[Federal Register Volume 79, Number 182 (Friday, September 19, 2014)]
[Notices]
[Pages 56409-56411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22339]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. IC-31250; File No. 812-14293]
Evanston Alternative Opportunities Fund and Evanston Capital
Management, LLC; Notice of Application
September 15, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under Section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from Sections 18(c)
and 18(i) of the Act, and for an order pursuant to Section 17(d) of the
Act and Rule 17d-1 under the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered closed-end management investment companies to issue multiple
classes of shares, units or interests (``Shares'') with varying sales
loads and asset-based service and/or asset-based distribution fees.
APPLICANTS: Evanston Alternative Opportunities Fund (``Fund'') and
Evanston Capital Management, LLC (``Adviser'').
DATES: Filing Dates: The application was filed on March 31, 2014, and
amended on July 16, 2014 and on August 7, 2014.
HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief 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 10, 2014 and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, 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: Evanston Alternative
Opportunities Fund and Evanston Capital Management, LLC, 1560 Sherman
Avenue, Suite 960, Evanston, IL 60201.
FOR FURTHER INFORMATION CONTACT: Rochelle Kauffman Plesset, Senior
Counsel, at (202) 551-6840, or Nadya Roytblat, Assistant Chief Counsel
at (202) 551-0825 (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 http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. The Fund is a Delaware statutory trust that is registered under
the Act as a non-diversified, closed-end management investment company.
The Fund's primary investment objective is to seek attractive long-term
risk adjusted returns. The Fund is a ``fund of funds'' and seeks to
achieve its objective by investing substantially all of its assets in
investment vehicles, often referred to as ``hedge funds,'' that are
managed by independent investment managers.
2. The Adviser is a Delaware limited liability company and is
registered as an investment adviser under the Investment Advisers Act
of 1940. The
[[Page 56410]]
Adviser serves as investment adviser to the Fund.
3. The Fund currently issues a single class of Shares (``Initial
Class''). The Shares are continuously offered and are registered under
the Securities Act of 1933. Shares of the Fund are not listed on any
securities exchange, nor quoted on any quotation medium. The Shares are
not offered or traded on a secondary market. In order to provide a
limited degree of liquidity, the Fund may from time to time offer to
repurchase Shares at their then-current net asset value pursuant to
Rule 13e-4 under the Securities Exchange Act of 1934 (``Exchange
Act''). Repurchases will be made at such times, in such amounts and on
such terms as may be determined by the Fund's board of directors
(``Board'') in its sole discretion. The Adviser expects to recommend
ordinarily that the Board authorize the Fund to offer to repurchase
Shares from shareholders quarterly.
4. The Fund's Initial Class is subject to a sales load, but is not
subject to any service or distribution fee. Shareholders of the Initial
Class are subject to a repurchase fee if the interval between the date
of purchase of the Shares and the valuation date with respect to the
repurchase of Shares is less than one year.
5. The Applicants seek an order to permit the Fund to issue
multiple classes of Shares, with varying sales loads and asset-based
service and/or asset-based distribution fees. Applicants request that
the order also apply to any other continuously-offered registered
closed-end management investment company existing now or in the future
for which the Adviser or any entity controlling, controlled by, or
under common control with the Adviser, acts as investment adviser, and
which provides periodic liquidity to its Shares pursuant to Rule 13e-4
under the Exchange Act (together with the Fund, the ``Funds'').\1\
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\1\ Any Fund relying on this relief in the future will do so in
a manner consistent with the terms and conditions of the
application. Applicants represent that each entity presently
intending to rely on the requested relief is listed in the
application as an Applicant.
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6. If the requested relief is granted, the Fund intends to offer
multiple classes of Shares of the Fund. Each class would be offered at
net asset value. Because of different class expenses, the net income
attributable to, and any dividends payable on, each class of Shares may
differ from each other from time to time. As a result, the net asset
value per Share of the classes may differ over time.
7. Applicants represent that each new class of Shares may charge a
front-end sales load and an annual asset-based service and/or
distribution fee. Applicants further represent that any distribution
fee would be paid pursuant to a plan of distribution adopted by the
Fund in compliance with the provisions of Rules 12b-1 and 17d-3 under
the Act as if those rules applied to closed-end management investment
companies. In addition, any asset-based service fee and distribution
fee for each class of Shares will comply with the provisions of NASD
Rule 2830 (``NASD Sales Charge Rule'').\2\ Any repurchase fee will
apply equally to all shareholders of the Fund, regardless of the class,
consistent with Section 18 of the Act and Rule 18f-3 under the Act.
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\2\ Any reference to the NASD Sales Charge Rule includes any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority (``FINRA'').
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8. Applicants state that the Fund does not currently intend to
impose a contingent deferred sales load (``CDSC''). In the event that
the Fund does impose a CDSC, however, Applicants represent that it
would only do so in compliance with Rule 6c-10 under the Act as if the
rule applied to closed-end management investment companies. With
respect to any waiver of, scheduled variation in, or elimination of the
CDSC, the Fund will comply with Rule 22d-1 under the Act as if the Fund
were an open-end investment company and will be applied uniformly to
all shareholders of the Fund.
9. Applicants represent that all expenses incurred by the Fund will
be allocated among the various classes of Shares based on the net
assets of the Fund attributable to each class, except that the net
asset value and expenses of each class will reflect distribution fees,
service fees, and any other expenses of that class. Expenses of the
Fund allocated to a particular class of Shares will be borne on a pro
rata basis by each outstanding Share of that class. Applicants state
that each Fund will comply with the provisions of Rule 18f-3 under the
Act as if it were an open-end investment company.
10. Applicants state that, from time to time, the Fund may create
and offer additional classes of Shares, the terms of which may differ,
including in the following respects: (i) The amount of fees permitted
by different distribution plans and/or different service fee
arrangements; (ii) voting rights with respect to a distribution plan
and/or service plan of a class; (iii) different class designations;
(iv) the impact of any class expenses directly attributable to a
particular class of Shares allocated on a class basis as described in
this application; (v) any differences in dividends and net asset values
per Share resulting from differences in fees under a distribution plan
and/or service plan or in class expenses; (vi) any sales load
structure; and (vii) any conversion features as permitted under the
Act.
11. Applicants state that any repurchase offers made by the Fund
will be made to all classes of Shares at the same time, in the same
proportional amounts and on the same terms, except for differences in
net asset values per Share resulting from differences in fees under a
distribution plan and/or service plan or in class expenses.
12. Applicants represent that the Fund will disclose in its
prospectus the fees, expenses and other characteristics of each class
of Shares offered for sale by the prospectus, as is required for open-
end multiple class investment companies under Form N-1A. As is required
for open-end management investment companies, the Fund will disclose
its expenses in shareholder reports, and disclose any arrangements that
result in breakpoints in, or elimination of, sales loads in its
prospectus.\3\ In addition, Applicants will comply with applicable
enhanced fee disclosure requirements for fund of funds, including
registered funds of hedge funds.\4\
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\3\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release); Disclosure
of Breakpoint Discounts by Mutual Funds, Investment Company Act
Release No. 26464 (June 7, 2004) (adopting release).
\4\ Fund of Funds Investments, Investment Company Act Rel. No.
27399 (Jun. 20, 2006) (adopting release). See also Rules 12d1-1, et
seq. of the Act.
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13. The Fund will comply with any requirements that the Commission
or FINRA may adopt regarding disclosure at the point of sale and in
transaction confirmations about the costs and conflicts of interest
arising out of the distribution of open-end investment company shares,
and regarding prospectus disclosure of sales loads and revenue sharing
arrangements as if those requirements applied to the Fund. In addition,
each Fund will contractually require that any distributor of the Fund's
Shares comply with such requirements in connection with the
distribution of such Shares.
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides, in relevant part, that a
closed-end
[[Page 56411]]
investment company may not issue or sell any senior security if,
immediately thereafter, the company has outstanding more than one class
of senior security. Applicants state that the creation of multiple
classes of shares of the Fund may be prohibited by Section 18(c), as a
class may have priority over another class as to payment of dividends
because shareholders of different classes would pay different fees and
expenses.
2. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that multiple classes of Fund Shares may
violate Section 18(i) of the Act because each class would be entitled
to exclusive voting rights with respect to matters solely related to
that class.
3. 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 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 request an exemption under Section
6(c) from Sections 18(c) and 18(i) to permit the Fund to issue multiple
classes of shares.
4. Applicants submit that the proposed allocation of expenses and
voting rights among multiple classes is equitable and will not
discriminate against any group or class of shareholders. Applicants
submit that the proposed arrangements would permit a Fund to facilitate
the distribution of its shares and provide investors with a broader
choice of shareholder services. Applicants assert that the proposed
closed-end investment company multiple class structure does not raise
the concerns underlying Section 18 of the Act to any greater degree
than open-end investment companies' multiple class structures that are
permitted by Rule 18f-3 under the Act. Applicants state that each Fund
will comply with the provisions of Rule 18f-3 as if it were an open-end
investment company.
CDSCs
1. Applicants believe that the requested relief meets the standards
of Section 6(c) of the Act. Rule 6c-10 under the Act permits open-end
investment companies to impose CDSCs, subject to certain conditions.
Applicants state that any CDSC imposed by the Fund will comply with
Rule 6c-10 under the Act as if the rule were applicable to closed-end
investment companies. The Fund also will disclose CDSCs in accordance
with the requirements of Form N-1A concerning CDSCs as if the Fund were
an open-end investment company. Applicants further state that the Fund
will apply the CDSC (and any waivers or scheduled variations of the
CDSC) uniformly to all shareholders in a given class and consistently
with the requirements of Rule 22d-1 under the Act.
Asset-Based Service and/or Distribution Fees
1. Section 17(d) of the Act and Rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company or an
affiliated person of such person, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates unless the Commission issues an order permitting the
transaction. In reviewing applications submitted under Section 17(d)
and Rule 17d-1, the Commission considers whether the participation of
the investment company in a joint enterprise or joint arrangement is
consistent with the provisions, policies and purposes of the Act, and
the extent to which the participation is on a basis different from or
less advantageous than that of other participants.
2. Rule 17d-3 under the Act provides an exemption from Section
17(d) and Rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to Rule 12b-1 under the Act.
Applicants request an order under Section 17(d) and Rule 17d-1 under
the Act to the extent necessary to permit the Fund to impose asset-
based service and/or distribution fees. Applicants have agreed to
comply with Rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Each Fund relying on the order will comply with the provisions of
Rules 6c-10, 12b-1, 17d-3, 18f-3 and 22d-1 under the Act, as amended
from time to time, as if those rules applied to closed-end management
investment companies, and will comply with the NASD Sales Charge Rule,
as amended from time to time, as if that rule applied to all closed-end
management investment companies.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22339 Filed 9-18-14; 8:45 am]
BILLING CODE 8011-01-P