Securities and Exchange Commission (“Commission”).
Notice of application for an order under section 6(c) of the Investment Company Act of 1940 (the “Act”) for an exemption from section 15(a) of the Act and rule 18f-2 under the Act.
Summary of Application:
Applicants request an order that would permit them to enter into and materially amend sub-advisory agreements without shareholder approval.
RSI Retirement Trust (the “Trust”) and Retirement System Investors Inc. (the “Adviser”).
The application was filed on October 28, 2003 and amended on April 20, 2004.
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 June 1, 2004, 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.
Secretary, Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Applicants, c/o Ryan M. Louvar, Esq., BISYS, 100 Summer Street, Suite 1500, Boston, MA 02110.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Shannon Conaty, Attorney-Adviser, at (202) 942-0527, or Annette M. Capretta, Branch Chief, at (202) 942-0564 (Division of Investment Management, Office of Investment Company Regulation).End Further Info End Preamble Start Supplemental Information
The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 20549-0102 (telephone (202) 942-8090).
1. The Trust, a New York common law trust, is registered under the Act as an open-end management investment company. The Trust is organized as a series investment company and has seven series (each series, a “Fund” and collectively, the “Funds”), each with its own investment objectives, policies and restrictions. The Adviser, a Delaware corporation and wholly-owned subsidiary of Retirement System Group Start Printed Page 25939Inc., a Delaware corporation, is registered as an investment adviser under the Investment Advisers Act of 1940 (“Advisers Act”).
2. The Adviser serves as investment adviser to the Funds pursuant to an investment advisory agreement between the Trust, on behalf of each Fund, and the Adviser (“Management Agreement”) that was approved by the Trust's board of trustees (“Board”), including a majority of the trustees who are not “interested persons,” as defined in section 2(a)(19) of the Act (“Independent Trustees”), and each Fund's shareholder(s). The Management Agreement permits the Adviser to enter into separate investment advisory agreements (“Sub-Advisory Agreements”) with one or more sub-advisers (“Sub-Advisers”). Each Sub-Adviser has discretionary authority to invest that portion of the Fund's assets assigned to it by the Adviser. Each Sub-Adviser is or will be registered or exempt from registration under the Advisers Act. The Adviser monitors and evaluates the Sub-Advisers and recommends to the Board their hiring, termination, and replacement. The Adviser recommends Sub-Advisers based on a number of factors discussed in the application used to evaluate their skills in managing assets pursuant to particular investment objectives. The Adviser compensates the Sub-Advisers out of the fee paid to the Adviser by a Fund.
3. Applicants request an order to permit the Adviser, subject to Board approval, to enter into and materially amend Sub-Advisory Agreements without shareholder approval. The requested relief will not extend to any Sub-Adviser that is an affiliated person, as defined in section 2(a)(3) of the Act, of a Fund or the Adviser, other than by reason of serving as a Sub-Adviser to one or more of the Funds (an “Affiliated Sub-Adviser”). None of the current Sub-Advisers is an Affiliated Sub-Adviser.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is unlawful for any person to act as an investment adviser to a registered investment company except pursuant to a written contract that has been approved by the vote of a majority of the company's outstanding voting securities. Rule 18f-2 under the Act provides that each series or class of stock in a series company affected by a matter must approve the matter if the Act requires shareholder approval.
2. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provision of the Act, or from any rule thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Applicants believe that the requested relief meets this standard for the reasons discussed below.
3. Applicants state that the Funds' shareholders rely on the Adviser to select the Sub-Advisers best suited to achieve a Fund's investment objectives. Applicants assert that, from the perspective of the investor, the role of the Sub-Advisers is comparable to that of individual portfolio managers employed by other investment advisory firms. Applicants contend that requiring shareholder approval of each Sub-Advisory Agreement would impose costs and unnecessary delays on the Funds, and may preclude the Adviser from acting promptly in a manner considered advisable by the Board. Applicants also note that the Management Agreements will remain subject to section 15(a) of the Act and rule 18f-2 under the Act.
Applicants agree that any order granting the requested relief will be subject to the following conditions:
1. Before a Fund may rely on the requested order, the operation of the Fund in the manner described in the application will be approved by a majority of the Fund's outstanding voting securities, as defined in the Act, or, in the case of a Fund whose public shareholders purchase shares on the basis of a prospectus containing the disclosure contemplated by condition 2 below, by the initial shareholder(s) before shares of such Fund are offered to the public.
2. Each Fund relying on the requested order will disclose in its prospectus the existence, substance and effect of any order granted pursuant to this application. In addition, each Fund relying on the requested order will hold itself out to the public as employing the “manager of managers” structure described in this application. Such Fund's prospectus will prominently disclose that the Adviser has ultimate responsibility (subject to oversight by the Board) to oversee the Sub-Advisers and recommend their hiring, termination and replacement.
3. The Adviser will provide general management and administrative services to each of the Funds, including overall supervisory responsibility for the general management and investment of each Fund's assets, and, subject to review and approval by the Board, will (i) set each Fund's overall investment strategies; (ii) evaluate, select and recommend Sub-Advisers to manage all or part of a Fund's assets; (iii) when appropriate, allocate and reallocate a Fund's assets among multiple Sub-Advisers; (iv) monitor and evaluate the performance of Sub-Advisers; and (v) implement procedures reasonably designed to ensure that the Sub-Advisers comply with the relevant Fund's investment objectives, policies and restrictions.
4. At all times, a majority of the Board will be Independent Trustees, and the nomination of new or additional Independent Trustees will be placed within the discretion of the then-existing Independent Trustees.
5. The Adviser will not enter into a Sub-Advisory Agreement with any Affiliated Sub-Adviser without such agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Fund.
6. When a Sub-Adviser change is proposed for a Fund with an Affiliated Sub-Adviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the Board minutes, that such change is in the best interests of the Fund and its shareholders and does not involve a conflict of interest from which the Adviser or an Affiliated Sub-Adviser derives an inappropriate advantage.
7. No trustee or officer of the Trust or director or officer of the Adviser will own directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person) any interest in a Sub-Adviser except for (i) ownership of interests in the Adviser or any entity that controls, is controlled by, or is under common control with the Adviser; or (ii) ownership of less than 1% of the outstanding securities of any class of equity or debt of a publicly-Start Printed Page 25940traded company that is either a Sub-Adviser or an entity that controls, is controlled by, or is under common control with a Sub-Adviser.
8. Within 90 days of the hiring of any new Sub-Adviser, the Adviser will furnish the shareholders of the applicable Fund all information about the new Sub-Adviser that would be included in a proxy statement. To meet this obligation, the Adviser will provide the shareholders of the applicable Fund with an information statement meeting the requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the Exchange Act.
9. The requested order will expire on the effective date of rule 15a-5 under the Act, if adopted.Start Signature
For the Commission, by the Division of Investment Management, under delegated authority.
Margaret H. McFarland,
1. Applicants also request that any relief granted pursuant to the application apply to future series of the Trust and any other registered open-end management investment companies and their series that: (a) Are advised by the Adviser or any entity controlling, controlled by, or under common control with the Adviser; (b) use the manager of managers structure described in the application; and (c) comply with the terms and conditions in the application (“Future Funds,” and together with the Funds, the “Funds”). The Trust is the only existing registered open-end management investment company that currently intends to rely on the requested order. If the name of any Fund contains the name of a Sub-Adviser (as defined below), the name of the Adviser or the name of the entity controlling, controlled by, or under common control with the Adviser that serves as the primary adviser to the Fund will precede the name of the Sub-Adviser.Back to Citation
[FR Doc. 04-10562 Filed 5-7-04; 8:45 am]
BILLING CODE 8010-01-P