[Federal Register Volume 78, Number 80 (Thursday, April 25, 2013)]
[Notices]
[Pages 24445-24447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-09772]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30472; 812-14081]
Symetra Mutual Funds Trust, et al.; Notice of Application
April 19, 2013
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from section
15(a) of the Act and rule 18f-2 under the Act, as well as from certain
disclosure requirements.
-----------------------------------------------------------------------
Summary of the Application: Applicants request an order that would
permit them to enter into and materially amend subadvisory agreements
without shareholder approval and would grant relief from certain
disclosure requirements.
Applicants: Symetra Mutual Funds Trust (the ``Trust'') and Symetra
Investment Management, Inc. (the ``Adviser'').
Filing Dates: The application was filed on October 3, 2012, and amended
on March 25, 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 May 13, 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,
Symetra Financial Corporation, 777 108th Avenue, Suite 1200, Bellevue,
WA 98004.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at
(202) 551-6868, or Daniele Marchesani, Branch Chief, at (202) 551-6821
(Office of Investment Company Regulation, Division of Investment
Management).
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 http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. The Trust, a Delaware statutory trust, is registered under the
Act as an open-end management investment company and currently offers
three series which are advised by the Adviser.\1\ The Adviser, a
Washington state corporation, is, and any future Adviser will be,
registered as an investment adviser under the Investment Advisers Act
of 1940 (``Advisers Act''). The Adviser will serve as investment
adviser to the Funds under an investment advisory
[[Page 24446]]
agreement with the Trust (``Advisory Agreement'') that will have been
approved by each respective Fund's shareholders and the Trust's Board
of Trustees (``Board''),\2\ including a majority of the trustees who
are not ``interested persons,'' as defined in section 2(a)(19) of the
Act, of either the Trust or the Adviser (``Independent Trustees'') in
the manner required by sections 15(a) and (c) of the Act and rule 18f-2
under the Act.
---------------------------------------------------------------------------
\1\ Applicants request relief with respect to any existing and
any future series of the Trust and any other existing and future
registered open-end management company or series thereof that: (a)
is advised by the Adviser, or any entity controlling, controlled by,
or under common control with the Adviser or its successor (each,
also an ``Adviser''); (b) uses the manager of managers structure
described in the application; and (c) complies with the terms and
conditions of the requested order (each, a ``Fund'' and
collectively, the ``Funds''). The only existing registered open-end
management investment company that currently intends to rely on the
requested order is named as an applicant and each series that
currently intends to be a Fund is identified in the application. For
purposes of the requested order, ``successor'' is limited to an
entity or entities that result from a reorganization into another
jurisdiction or a change in the type of business organization. If
the name of any Fund contains the name of a Subadviser (as defined
below), that name will be preceded by the name of the Adviser.
\2\ The term ``Board'' also includes the board of trustees or
directors of a future Fund.
---------------------------------------------------------------------------
2. Under the terms of the Advisory Agreement, and subject to the
authority of the Board, the Adviser is responsible for the overall
management of each Fund's business affairs and selecting each Fund's
investments according to that Fund's investment objectives, policies,
and restrictions. For the investment management services it will
provide to each Fund, the Adviser will receive the fee specified in the
Advisory Agreement from such Fund based on the average daily net assets
of the Fund. The Advisory Agreement permits the Adviser, subject to the
approval of the Board, to delegate certain responsibilities to one or
more subadvisers (``Subadvisers''). The Adviser expects to enter into
subadvisory agreements with various Subadvisers (``Subadvisory
Agreements'') to provide investment advisory services to the Funds.\3\
Each Subadviser is or will be an investment adviser as defined in
section 2(a)(20) of the Act as well as registered, or not subject to
registration, with the Commission as an ``investment adviser'' under
the Advisers Act. The Adviser evaluates, allocates assets to and
oversees the Subadvisers, and makes recommendations about their hiring,
termination and replacement to the Board, at all times subject to the
authority of the Board. The Adviser will compensate the Subadvisers out
of the advisory fee paid by a Fund to the Adviser under the Advisory
Agreement.
---------------------------------------------------------------------------
\3\ The Adviser has entered into Subadvisory Agreements with
DoubleLine Capital LP and Yacktman Asset Management L.P.
---------------------------------------------------------------------------
3. Applicants request an order to permit the Adviser, subject to
Board approval, to select certain Subadvisers to manage all or a
portion of the assets of a Fund or Funds pursuant to a Subadvisory
Agreement and materially amend Subadvisory Agreements without obtaining
shareholder approval. The requested relief will not extend to any
Subadviser that is an affiliated person, as defined in section 2(a)(3)
of the Act, of the Trust, a Fund, or of the Adviser, other than by
reason of serving as a subadviser to one or more of the Funds
(``Affiliated Subadviser'').
4. Applicants also request an order exempting the Funds from
certain disclosure provisions described below that may require a Fund
to disclose fees paid by the Adviser to each Subadviser. Applicants
seek an order to permit the Trust to disclose for a Fund (as both a
dollar amount and as a percentage of the Fund's net assets): (a) The
aggregate fees paid to the Adviser and any Affiliated Subadviser; and
(b) the aggregate fees paid to Subadvisers other than Affiliated
Subadvisers (collectively, ``Aggregate Fee Disclosure''). Any Fund that
employs an Affiliated Subadviser will provide separate disclosure of
any fees paid to the Affiliated Subadviser.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that is
unlawful for any person to act as an investment adviser to a registered
investment company except pursuant to a written contract that has been
approved by a vote of a majority of the company's outstanding voting
securities. Rule 18f-2 under the Act provides that each series or class
of stock in a series investment company affected by a matter must
approve that matter if the Act requires shareholder approval.
2. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of
the method and amount of the investment adviser's compensation.
3. Rule 20a-1 under the Act requires proxies solicited with respect
to an investment company to comply with Schedule 14A under the
Securities Exchange Act of 1934 (``1934 Act''). Items 22(c)(1)(ii),
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together,
require a proxy statement for a shareholder meeting at which the
advisory contract will be voted upon to include the ``rate of
compensation of the investment adviser,'' the ``aggregate amount of the
investment adviser's fees,'' a description of the ``terms of the
contract to be acted upon,'' and, if a change in the advisory fee is
proposed, the existing and proposed fees and the difference between the
two fees.
4. Regulation S-X sets forth the requirements for financial
statements required to be included as part of 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 investment advisory fees.
5. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction or any class or classes of
persons, securities, or transactions from any provisions of the Act, or
from any rule thereunder, if such exemption is necessary or appropriate
in the public interest and consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act. Applicants state that the requested relief meets this standard for
the reasons discussed below.
6. Applicants assert that the shareholders expect the Adviser
subject to the review and approval of the Board, to select the
Subadvisers who are best suited to achieve the Fund's investment
objectives. Applicants assert that, from the perspective of the
shareholder, the role of the Subadvisers is substantially equivalent to
that of the individual portfolio managers employed by traditional
investment company advisory firms. Applicants state that requiring
shareholder approval of each Subadvisory Agreement would impose
unnecessary delays and expenses on the Funds and may preclude the Funds
from acting promptly when the Adviser and Board consider it appropriate
to hire Subadvisers or amend Subadvisory Agreements. Applicants note
that the Advisory Agreements and any Subadvisory Agreements with
Affiliated Subadvisers will remain subject to the shareholder approval
requirements of section 15(a) of the Act and rule 18f-2 under the Act.
7. If a new Subadviser is retained in reliance on the requested
order, the Funds will inform shareholders of the hiring of a new
Subadviser pursuant to the following procedures (``Modified Notice and
Access Procedures''): (a) Within 90 days after a new Subadviser 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; \4\ and (b) the Fund will make
[[Page 24447]]
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
Subadvisers provides no more meaningful information to shareholders
than the proposed Multi-manager Information Statement. Moreover, the
applicable Board will comply with the requirements of sections 15(a)
and 15(c) of the 1940 Act before entering into or amending Subadvisory
Agreements.
---------------------------------------------------------------------------
\4\ A ``Multi-manager Notice'' will be modeled on a Notice of
Internet Availability as defined in rule 14a-16 under the Exchange
Act, and specifically will, among other things: (a) summarize the
relevant information regarding the new Subadviser; (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 Funds.
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 requested order to permit Aggregate Fee Disclosure.
Multi-manager Information Statements will be filed electronically
with the Commission via the EDGAR system.
---------------------------------------------------------------------------
8. Applicants assert that the requested disclosure relief would
benefit shareholders of the Funds because it would improve the
Adviser's ability to negotiate the fees paid to Subadvisers. Applicants
state that the Adviser may be able to negotiate rates that are below a
Subadviser's ``posted'' amounts if the Adviser is not required to
disclose the Subadvisers' fees to the public.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions: \5\
---------------------------------------------------------------------------
\5\ Applicants will only comply with conditions 7, 8, 9 and 12
if they rely on the relief that would allow them to provide
Aggregate Fee Disclosure.
---------------------------------------------------------------------------
1. Before a Fund may rely on the order requested in the
application, 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
sole initial shareholder before offering the Fund's shares to the
public.
2. The prospectus for each Fund will disclose the existence,
substance, and effect of any order granted pursuant to the application.
Each Fund will hold itself out to the public as employing the manager
of managers structure described in the application. The prospectus will
prominently disclose that the Adviser has ultimate responsibility
(subject to oversight by the Board) to oversee the Subadvisers and
recommend their hiring, termination, and replacement.
3. Funds will inform shareholders of the hiring of a new Subadviser
within 90 days after the hiring of a new Subadviser pursuant to the
Modified Notice and Access Procedures.
4. The Adviser will not enter into a Subadvisory Agreement with any
Affiliated Subadviser without that agreement, including the
compensation to be paid thereunder, being approved by the shareholders
of the applicable Fund.
5. At all times, at least a majority of the Board will be
Independent Trustees, and the nomination and selection of new or
additional Independent Trustees will be placed within the discretion of
the then-existing Independent Trustees.
6. When a Subadviser change is proposed for a Fund with an
Affiliated Subadviser, 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 Adviser or the Affiliated Subadviser derives an
inappropriate advantage.
7. Independent legal counsel, as defined in rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Trustees. The
selection of such counsel will be within the discretion of the then
existing Independent Trustees.
8. The Adviser will provide the Board, no less frequently than
quarterly, with information about the profitability of the Adviser on a
per-Fund basis. The information will reflect the impact on
profitability of the hiring or termination of any Subadviser during the
applicable quarter.
9. Whenever a Subadviser is hired or terminated, the Adviser will
provide the Board with information showing the expected impact on the
profitability of the Adviser.
10. The Adviser will provide general management services to each
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 (i) set each Fund's overall investment
strategies; (ii) evaluate, select and recommend Subadvisers to manage
all or part of a Fund's assets; (iii) when appropriate, allocate and
reallocate a Fund's assets among multiple Subadvisers; (iv) monitor and
evaluate the performance of Subadvisers; and (v) implement procedures
reasonably designed to ensure that the Subadvisers comply with each
Fund's investment objective, policies and restrictions.
11. No trustee or officer of the Trust, or of a Fund, or director
or officer of the Adviser, will own directly or indirectly (other than
through a pooled investment vehicle that is not controlled by such
person) any interest in a Subadviser, except for (a) ownership of
interests in the Adviser or any entity that controls, is controlled by,
or is under common control with the Adviser; or (b) ownership of less
than 1% of the outstanding securities of any class of equity or debt of
a publicly traded company that is either a Subadviser or an entity that
controls, is controlled by, or is under common control with a
Subadviser.
12. Each Fund will disclose in its registration statement the
Aggregate Fee Disclosure.
13. In the event the Commission adopts a rule under the Act
providing substantially similar relief to that in the order requested
in the application, the requested order will expire on the effective
date of that rule.
For the Commission, by the Division of Investment Management,
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-09772 Filed 4-24-13; 8:45 am]
BILLING CODE 8011-01-P