 2013.
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.

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Summary of Application: Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements with 
Wholly-Owned Subadvisors (as defined below) and non-affiliated 
subadvisors without shareholder approval and would grant relief from 
certain disclosure requirements.

Applicants: The KP Funds (the ``Trust'') and Callan Associates Inc. 
(``Callan'').

Filing Dates: The application was filed on April 3, 2013, and amended 
on August 21, 2013 and September 19, 2013.

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 18, 2013, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: 
The Trust, One Freedom Valley Drive, Oaks, PA 19456; and Callan, 101 
California Street, Suite 3500, San Francisco, CA 94111.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
(202) 551-6873, or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Exemptive Applications Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number or an applicant 
using the Company name box, at https://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is organized as a Massachusetts business trust and is 
registered under the Act as an open-end management investment company. 
The Trust currently intends to offer 14 series (each, a ``Fund'' and 
collectively, the ``Funds''), each with its own distinct investment 
objectives, policies and restrictions.\1\ Callan is organized as a 
California corporation and is registered as an investment adviser under 
the Investment Advisers Act of 1940 (``Advisers Act''). Each Fund has, 
or will have, as its investment adviser, Callan or another entity 
controlling, controlled by or under common control with Callan or its 
successors (collectively, the ``Advisor'').\2\ Any future Advisor will 
be registered as an investment adviser under the Advisers Act.\3\
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    \1\ The Funds that currently intend to rely on the requested 
order are KP Large Cap Equity Fund, KP Small Cap Equity Fund, KP 
International Equity Fund, and KP Fixed Income Fund.
    \2\ For purposes of the requested order, ``successor'' is 
limited to any entity that results from a reorganization into 
another jurisdiction or a change in the type of business 
organization.
    \3\ Applicants request that the relief apply to applicants, as 
well as to any existing or future series of the Trust and any other 
existing or future registered open-end management investment company 
or series thereof that: (a) Is advised by the Advisor; (b) uses the 
manager of managers structure (``Manager of Managers Structure'') 
described in the application, and (c) complies with the terms and 
conditions of the application (included in the term ``Funds''). 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 Subadvisor 
(as defined below), the name of the Advisor that serves as the 
primary adviser to the Fund will precede the name of the Subadvisor.
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    2. Each Fund will enter into an investment advisory agreement with 
the Advisor (the ``Advisory Agreement''). The Advisory Agreement with 
Callan has been approved by the board of trustees of the Trust (the 
``Board''),\4\ including a majority of the members of the Board who are 
not ``interested persons,'' as defined in section 2(a)(19) of the Act, 
of the Trust, the relevant Fund, or the Advisor (``Independent 
Trustees'') and will be approved by the initial shareholder of the 
relevant Fund as required by sections 15(a) and 15(c) of the Act and 
rule 18f-2 thereunder. The terms of the Advisory Agreement will comply 
with section 15(a) of the Act.
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    \4\ The term ``Board'' also includes the board of directors or 
trustees of a future Fund.
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    3. Under the terms of the Advisory Agreement, the Advisor, subject 
to the authority of the Board, is responsible for the overall 
management of a Fund's business affairs and selecting the Fund's 
investments in accordance with the Fund's investment objectives, 
policies,

[[Page 59736]]

and restrictions. For the investment advisory services that it provides 
to a Fund, the Advisor receives the fee specified in the Advisory 
Agreement based on the Fund's average daily net assets. The Advisory 
Agreement also permits the Advisor to enter into investment subadvisory 
agreements (``Subadvisory Agreements'') with one or more subadvisors 
(each, a ``Subadvisor'') for the purpose of managing a Fund's 
investments.\5\ Each Subadvisory Agreement will be approved by the 
Board, including by a majority of the Independent Trustees, and the 
initial shareholder of the Fund in accordance with sections 15(a) and 
15(c) of the Act and rule 18f-2 under the Act. Each Subadvisor is or 
will be registered as an investment adviser under the Advisers Act or 
not subject to such registration. The Advisor will supervise, evaluate 
and allocate assets to the Subadvisors, and make recommendations to the 
Board about their hiring, retention or release. The Advisor will 
compensate each Subadvisor out of the fee paid to the Advisor under the 
Advisory Agreement or the Fund will be responsible for paying 
subadvisory fees directly to the Subadvisor.\6\
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    \5\ A ``Subadvisor'' to a Fund is: (a) An indirect or direct 
``wholly-owned subsidiary'' (as such term is defined in the Act) of 
the Advisor for that Fund; (b) a sister company of the Advisor for 
that Fund that is an indirect or direct ``wholly-owned subsidiary'' 
(as such term is defined in the Act) of the same company that, 
indirectly or directly, wholly owns the Advisor (each of (a) and 
(b), a ``Wholly-Owned Subadvisor'' and collectively, the ``Wholly-
Owned Subadvisors''); or (c) an investment subadvisor for that Fund 
that is not an ``affiliated person'' (as such term is defined in 
section 2(a)(3) of the Act) of the Fund or the Advisor, except to 
the extent that an affiliation arises solely because the subadvisor 
serves as a subadvisor to a Fund (each, a ``Non-Affiliated 
Subadvisor'').
    \6\ To the extent a Fund pays subadvisory fees directly from its 
assets, any changes to a Subadvisory Agreement that would result in 
an increase in the total management and advisory fees payable by the 
Fund will be required to be approved by the shareholders of that 
Fund.
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    4. Applicants request an order to permit the Advisor, subject to 
the approval of the Board, including a majority of the Independent 
Trustees, to, without obtaining shareholder approval: (a) Select 
Subadvisors to manage all or a portion of the assets of a Fund and 
enter into Subadvisory Agreements with the Subadvisors; and (b) 
materially amend Subadvisory Agreements with the Subadvisors.\7\ The 
requested relief will not extend to any subadvisor, other than a 
Wholly-Owned Subadvisor, who 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 subadvisor to one or more of the Funds 
(``Affiliated Subadvisor'').
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    \7\ Shareholder approval will continue to be required for any 
other subadvisor change (not otherwise permitted by rule or other 
action of the Commission or its staff) and material amendments to an 
existing Subadvisory Agreement with any subadvisor other than a Non-
Affiliated Subadvisor or a Wholly-Owned Subadvisor (all such changes 
referred to as ``Ineligible Subadvisor Changes'').
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    5. Funds will inform shareholders of the hiring of a new Subadvisor 
pursuant to the following procedures (``Modified Notice and Access 
Procedures''): (a) Within 90 days after a new Subadvisor is hired for 
any Fund, that Fund will send its shareholders either a Multi-manager 
Notice or a Multi-manager Notice and Multi-manager Information 
Statement; \8\ and (b) the Fund will make the Multi-manager Information 
Statement available on the Web site identified in the Multi-manager 
Notice no later than when the Multi-manager Notice (or Multi-manager 
Notice and Multi-manager Information Statement) is first sent to 
shareholders, and will maintain it on that Web site for at least 90 
days.
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    \8\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Securities 
Exchange Act of 1934 (``Exchange Act''), and specifically will, 
among other things: (a) Summarize the relevant information regarding 
the new Subadvisor; (b) inform shareholders that the Multi-manager 
Information Statement is available on a Web site; (c) provide the 
Web site address; (d) state the time period during which the Multi-
manager Information Statement will remain available on that Web 
site; (e) provide instructions for accessing and printing the Multi-
manager Information Statement; and (f) instruct the shareholder that 
a paper or email copy of the Multi-manager Information Statement may 
be obtained, without charge, by contacting the Fund.
    A ``Multi-manager Information Statement'' will meet the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Exchange Act for an information statement, except as 
modified by the order to permit Aggregate Fee Disclosure (as defined 
below). Multi-manager Information Statements will be filed with the 
Commission via the EDGAR system.
---------------------------------------------------------------------------

    6. Applicants also request an order exempting the Funds from 
certain disclosure obligations that may require each Fund to disclose 
fees paid by the Advisor to each Subadvisor. Applicants seek relief to 
permit each Fund to disclose (both as a dollar amount and as a 
percentage of the Fund's net assets): (a) The aggregate fees paid to 
the Advisor and any Wholly-Owned Subadvisors; and (b) the aggregate 
fees paid to Non-Affiliated Subadvisors (collectively, the ``Aggregate 
Fee Disclosure''). The Aggregate Fee Disclosure for a Fund also will 
include separate disclosure of any subadvisory fees paid to any 
Affiliated Subadvisor.

Applicants' Legal Analysis

    1. Section 15(a) of the Act states, in 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, which 
contract, whether with such registered company or with an investment 
adviser of such registered company, has been approved by the vote of a 
majority of the outstanding voting securities of such registered 
company.'' 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 
management investment companies. Item 19(a)(3) of Form N-1A requires a 
registered open-end management investment company to disclose in its 
statement of additional information, with respect to each investment 
adviser, the method of calculating the advisory fee payable by the 
investment company, including the total dollar amounts paid to each 
adviser for the last three fiscal years.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to a registered investment company to comply with Schedule 14A under 
the Exchange 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 fee,'' 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 a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require 
a registered investment company to include in its financial statement 
information about the investment advisory fees.
    5. Section 6(c) of the Act provides that the Commission by order 
upon application may conditionally or unconditionally 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

[[Page 59737]]

state that their requested relief meets this standard for the reasons 
discussed below.
    6. Applicants assert that the shareholders expect the Advisor, 
subject to the review and approval of the Board, to select the 
Subadvisors who are in the best position to achieve the Fund's 
investment objective. Applicants assert that, from the perspective of 
the shareholder, the role of the Subadvisor is substantially equivalent 
to the role of the individual portfolio managers employed by an 
investment adviser to a traditional investment company. Applicants 
believe that permitting the Advisor to perform the duties for which the 
shareholders of the Funds are paying the Advisor--the selection, 
supervision and evaluation of the Subadvisors--without incurring 
unnecessary delays or expenses is appropriate in the interest of the 
Fund's shareholders and will allow such Funds to operate more 
efficiently. Applicants state that each Advisory Agreement will 
continue to be fully subject to section 15(a) of the Act and rule 18f-2 
under the Act.
    7. Applicants assert that disclosure of the individual fees that 
the Advisor would pay to the Subadvisors of Funds that operate under 
the Manager of Managers Structure would not serve any meaningful 
purpose. Applicants contend that the primary reasons for requiring 
disclosure of individual fees paid to Subadvisors are to inform 
shareholders of expenses to be charged by a particular Fund and to 
enable shareholders to compare the fees to those of other comparable 
investment companies. Applicants believe that the requested relief 
satisfies these objectives because the advisory fee paid to the Advisor 
will be fully disclosed and, therefore, shareholders will know what the 
Funds' fees and expenses are and will be able to compare the advisory 
fees a Fund is charged to those of other investment companies. 
Applicants assert that the requested disclosure relief would benefit 
shareholders of the Funds because it would improve the Advisor's 
ability to negotiate the fees paid to Subadvisors. Applicants state 
that the Advisor may be able to negotiate rates that are below a 
Subadvisor's ``posted'' amounts if the Advisor is not required to 
disclose the Subadvisors' fees to the public. Applicants submit that 
the relief requested to use Aggregate Fee Disclosure will encourage 
Subadvisors to negotiate lower subadvisory fees with the Advisor if the 
lower fees are not required to be made public.

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, including the 
hiring of Wholly-Owned Subadvisors, 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 that 
Fund's shares 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 the application. Each Fund will hold itself out to the 
public as utilizing the Manager of Managers Structure. The prospectus 
will prominently disclose that the Advisor has ultimate responsibility 
(subject to oversight by the Board) to oversee the Subadvisors and 
recommend their hiring, termination, and replacement.
    3. A Fund will inform shareholders of the hiring of a new 
Subadvisor within 90 days after the hiring of the new Subadvisor 
pursuant to the Modified Notice and Access Procedures.
    4. A Fund will not make any Ineligible Subadvisor Changes without 
the approval of the shareholders of the applicable Fund.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the selection and nomination of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    6. Whenever a subadvisor change is proposed for a Fund with an 
Affiliated Subadvisor or a Wholly-Owned Subadvisor, the Board, 
including a majority of the Independent Trustees, will make a separate 
finding, reflected in the applicable Board minutes, that such change is 
in the best interests of the Fund and its shareholders, and does not 
involve a conflict of interest from which the Advisor or the Affiliated 
Subadvisor or Wholly-Owned Subadvisor 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 Trustees. The 
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
    8. The Advisor will provide general management services to a 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: (a) Set a Fund's overall investment strategies; (b) 
evaluate, select and recommend Subadvisors to manage all or a part of a 
Fund's assets; (c) allocate and, when appropriate, reallocate a Fund's 
assets among one or more Subadvisors; (d) monitor and evaluate the 
performance of Subadvisors; and (e) implement procedures reasonably 
designed to ensure that the Subadvisors comply with a Fund's investment 
objective, policies and restrictions.
    9. No trustee or officer of a Trust or of a Fund, or director, 
manager, 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 subadvisor to a Fund, 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 any publicly traded company that is either a 
Subadvisor or an entity that controls, is controlled by, or is under 
common control with a Subadvisor.
    10. Each Fund will disclose in its registration statement the 
Aggregate Fee Disclosure.
    11. 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.
    12. For any Fund that pays subadvisory fees directly from its 
assets, any changes to a Subadvisory Agreement that would result in an 
increase in the total management and advisory fees payable by the Fund 
will be required to be approved by the shareholders of that Fund.
    13. Whenever a subadvisor is hired or terminated, the Advisor will 
provide the Board with information showing the expected impact on the 
profitability of the Advisor.
    14. The Advisor will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Advisor on a 
per Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any subadvisor during the 
applicable quarter.


[[Page 59738]]


    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23541 Filed 9-26-13; 8:45 am]
BILLING CODE 8011-01-P
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