Legg Mason Partners Equity Trust, et al.; Notice of Application, 11837-11840 [2014-04555]
Download as PDF
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 41 / Monday, March 3, 2014 / Notices
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 8c–1 (17 CFR 240.8c–1), under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) (15 U.S.C. 78a et seq.).
Rule 8c–1 generally prohibits a
broker-dealer from using its customers’
securities as collateral to finance its own
trading, speculating, or underwriting
transactions. More specifically, Rule 8c–
1 states three main principles: (1) a
broker-dealer is prohibited from
commingling the securities of different
customers as collateral for a loan
without the consent of each customer;
(2) a broker-dealer cannot commingle
customers’ securities with its own
securities under the same pledge; and
(3) a broker-dealer can only pledge its
customers’ securities to the extent that
customers are in debt to the brokerdealer.1
The information required by Rule 8c–
1 is necessary for the execution of the
Commission’s mandate under the
Exchange Act to prevent broker-dealers
from hypothecating or arranging for the
hypothecation of any securities carried
for the account of any customer under
certain circumstances. In addition, the
information required by Rule 8c–1
provides important investor protections.
There are approximately 82
respondents as of year-end 2012 (i.e.,
broker-dealers that conducted business
with the public, filed Part II of the
FOCUS Report, did not claim an
exemption from the Reserve Formula
computation, and reported that they had
a bank loan during at least one quarter
of the current year). Each respondent
makes an estimated 45 annual
responses, for an aggregate total of 3,690
responses per year.2 Each response takes
approximately 0.5 hours to complete.
Therefore, the total third-party reporting
burden per year is 1,845 burden hours.3
The retention period for the
recordkeeping requirement under Rule
8c–1 is three years. The recordkeeping
requirement under Rule 8c–1 is
mandatory to ensure that broker-dealers
do not commingle their securities or use
them to finance the broker-dealers’
proprietary business. This rule does not
1 See Exchange Act Release No. 2690 (November
15, 1940); Exchange Act Release No. 9428
(December 29, 1971).
2 82 respondents x 45 annual responses = 3,690
aggregate total of annual responses.
3 3,690 responses x 0.5 hours = 1,845 hours.
VerDate Mar<15>2010
19:40 Feb 28, 2014
Jkt 232001
involve the collection of confidential or
personal identifiable information.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following Web site:
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Thomas
Bayer, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street, NE Washington, DC 20549,
or by sending an email to: PRA_
Mailbox@sec.gov. Comments must be
submitted to OMB within 30 days of
this notice.
Dated: February 25, 2014.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–04556 Filed 2–28–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30923; File No. 812–14127]
Legg Mason Partners Equity Trust, et
al.; Notice of Application
February 24, 2014.
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:
SUMMARY: Summary of Application:
Applicants request an order that would
permit them to enter into, and amend,
subadvisory agreements with WhollyOwned Sub-Advisors (as defined below)
and Non-Affiliated Sub-Advisors (as
defined below) without shareholder
approval. The order would also grant
relief from certain disclosure
requirements.
Applicants: Legg Mason Partners
Equity Trust (‘‘Equity Trust’’), Legg
Mason Partners Variable Equity Trust
(‘‘Variable Equity Trust,’’ and, together
with Equity Trust, the ‘‘Trusts’’), and
Permal Asset Management LLC
(‘‘Permal’’).
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
11837
DATES: Filing Dates: The application
was filed on March 1, 2013, and
amended on September 24, 2013, and
February 6, 2014.
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 March 21, 2014, 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: Trusts, 620 Eighth Avenue,
New York, NY 10018; Permal, 900 3rd
Avenue, New York, NY 10022.
FOR FURTHER INFORMATION CONTACT:
Courtney S. Thornton, Senior Counsel,
at (202) 551–6812, or David P. Bartels,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s 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 for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. Each Trust is organized as a
Maryland statutory trust and is
registered with the Commission as an
open-end management investment
company under the Act. The Equity
Trust currently consists of 39 series of
shares (each a ‘‘Series’’ and collectively,
‘‘Series’’), each with its own distinct
investment objectives, policies and
restrictions. The Variable Equity Trust
consists of 14 Series, each with its own
distinct investment objectives, policies
and restrictions. The Trusts may offer
additional Series that in the future may
operate under the multi-manager
structure described in the application
and comply with the terms and
conditions set forth therein.
2. Permal is a limited liability
company organized under the laws of
the State of Delaware and is registered
E:\FR\FM\03MRN1.SGM
03MRN1
11838
Federal Register / Vol. 79, No. 41 / Monday, March 3, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
with the Commission as an investment
adviser under the Investment Advisers
Act of 1940 (‘‘Advisers Act’’).
3. Applicants request an order to
permit the Advisor,1 subject to the
approval of the applicable board of
trustees (‘‘Board’’), 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 Series
or the Advisor (‘‘Independent Board
Members’’), to, without obtaining
shareholder approval: (i) select SubAdvisors 2 to manage all or a portion of
the assets of a Series and enter into SubAdvisory Agreements (as defined below)
with the Sub-Advisors, and (ii)
materially amend Sub-Advisory
Agreements with the Sub-Advisors.3
Applicants request that the relief apply
to the applicants, as well as to any
future Series and any other existing or
future registered open-end management
investment company or series thereof
that is advised by an Advisor, uses the
multi-manager structure described in
the application, and complies with the
terms and conditions of the application
(each a ‘‘Subadvised Series’’).4 The
1 The term ‘‘Advisor’’ includes (i) Permal and (ii)
any entity controlling, controlled by or under
common control with, the Permal or its successors.
For purposes of the requested order, ‘‘successor’’ is
limited to an entity that results from a
reorganization into another jurisdiction or a change
in the type of business organization. Each Advisor
will be registered with the Commission under the
Advisers Act.
2 As used herein, a ‘‘Sub-Advisor’’ is (1) an
indirect or direct ‘‘wholly-owned subsidiary’’ (as
such term is defined in the Act) of the Advisor for
that Series, or (2) a sister company of the Advisor
for that Series that is an indirect or direct whollyowned subsidiary of the same company that,
indirectly or directly, wholly owns the Advisor
(each of (1) and (2) a ‘‘Wholly-Owned SubAdvisor’’), or (3) not an ‘‘affiliated person’’ (as
defined in section 2(a)(3) of the Act) of the Series,
the applicable Trust, or the Advisor, except to the
extent that an affiliation arises solely because the
Sub-Advisor serves as a Sub-Advisor to a
Subadvised Series (each a ‘‘Non-Affiliated SubAdvisor). Each Sub-Advisor will be registered
under Advisers Act or exempt from registration.
3 Shareholder approval will continue to be
required for any other Sub-Advisor change not
otherwise permitted by rule or other action of the
Commission or staff and material amendments to an
existing Sub-Advisory Agreement with any subadvisor other than a Non-Affiliated Sub-Advisor or
a Wholly-Owned Sub-Advisor (all such changes
referred to as ‘‘Ineligible Sub-Advisor Changes’’).
4 All registered open-end investment companies
that currently intend to rely on the requested order
are named as applicants. All Series that currently
are, or that currently intend to be, Subadvised
Series are identified in the application. Any entity
that relies on the requested order will do so only
in accordance with the terms and conditions
contained the application. The Series that currently
intend to rely on the requested order, and to be
Subadvised Series are Permal Alternative Select
Fund (‘‘Alternative Select Fund’’), a Series of the
Equity Trust, and Permal Alternative Select VIT
Portfolio (‘‘Alternative Select Portfolio’’), a Series of
Variable Equity Trust. The Alternative Select
Portfolio is newly organized and the Board meeting
VerDate Mar<15>2010
19:40 Feb 28, 2014
Jkt 232001
requested relief will not extend to any
sub-advisor, other than a WhollyOwned Sub-Advisor, who is an
affiliated person, as defined in section
2(a)(3) of the Act, of the Subadvised
Series or of the Advisor, other than by
reason of serving as sub-advisor to one
or more of the Subadvised Series
(‘‘Affiliated Sub-Advisor’’).
4. The Advisor serves or will serve as
the investment adviser to each
Subadvised Series pursuant to an
investment advisory agreement with
each Trust (‘‘Investment Management
Agreement’’). The Investment
Management Agreement for each
Subadvised Series has been or will be
approved by the applicable Board,
including a majority of the Independent
Board Members and by the shareholders
of the applicable Series as required by
sections 15(a) and 15(c) of the Act and
rule 18f-2 thereunder. The terms of the
Investment Management Agreements
will comply with section 15(a) of the
Act.
5. Under the terms of each Investment
Management Agreement, the Advisor,
subject to the supervision of the Board,
will provide continuous investment
management of the assets of the
Subadvised Series. The Advisor will
periodically review the Subadvised
Series’ investment policies and
strategies and may recommend changes
to the investment policies and strategies
of the Subadvised Series for
consideration by the Board. For its
services to the Subadvised Series under
the Investment Management Agreement,
the Advisor will receive an investment
management fee from the Subadvised
Series based on the average net assets of
the Subadvised Series. The terms of the
Investment Management Agreement will
permit the Advisor, subject to the
approval of the applicable Board,
including a majority of the Independent
Board Members, and the shareholders of
the Subadvised Series, to delegate
portfolio management responsibilities of
all or a portion of the assets of the
Subadvised Series to one or more SubAdvisors.
6. Pursuant to each Investment
Management Agreement, the Advisor
will have overall responsibility for the
management and investment of the
assets of each Subadvised Series. These
responsibilities include recommending
the removal or replacement of SubAdvisors, determining the portion of
at which the Advisor will be appointed as
investment adviser has not yet occurred. If the
name of any Subadvised Series contains the name
of a Sub-Advisor, the name of the Advisor or a
trademark or trade name that is owned by or
publicly used to identify the Advisor, will precede
the name of the Sub-Advisor.
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
that Subadvised Series’ assets to be
managed by any given Sub-Advisor and
reallocating those assets as necessary
from time to time.5 In accordance with
each Investment Management
Agreement, the Advisor will supervise
each Sub-Advisor in its performance of
its duties.
7. The Advisor will enter into subadvisory agreements with Sub-Advisors
(‘‘Sub-Advisory Agreements’’) to
provide investment management
services to the Subadvised Series. The
terms of each Sub-Advisory Agreement
will comply fully with the requirements
of section 15(a) of the Act and will be
approved by the applicable Board,
including a majority of the Independent
Board Members, in accordance with
sections 15(a) and 15(c) of the Act and
rule 18f–2 thereunder. The SubAdvisors, subject to the supervision of
the Advisor and oversight of the
applicable Board, will determine the
securities and other instruments or
investments to be purchased, sold, or
entered into by a Subadvised Series’
portfolio or a portion thereof, and will
place orders with brokers or dealers that
they select. The Advisor will
compensate each Sub-Advisor out of the
fee paid to the Advisor under the
relevant Investment Management
Agreement.
8. Each Subadvised Series will inform
its shareholders of the hiring of a new
Sub-Advisor pursuant to the following
procedures (‘‘Modified Notice and
Access Procedures’’): (a) within 90 days
after a new Sub-Advisor is hired for any
Subadvised Series, that Subadvised
Series will send its shareholders either
a Multi-manager Notice or a Multimanager Notice and Multi-manager
Information Statement; 6 and (b) the
5 Although the Advisor will not normally make
day-to-day investment decisions, it may manage all
or a portion of a Subadvised Series.
6 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 Sub-Advisor; (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 Multimanager Information Statement; and (f) instruct the
shareholder that a paper or email copy of the Multimanager Information Statement may be obtained,
without charge, by contacting the Subadvised
Series.
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.
E:\FR\FM\03MRN1.SGM
03MRN1
Federal Register / Vol. 79, No. 41 / Monday, March 3, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
Subadvised Series will make the Multimanager 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 Multimanager Information Statement) is first
sent to shareholders, and will maintain
it on that Web site for at least 90 days.
In the circumstances described in the
application, a proxy solicitation to
approve the appointment of new SubAdvisors provides no more meaningful
information to shareholders than the
proposed Multi-manager Information
Statement. Applicants state that the
Board would comply with the
requirements of sections 15(a) and 15(c)
of the Act before entering into or
amending Sub-Advisory Agreements.
9. Applicants also request an order
exempting the Subadvised Series from
certain disclosure obligations that may
require the applicants to disclose fees
paid by the Advisor to each SubAdvisor. Applicants seek relief to
permit each Subadvised Series to
disclose (as a dollar amount and a
percentage of the Subadvised Series’ net
assets): (a) The aggregate fees paid to the
Advisor and any Wholly-Owned SubAdvisors; (b) the aggregate fees paid to
Non-Affiliated Sub-Advisors; and (c) the
fee paid to each Affiliated Sub-Advisor
(collectively, the ‘‘Aggregate Fee
Disclosure’’).7 An exemption is
requested to permit the Series to include
only the Aggregate Fee Disclosure. All
other items required by Sections 6–
07(2)(a), (b) and (c) of Regulation S–X
will be disclosed.
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 states that any ‘‘matter required
to be submitted . . . to the holders of
the outstanding voting securities of a
series company shall not be deemed to
have been effectively acted upon unless
approved by the holders of a majority of
the outstanding voting securities of each
class or series of stock affected by such
matter.’’ Further, rule 18(f)–2(c)(1)
under the Act provides that a vote to
approve an investment advisory
7 Applicants will only comply with conditions 8,
9, and 12 if they rely on the relief that would allow
them to provide Aggregate Fee Disclosure.
VerDate Mar<15>2010
19:40 Feb 28, 2014
Jkt 232001
contract required by section 15(a) of the
Act ‘‘shall be deemed to be effectively
acted upon with respect to any class or
series of securities of such [registered
investment] company if a majority of the
outstanding voting securities of such
class or series vote for the approval of
such matter.’’
2. Form N–1A is the registration
statement used by open-end investment
companies. Item 19(a)(3) of Form N–1A
requires a registered investment
company to disclose in its statement of
additional information the method of
computing the ‘‘advisory fee payable’’
by the investment company, including
the total dollar amounts that the
investment company ‘‘paid to the
adviser (aggregated with amounts paid
to affiliated advisers, if any), and any
advisers who are not affiliated persons
of the adviser, under the investment
advisory contract 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
state that their requested relief meets
this standard for the reasons discussed
below.
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
11839
6. Applicants assert that the
shareholders expect the Advisor, subject
to review and approval of the applicable
Board, to select the Sub-Advisors who
are in the best position to achieve the
Subadvised Series’ investment
objective. Applicants assert that, from
the perspective of the shareholder, the
role of the Sub-Advisors 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 Subadvised Series
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
Subadvised Series’ shareholders and
will allow such Subadvised Series to
operate more efficiently. Applicants
state that each Investment Management
Agreement will continue to be fully
subject to section 15(a) of the Act and
rule 18f–2 under the Act and approved
by the applicable Board, including a
majority of the Independent Board
Members, in the manner required by
sections 15(a) and 15(c) of the Act.
Applicants are not seeking an
exemption with respect to the
Investment Management Agreements.
7. Applicants assert that disclosure of
the individual fees that the Advisor
would pay to the Sub-Advisors of
Subadvised Series that operate under
the multi-manager structure described
in the application would not serve any
meaningful purpose. Applicants
contend that the primary reasons for
requiring disclosure of individual fees
paid to Sub-Advisors are to inform
shareholders of expenses to be charged
by a particular Subadvised Series 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 Subadvised Series’ fees and
expenses are and will be able to
compare the advisory fees a Subadvised
Series is charged to those of other
investment companies. Applicants
assert that the requested disclosure
relief would benefit shareholders of the
Subadvised Series because it would
improve the Advisor’s ability to
negotiate the fees paid to Sub-Advisors.
Applicants state that the Advisor may
be able to negotiate rates that are below
a Sub-Advisor’s ‘‘posted’’ amounts if the
Advisor is not required to disclose the
E:\FR\FM\03MRN1.SGM
03MRN1
11840
Federal Register / Vol. 79, No. 41 / Monday, March 3, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
Sub-Advisors’ fees to the public.
Applicants submit that the relief
requested to use Aggregate Fee
Disclosure will encourage Sub-Advisors
to negotiate lower subadvisory fees with
the Advisor if the lower fees are not
required to be made public.
8. For the reasons discussed above,
Applicants submit that the requested
relief meets the standards for relief
under section 6(c) of the Act. Applicants
state that the operation of the
Subadvised Series in the manner
described in the application must be
approved by shareholders of a
Subadvised Series before that
Subadvised Series may rely on the
requested relief. In addition, Applicants
state that the proposed conditions to the
requested relief are designed to address
any potential conflicts of interest,
including any posed by the use of
Wholly-owned Sub-Advisors, and
provide that shareholders are informed
when new Sub-Advisors are hired.
Applicants assert that conditions 6, 7,
10 and 11 are designed to provide the
applicable Board with sufficient
independence and the resources and
information it needs to monitor and
address any conflicts of interest with
affiliated person of the Advisor,
including Wholly-Owned Sub-Advisors.
Applicants state that, accordingly, they
believe the requested relief 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’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Before a Subadvised Series may
rely on the order requested in the
application, the operation of the
Subadvised Series in the manner
described in the application, including
the hiring of Wholly-Owned SubAdvisors, will be approved by a
majority of the Subadvised Series’
outstanding voting securities as defined
in the Act, or, in the case of a new
Subadvised Series whose public
shareholders purchase shares on the
basis of a prospectus containing the
disclosure contemplated by condition 2
below, by the sole initial shareholder
before offering the Subadvised Series’
shares to the public.
2. The prospectus for each
Subadvised Series will disclose the
existence, substance, and effect of any
order granted pursuant to the
application. Each Subadvised Series
will hold itself out to the public as
employing the multi-manager structure
VerDate Mar<15>2010
19:40 Feb 28, 2014
Jkt 232001
described in the application. Each
prospectus will prominently disclose
that the Advisor has the ultimate
responsibility, subject to oversight by
the applicable Board, to oversee the
Sub-Advisors and recommend their
hiring, termination and replacement.
3. The Advisor will provide general
management services to a Subadvised
Series, including overall supervisory
responsibility for the general
management and investment of the
Subadvised Series’ assets. Subject to
review and approval of the applicable
Board, the Advisor will (a) set a
Subadvised Series’ overall investment
strategies, (b) evaluate, select, and
recommend Sub-Advisors to manage all
or a portion of a Subadvised Series’
assets, and (c) implement procedures
reasonably designed to ensure that SubAdvisors comply with a Subadvised
Series’ investment objective, policies
and restrictions. Subject to review by
the applicable Board, the Advisor will
(a) when appropriate, allocate and
reallocate a Subadvised Series’ assets
among multiple Sub-Advisors; and (b)
monitor and evaluate the performance
of Sub-Advisors.
4. A Subadvised Series will not make
any Ineligible Sub-Advisor Changes
without such agreement, including the
compensation to be paid thereunder,
being approved by the shareholders of
the applicable Subadvised Series.
5. A Subadvised Series will inform
shareholders of the hiring of a new SubAdvisor within 90 days after the hiring
of a new Sub-Advisor pursuant to the
Modified Notice and Access Procedures.
6. At all times, at least a majority of
the applicable Board will be
Independent Board Members, and the
selection and nomination of new or
additional Independent Board Members
will be placed within the discretion of
the then-existing Independent Board
Members.
7. Independent Legal Counsel, as
defined in rule 0–1(a)(6) under the Act,
will be engaged to represent the
Independent Board Members. The
selection of such counsel will be within
the discretion of the then-existing
Independent Board Members.
8. The Advisor will provide the
applicable Board, no less frequently
than quarterly, with information about
the profitability of the Advisor on a per
Subadvised Series basis. The
information will reflect the impact on
profitability of the hiring or termination
of any sub-advisor during the applicable
quarter.
9. Whenever a sub-advisor is hired or
terminated, the Advisor will provide the
applicable Board with information
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
showing the expected impact on the
profitability of the Advisor.
10. Whenever a sub-advisor change is
proposed for a Subadvised Series with
an Affiliated Sub-Advisor or a WhollyOwned Sub-Advisor, the applicable
Board, including a majority of the
Independent Board Members, will make
a separate finding, reflected in the
applicable Board minutes, that such
change is in the best interests of the
Subadvised Series and its shareholders
and does not involve a conflict of
interest from which the Advisor or the
Affiliated Sub-Advisor or WhollyOwned Sub-Advisor derives an
inappropriate advantage.
11. No Board member or officer of a
Subadvised Series, or partner, 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 Sub-Advisor, except for
(a) ownership of interests in the Advisor
or any entity, except a Wholly-Owned
Sub-Advisor, that controls, is controlled
by, or is under common control with the
Advisor, or (b) ownership of less than
1% of the outstanding securities of any
class of equity or debt of a publicly
traded company that is either a SubAdvisor or an entity that controls, is
controlled by, or is under common
control with a Sub-Advisor.
12. Each Subadvised Series will
disclose the Aggregate Fee Disclosure in
its registration statement.
13. In the event the Commission
adopts a rule under the Act providing
substantially similar relief to that
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.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–04555 Filed 2–28–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71614; File No. SR–
ISEGemini-2014–10]
Self-Regulatory Organizations; ISE
Gemini, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Amend the Schedule
of Fees
February 25, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
E:\FR\FM\03MRN1.SGM
03MRN1
Agencies
[Federal Register Volume 79, Number 41 (Monday, March 3, 2014)]
[Notices]
[Pages 11837-11840]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-04555]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30923; File No. 812-14127]
Legg Mason Partners Equity Trust, et al.; Notice of Application
February 24, 2014.
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: Summary of Application: Applicants request an order that would
permit them to enter into, and amend, subadvisory agreements with
Wholly-Owned Sub-Advisors (as defined below) and Non-Affiliated Sub-
Advisors (as defined below) without shareholder approval. The order
would also grant relief from certain disclosure requirements.
Applicants: Legg Mason Partners Equity Trust (``Equity Trust''),
Legg Mason Partners Variable Equity Trust (``Variable Equity Trust,''
and, together with Equity Trust, the ``Trusts''), and Permal Asset
Management LLC (``Permal'').
DATES: Filing Dates: The application was filed on March 1, 2013,
and amended on September 24, 2013, and February 6, 2014.
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 March 21, 2014, 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: Trusts, 620 Eighth
Avenue, New York, NY 10018; Permal, 900 3rd Avenue, New York, NY 10022.
FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at (202) 551-6812, or David P. Bartels, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's 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 for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. Each Trust is organized as a Maryland statutory trust and is
registered with the Commission as an open-end management investment
company under the Act. The Equity Trust currently consists of 39 series
of shares (each a ``Series'' and collectively, ``Series''), each with
its own distinct investment objectives, policies and restrictions. The
Variable Equity Trust consists of 14 Series, each with its own distinct
investment objectives, policies and restrictions. The Trusts may offer
additional Series that in the future may operate under the multi-
manager structure described in the application and comply with the
terms and conditions set forth therein.
2. Permal is a limited liability company organized under the laws
of the State of Delaware and is registered
[[Page 11838]]
with the Commission as an investment adviser under the Investment
Advisers Act of 1940 (``Advisers Act'').
3. Applicants request an order to permit the Advisor,\1\ subject to
the approval of the applicable board of trustees (``Board''), 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 Series or
the Advisor (``Independent Board Members''), to, without obtaining
shareholder approval: (i) select Sub-Advisors \2\ to manage all or a
portion of the assets of a Series and enter into Sub-Advisory
Agreements (as defined below) with the Sub-Advisors, and (ii)
materially amend Sub-Advisory Agreements with the Sub-Advisors.\3\
Applicants request that the relief apply to the applicants, as well as
to any future Series and any other existing or future registered open-
end management investment company or series thereof that is advised by
an Advisor, uses the multi-manager structure described in the
application, and complies with the terms and conditions of the
application (each a ``Subadvised Series'').\4\ The requested relief
will not extend to any sub-advisor, other than a Wholly-Owned Sub-
Advisor, who is an affiliated person, as defined in section 2(a)(3) of
the Act, of the Subadvised Series or of the Advisor, other than by
reason of serving as sub-advisor to one or more of the Subadvised
Series (``Affiliated Sub-Advisor'').
---------------------------------------------------------------------------
\1\ The term ``Advisor'' includes (i) Permal and (ii) any entity
controlling, controlled by or under common control with, the Permal
or its successors. For purposes of the requested order,
``successor'' is limited to an entity that results from a
reorganization into another jurisdiction or a change in the type of
business organization. Each Advisor will be registered with the
Commission under the Advisers Act.
\2\ As used herein, a ``Sub-Advisor'' is (1) an indirect or
direct ``wholly-owned subsidiary'' (as such term is defined in the
Act) of the Advisor for that Series, or (2) a sister company of the
Advisor for that Series that is an indirect or direct wholly-owned
subsidiary of the same company that, indirectly or directly, wholly
owns the Advisor (each of (1) and (2) a ``Wholly-Owned Sub-
Advisor''), or (3) not an ``affiliated person'' (as defined in
section 2(a)(3) of the Act) of the Series, the applicable Trust, or
the Advisor, except to the extent that an affiliation arises solely
because the Sub-Advisor serves as a Sub-Advisor to a Subadvised
Series (each a ``Non-Affiliated Sub-Advisor). Each Sub-Advisor will
be registered under Advisers Act or exempt from registration.
\3\ Shareholder approval will continue to be required for any
other Sub-Advisor change not otherwise permitted by rule or other
action of the Commission or staff and material amendments to an
existing Sub-Advisory Agreement with any sub-advisor other than a
Non-Affiliated Sub-Advisor or a Wholly-Owned Sub-Advisor (all such
changes referred to as ``Ineligible Sub-Advisor Changes'').
\4\ All registered open-end investment companies that currently
intend to rely on the requested order are named as applicants. All
Series that currently are, or that currently intend to be,
Subadvised Series are identified in the application. Any entity that
relies on the requested order will do so only in accordance with the
terms and conditions contained the application. The Series that
currently intend to rely on the requested order, and to be
Subadvised Series are Permal Alternative Select Fund (``Alternative
Select Fund''), a Series of the Equity Trust, and Permal Alternative
Select VIT Portfolio (``Alternative Select Portfolio''), a Series of
Variable Equity Trust. The Alternative Select Portfolio is newly
organized and the Board meeting at which the Advisor will be
appointed as investment adviser has not yet occurred. If the name of
any Subadvised Series contains the name of a Sub-Advisor, the name
of the Advisor or a trademark or trade name that is owned by or
publicly used to identify the Advisor, will precede the name of the
Sub-Advisor.
---------------------------------------------------------------------------
4. The Advisor serves or will serve as the investment adviser to
each Subadvised Series pursuant to an investment advisory agreement
with each Trust (``Investment Management Agreement''). The Investment
Management Agreement for each Subadvised Series has been or will be
approved by the applicable Board, including a majority of the
Independent Board Members and by the shareholders of the applicable
Series as required by sections 15(a) and 15(c) of the Act and rule 18f-
2 thereunder. The terms of the Investment Management Agreements will
comply with section 15(a) of the Act.
5. Under the terms of each Investment Management Agreement, the
Advisor, subject to the supervision of the Board, will provide
continuous investment management of the assets of the Subadvised
Series. The Advisor will periodically review the Subadvised Series'
investment policies and strategies and may recommend changes to the
investment policies and strategies of the Subadvised Series for
consideration by the Board. For its services to the Subadvised Series
under the Investment Management Agreement, the Advisor will receive an
investment management fee from the Subadvised Series based on the
average net assets of the Subadvised Series. The terms of the
Investment Management Agreement will permit the Advisor, subject to the
approval of the applicable Board, including a majority of the
Independent Board Members, and the shareholders of the Subadvised
Series, to delegate portfolio management responsibilities of all or a
portion of the assets of the Subadvised Series to one or more Sub-
Advisors.
6. Pursuant to each Investment Management Agreement, the Advisor
will have overall responsibility for the management and investment of
the assets of each Subadvised Series. These responsibilities include
recommending the removal or replacement of Sub-Advisors, determining
the portion of that Subadvised Series' assets to be managed by any
given Sub-Advisor and reallocating those assets as necessary from time
to time.\5\ In accordance with each Investment Management Agreement,
the Advisor will supervise each Sub-Advisor in its performance of its
duties.
---------------------------------------------------------------------------
\5\ Although the Advisor will not normally make day-to-day
investment decisions, it may manage all or a portion of a Subadvised
Series.
---------------------------------------------------------------------------
7. The Advisor will enter into sub-advisory agreements with Sub-
Advisors (``Sub-Advisory Agreements'') to provide investment management
services to the Subadvised Series. The terms of each Sub-Advisory
Agreement will comply fully with the requirements of section 15(a) of
the Act and will be approved by the applicable Board, including a
majority of the Independent Board Members, in accordance with sections
15(a) and 15(c) of the Act and rule 18f-2 thereunder. The Sub-Advisors,
subject to the supervision of the Advisor and oversight of the
applicable Board, will determine the securities and other instruments
or investments to be purchased, sold, or entered into by a Subadvised
Series' portfolio or a portion thereof, and will place orders with
brokers or dealers that they select. The Advisor will compensate each
Sub-Advisor out of the fee paid to the Advisor under the relevant
Investment Management Agreement.
8. Each Subadvised Series will inform its shareholders of the
hiring of a new Sub-Advisor pursuant to the following procedures
(``Modified Notice and Access Procedures''): (a) within 90 days after a
new Sub-Advisor is hired for any Subadvised Series, that Subadvised
Series will send its shareholders either a Multi-manager Notice or a
Multi-manager Notice and Multi-manager Information Statement; \6\ and
(b) the
[[Page 11839]]
Subadvised Series 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. In the
circumstances described in the application, a proxy solicitation to
approve the appointment of new Sub-Advisors provides no more meaningful
information to shareholders than the proposed Multi-manager Information
Statement. Applicants state that the Board would comply with the
requirements of sections 15(a) and 15(c) of the Act before entering
into or amending Sub-Advisory Agreements.
---------------------------------------------------------------------------
\6\ 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 Sub-Advisor; (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 Subadvised Series.
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.
---------------------------------------------------------------------------
9. Applicants also request an order exempting the Subadvised Series
from certain disclosure obligations that may require the applicants to
disclose fees paid by the Advisor to each Sub-Advisor. Applicants seek
relief to permit each Subadvised Series to disclose (as a dollar amount
and a percentage of the Subadvised Series' net assets): (a) The
aggregate fees paid to the Advisor and any Wholly-Owned Sub-Advisors;
(b) the aggregate fees paid to Non-Affiliated Sub-Advisors; and (c) the
fee paid to each Affiliated Sub-Advisor (collectively, the ``Aggregate
Fee Disclosure'').\7\ An exemption is requested to permit the Series to
include only the Aggregate Fee Disclosure. All other items required by
Sections 6-07(2)(a), (b) and (c) of Regulation S-X will be disclosed.
---------------------------------------------------------------------------
\7\ Applicants will only comply with conditions 8, 9, and 12 if
they rely on the relief that would allow them to provide Aggregate
Fee Disclosure.
---------------------------------------------------------------------------
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 states that any ``matter required
to be submitted . . . to the holders of the outstanding voting
securities of a series company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of
the outstanding voting securities of each class or series of stock
affected by such matter.'' Further, rule 18(f)-2(c)(1) under the Act
provides that a vote to approve an investment advisory contract
required by section 15(a) of the Act ``shall be deemed to be
effectively acted upon with respect to any class or series of
securities of such [registered investment] company if a majority of the
outstanding voting securities of such class or series vote for the
approval of such matter.''
2. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires a registered
investment company to disclose in its statement of additional
information the method of computing the ``advisory fee payable'' by the
investment company, including the total dollar amounts that the
investment company ``paid to the adviser (aggregated with amounts paid
to affiliated advisers, if any), and any advisers who are not
affiliated persons of the adviser, under the investment advisory
contract 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 state that their requested relief meets this standard for
the reasons discussed below.
6. Applicants assert that the shareholders expect the Advisor,
subject to review and approval of the applicable Board, to select the
Sub-Advisors who are in the best position to achieve the Subadvised
Series' investment objective. Applicants assert that, from the
perspective of the shareholder, the role of the Sub-Advisors 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 Subadvised Series are paying
the Advisor--the selection, supervision and evaluation of the Sub-
Advisors--without incurring unnecessary delays or expenses is
appropriate in the interest of the Subadvised Series' shareholders and
will allow such Subadvised Series to operate more efficiently.
Applicants state that each Investment Management Agreement will
continue to be fully subject to section 15(a) of the Act and rule 18f-2
under the Act and approved by the applicable Board, including a
majority of the Independent Board Members, in the manner required by
sections 15(a) and 15(c) of the Act. Applicants are not seeking an
exemption with respect to the Investment Management Agreements.
7. Applicants assert that disclosure of the individual fees that
the Advisor would pay to the Sub-Advisors of Subadvised Series that
operate under the multi-manager structure described in the application
would not serve any meaningful purpose. Applicants contend that the
primary reasons for requiring disclosure of individual fees paid to
Sub-Advisors are to inform shareholders of expenses to be charged by a
particular Subadvised Series 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 Subadvised Series' fees and
expenses are and will be able to compare the advisory fees a Subadvised
Series is charged to those of other investment companies. Applicants
assert that the requested disclosure relief would benefit shareholders
of the Subadvised Series because it would improve the Advisor's ability
to negotiate the fees paid to Sub-Advisors. Applicants state that the
Advisor may be able to negotiate rates that are below a Sub-Advisor's
``posted'' amounts if the Advisor is not required to disclose the
[[Page 11840]]
Sub-Advisors' fees to the public. Applicants submit that the relief
requested to use Aggregate Fee Disclosure will encourage Sub-Advisors
to negotiate lower subadvisory fees with the Advisor if the lower fees
are not required to be made public.
8. For the reasons discussed above, Applicants submit that the
requested relief meets the standards for relief under section 6(c) of
the Act. Applicants state that the operation of the Subadvised Series
in the manner described in the application must be approved by
shareholders of a Subadvised Series before that Subadvised Series may
rely on the requested relief. In addition, Applicants state that the
proposed conditions to the requested relief are designed to address any
potential conflicts of interest, including any posed by the use of
Wholly-owned Sub-Advisors, and provide that shareholders are informed
when new Sub-Advisors are hired. Applicants assert that conditions 6,
7, 10 and 11 are designed to provide the applicable Board with
sufficient independence and the resources and information it needs to
monitor and address any conflicts of interest with affiliated person of
the Advisor, including Wholly-Owned Sub-Advisors. Applicants state
that, accordingly, they believe the requested relief 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' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Before a Subadvised Series may rely on the order requested in
the application, the operation of the Subadvised Series in the manner
described in the application, including the hiring of Wholly-Owned Sub-
Advisors, will be approved by a majority of the Subadvised Series'
outstanding voting securities as defined in the Act, or, in the case of
a new Subadvised Series whose public shareholders purchase shares on
the basis of a prospectus containing the disclosure contemplated by
condition 2 below, by the sole initial shareholder before offering the
Subadvised Series' shares to the public.
2. The prospectus for each Subadvised Series will disclose the
existence, substance, and effect of any order granted pursuant to the
application. Each Subadvised Series will hold itself out to the public
as employing the multi-manager structure described in the application.
Each prospectus will prominently disclose that the Advisor has the
ultimate responsibility, subject to oversight by the applicable Board,
to oversee the Sub-Advisors and recommend their hiring, termination and
replacement.
3. The Advisor will provide general management services to a
Subadvised Series, including overall supervisory responsibility for the
general management and investment of the Subadvised Series' assets.
Subject to review and approval of the applicable Board, the Advisor
will (a) set a Subadvised Series' overall investment strategies, (b)
evaluate, select, and recommend Sub-Advisors to manage all or a portion
of a Subadvised Series' assets, and (c) implement procedures reasonably
designed to ensure that Sub-Advisors comply with a Subadvised Series'
investment objective, policies and restrictions. Subject to review by
the applicable Board, the Advisor will (a) when appropriate, allocate
and reallocate a Subadvised Series' assets among multiple Sub-Advisors;
and (b) monitor and evaluate the performance of Sub-Advisors.
4. A Subadvised Series will not make any Ineligible Sub-Advisor
Changes without such agreement, including the compensation to be paid
thereunder, being approved by the shareholders of the applicable
Subadvised Series.
5. A Subadvised Series will inform shareholders of the hiring of a
new Sub-Advisor within 90 days after the hiring of a new Sub-Advisor
pursuant to the Modified Notice and Access Procedures.
6. At all times, at least a majority of the applicable Board will
be Independent Board Members, and the selection and nomination of new
or additional Independent Board Members will be placed within the
discretion of the then-existing Independent Board Members.
7. Independent Legal Counsel, as defined in rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Board Members.
The selection of such counsel will be within the discretion of the
then-existing Independent Board Members.
8. The Advisor will provide the applicable Board, no less
frequently than quarterly, with information about the profitability of
the Advisor on a per Subadvised Series basis. The information will
reflect the impact on profitability of the hiring or termination of any
sub-advisor during the applicable quarter.
9. Whenever a sub-advisor is hired or terminated, the Advisor will
provide the applicable Board with information showing the expected
impact on the profitability of the Advisor.
10. Whenever a sub-advisor change is proposed for a Subadvised
Series with an Affiliated Sub-Advisor or a Wholly-Owned Sub-Advisor,
the applicable Board, including a majority of the Independent Board
Members, will make a separate finding, reflected in the applicable
Board minutes, that such change is in the best interests of the
Subadvised Series and its shareholders and does not involve a conflict
of interest from which the Advisor or the Affiliated Sub-Advisor or
Wholly-Owned Sub-Advisor derives an inappropriate advantage.
11. No Board member or officer of a Subadvised Series, or partner,
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 Sub-Advisor, except for
(a) ownership of interests in the Advisor or any entity, except a
Wholly-Owned Sub-Advisor, that controls, is controlled by, or is under
common control with the Advisor, or (b) ownership of less than 1% of
the outstanding securities of any class of equity or debt of a publicly
traded company that is either a Sub-Advisor or an entity that controls,
is controlled by, or is under common control with a Sub-Advisor.
12. Each Subadvised Series will disclose the Aggregate Fee
Disclosure in its registration statement.
13. In the event the Commission adopts a rule under the Act
providing substantially similar relief to that 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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-04555 Filed 2-28-14; 8:45 am]
BILLING CODE 8011-01-P