[Federal Register Volume 77, Number 222 (Friday, November 16, 2012)]
[Pages 68854-68856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27875]



[Investment Company Act Release No. 30259; 812-14006]

Highland Associates, Inc. and Financial Investors Trust; Notice 
of Application

November 9, 2012.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940, as amended (the ``Act''), for an 
exemption from section 15(a) of the Act and rule 18f-2 under the Act.


SUMMARY: Summary of Application: Applicants request an order that would 
permit them to enter into and materially amend subadvisory agreements 
without shareholder approval.

Applicants: Highland Associates, Inc. (the ``Adviser'') and Financial 
Investors Trust (the ``Trust''), on behalf of the Redmont Resolute Fund 
I and Redmont Resolute Fund II (the ``Redmont Funds'').

DATES: Filing Dates: The application was filed on February 2, 2012, and 
amended on July 17, 2012, and October 16, 2012.

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 December 4, 2012, and should be accompanied by proof of service 
on the 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: c/
o JoAnn Strasser, Thompson Hine LLP, 41 South High Street, 17th Floor, 
Columbus OH 43215.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876, or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 

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 is comprised of 
individual series, including the Redmont Funds, each with its own 
investment objective, policies and restrictions.\1\ The Adviser, an 
Alabama corporation, is, and each other Adviser will be, registered as 
an investment adviser under the Investment Advisers Act of 1940, as 
amended (the ``Advisers Act''). The Adviser serves as the investment 
adviser of the Redmont Funds and will serve as investment adviser to 
the future Funds. The Redmont Funds have entered into an investment 
advisory agreement with the Adviser (the ``Advisory Agreement''),\2\ 
approved by the Trust's board of trustees (the ``Board''),\3\ including 
a majority of the trustees who are not ``interested persons,'' as 
defined in section 2(a)(19) of the Act, of the Trust or the Adviser 
(the ``Independent Trustees''), and by shareholders representing a 
majority of each Redmont Fund's shares.

    \1\ Applicants also request relief with respect to any existing 
or future series of the Trust and any other existing or future 
registered open-end management investment company or series thereof 
that: (a) Is advised by the Adviser or any entity controlling, 
controlled by, or under common control with the Adviser or its 
successors (included within the term ``Adviser''); (b) uses the 
manager of managers structure (the ``Manager of Managers 
Structure'') described in the application; and (c) complies with the 
terms and conditions of the application (together with the Redmont 
Funds, the ``Funds'' and each, individually, a ``Fund''). For 
purposes of the requested order, ``successor'' is limited to any 
entity or entities that result from a reorganization of the Adviser 
into another jurisdiction or a change in the type of business 
organization. The only existing registered open-end investment 
company that currently intends to rely on the order is named as an 
applicant. The Redmont Funds are the only Funds that currently 
intend to rely on the requested order. If the name of any Fund 
contains the name of a Subadviser (as defined below), the name of 
the Adviser will precede the name of the Subadviser.
    \2\ The Adviser will enter into substantially similar investment 
advisory agreements to provide investment management services to 
future Funds (``Future Advisory Agreements''). The terms of Future 
Advisory Agreements will comply with section 15(a) of the Act and 
Future Advisory Agreements will be approved by shareholders and by 
the Board, including a majority of the Independent Trustees, in the 
manner required by sections 15(a) and 15(c) of the Act and rule 18f-
2 thereunder. References to any Advisory Agreement include Future 
Advisory Agreements as they pertain to future Funds.
    \3\ The term ``Board'' also includes the board of trustees or 
directors of a future Fund, if different.

    2. Under the terms of the Advisory Agreement, the Adviser is 
responsible for the overall management of each Redmont Fund's business 
affairs and selecting investments according to their respective 
investment objectives, policies and restrictions. For the investment 
management services that it provides to a Redmont Fund, the Adviser 
receives the fee specified in the Advisory Agreement. The Advisory 
Agreement also permits the Adviser to retain one or more subadvisers 
for the purpose of managing the investments of all or a portion of the 
assets of the Redmont Funds. Pursuant to this authority, the Adviser 
may enter into investment subadvisory agreements with unaffiliated 
investment subadvisers (``Subadvisers'') to provide investment advisory 
services to the Redmont Funds (each, a ``Subadvisory Agreement'' and 
together, the ``Subadvisory Agreements'').\4\ Each Subadviser will be 
registered as an investment adviser under the Advisers Act. The Adviser 
will supervise, evaluate and allocate assets to the Subadvisers, and 
make recommendations to the Board about their hiring, retention or 
release, at all times subject to the authority of the Board. The 
Adviser will compensate each Subadviser out of the fees paid to the 
Adviser under the Advisory Agreement.

    \4\ The Redmont Funds do not currently employ Subadvisers, but 
each anticipates doing so in the future.

    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval.

[[Page 68855]]

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 the Adviser, other than by reason of serving as a 
subadviser to one or more of the Funds (an ``Affiliated Subadviser'').
    4. 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; \5\ and (b) the Fund will make the Multi-manager Information 
Statement available on the Web site identified in the Multi-manager 
Notice no later than when the Multi-manager Notice (or Multi-manager 
Notice and Multi-manager Information Statement) is first sent to 
shareholders, and will maintain it on that Web site for at least 90 
days. 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, as indicated above, the Board 
would comply with the requirements of sections 15(a) and 15(c) of the 
Act before entering into or amending Subadvisory Agreements.

    \5\ 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 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. Multi-
manager Information Statements will be filed electronically with the 
Commission via the EDGAR system.

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 securities in a series investment company affected by a matter must 
approve that 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 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.
    3. Applicants assert that the shareholders expect the Adviser and 
the Board to select the Subadvisers for the Funds that are best suited 
to achieve each Fund's investment objective. Applicants assert that, 
from the perspective of the investor, the role of the Subadvisers is 
substantially equivalent to that of the individual portfolio managers 
employed by the Adviser. Applicants state that requiring shareholder 
approval of each Subadvisory 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 note that the Advisory Agreement and any Subadvisory 
Agreement with an Affiliated Subadviser will remain subject to section 
15(a) of the Act and rule 18f-2 under the Act, including the 
requirement for shareholder voting.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the requested order, the operation of 
the Fund in the manner described in the application will be approved by 
a majority of the Fund's outstanding voting securities, as defined in 
the Act, or in the case of a Fund whose public shareholders purchase 
shares on the basis of a prospectus containing the disclosure 
contemplated by condition 2 below, by the initial shareholder(s) before 
offering shares of that Fund to the public.
    2. Each Fund relying on the requested order will disclose in its 
prospectus the existence, substance, and effect of any order granted 
pursuant to the application. Each Fund will hold itself out to the 
public as utilizing the Manager of Managers Structure. The prospectus 
will prominently disclose that the 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 the 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 such 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 of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    6. Whenever 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. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets and, subject to review 
and approval of the Board, will: (a) Set each Fund's overall investment 
strategies; (b) evaluate, select and recommend Subadvisers to manage 
all or a part of each Fund's assets; (c) allocate and, when 
appropriate, reallocate each Fund's assets among one or more 
Subadvisers; (d) monitor and evaluate the performance of Subadvisers; 
and (e) implement procedures reasonably designed to ensure that the 
Subadvisers comply with each Fund's investment objective, policies and 
    8. No trustee or officer of the Trust or a Fund, or director, 
manager, 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 any publicly traded company that is either a Subadviser or an 
entity that controls, is controlled by, or is under common control with 
a Subadviser.

[[Page 68856]]

    9. 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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27875 Filed 11-15-12; 8:45 am]