[Federal Register Volume 78, Number 66 (Friday, April 5, 2013)]
[Notices]
[Pages 20701-20705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-07947]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30441; File No. 812-14099]
Munder Series Trust, et al.; Notice of Application
March 29, 2013.
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.
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SUMMARY: Summary of Application: Applicants request an order that would
permit them to enter into and materially amend sub-advisory agreements
with Wholly-Owned Sub-Advisers (as defined below) and non-affiliated
sub-advisers without shareholder approval and would grant relief from
certain disclosure requirements.
[[Page 20702]]
Applicants: Munder Series Trust (the ``Trust'') and Munder Capital
Management (``MCM'').
DATES: Filing Dates: The application was filed on November 28, 2012,
and amended on December 31, 2012, March 15, 2013 and March 28, 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 April 23, 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,
480 Pierce Street, Birmingham, MI 48009.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
(202) 551-6876, or Daniele Marchesani, Branch Chief, at (202) 551-6821
(Division of Investment Management, Exemptive Applications 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 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 is organized as a Delaware statutory trust and is
registered under the Act as an open-end management investment company.
The Trust may offer one or more series of shares (each, a ``Series'')
with its own distinct investment objective, policies and
restrictions.\1\ MCM is organized as a Delaware general partnership and
is registered as an investment adviser under the Investment Advisers
Act of 1940 (``Advisers Act''). Each Series has, or will have, as its
investment adviser, MCM, or another investment adviser controlling,
controlled by or under common control with MCM or its successors (each,
an ``Adviser'').\2\ Any future Adviser will also be registered as an
investment adviser under the Advisers Act.\3\
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\1\ The current Series of the Trust are: Munder Bond Fund,
Munder Growth Opportunities Fund, Munder Index 500 Fund, Munder
Integrity Mid-Cap Value Fund, Munder Integrity Small/Mid-Cap Value
Fund, Munder International Fund-Core Equity, Munder International
Small-Cap Fund, Munder Large-Cap Value Fund, Munder Micro-Cap Equity
Fund, Munder Mid-Cap Core Growth Fund, and Munder Veracity Small-Cap
Value Fund.
\2\ 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.
\3\ Applicants request that the relief apply to applicants, as
well as to any future Series and any other existing or future
registered open-end management investment company or series thereof
that (a) is advised by an Adviser, (b) uses the manager of managers
structure described in the application (``Manager of Managers
Structure''), and (c) complies with the terms and conditions of the
application (``Sub-Advised Series''). All registered open-end
investment companies that currently intend to rely on the requested
order are named as applicants. Any entity that relies on the
requested order will do so only in accordance with the terms and
conditions contained in the application.
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2. The Adviser serves as the investment adviser to each Series
pursuant to an investment advisory agreement with the Trust
(``Investment Advisory Agreement''). The Investment Advisory Agreement
was approved by the board of trustees of the Trust (``Board''),\4\
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 Trust, of a Series or the Adviser (``Independent Trustees'') and by
the shareholders of the relevant Series as required by sections 15(a)
and 15(c) of the Act and rule 18f-2 thereunder. The terms of the
Investment Advisory Agreement comply with section 15(a) of the Act.
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\4\ The term ``Board'' also includes the board of trustees or
directors of a future Series.
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3. Under the terms of the Investment Advisory Agreement, the
Adviser, subject to the supervision of the Board, will provide
continuous investment management of the assets of each Series. The
Adviser periodically reviews each Series' investment objective,
policies and strategies, and based on the need of a Series may
recommend changes to the investment objective, policies and strategies
of the Series for consideration by the Board. For its services to each
Series under the Investment Advisory Agreement, the Adviser receives an
advisory fee from that Series based on the average daily net assets of
that Series. The Investment Advisory Agreement provides that the
Adviser may, subject to the approval of the Board, including a majority
of the Independent Trustees, and the shareholders of the applicable
Series (if required), delegate portfolio management responsibilities of
all or a portion of the assets of a Series to a Sub-Adviser.\5\
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\5\ As used herein, a ``Sub-Adviser'' is (a) an indirect or
direct ``wholly-owned subsidiary'' (as such term is defined in the
Act) of the Adviser for that Series; (b) a sister company of the
Adviser for that Series that is an indirect or direct ``wholly-owned
subsidiary'' (as such term is defined in the Act) of the same
company that, indirectly or directly, wholly owns the Adviser (each
of (a) and (b), a ``Wholly-Owned Sub-Adviser'' and collectively, the
``Wholly-Owned Sub-Advisers''), or (c) not an ``affiliated person''
(as such term is defined in section 2(a)(3) of the Act) of the
applicable Series, the Trust, or the Adviser, except to the extent
that an affiliation arises solely because the Sub-adviser serves as
a sub-adviser to a Series (each, a ``Non-Affiliated Sub-Adviser'').
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4. Applicants request an order to permit the Adviser, subject to
the approval of the Board, including a majority of the Independent
Trustees, to, without obtaining shareholder approval: (a) Select Sub-
Advisers to manage all or a portion of the assets of a Series and enter
into Sub-Advisory Agreements (as defined below) with the Sub-Advisers,
and (b) materially amend Sub-Advisory Agreements with the Sub-
Advisers.\6\ The requested relief will not extend to any sub-adviser,
other than a Wholly-Owned Sub-Adviser, who is an affiliated person, as
defined in section 2(a)(3) of the Act, of the Sub-Advised Series, of
the Trust, or of the Adviser, other than by reason of serving as a sub-
adviser to one or more of the Sub-Advised Series (``Affiliated Sub-
Adviser'').
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\6\ Shareholder approval will continue to be required for any
other sub-adviser 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-adviser other than a
Non-Affiliated Sub-Adviser or a Wholly-Owned Sub-Adviser (all such
changes referred to as ``Ineligible Sub-Adviser Changes'').
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5. Pursuant to the terms of the Investment Advisory Agreement, the
Adviser will have overall responsibility for the management and
investment of each Series' assets. These responsibilities include
recommending the removal or replacement of Sub-Advisers, determining
the portion of that Sub-Advised Series' assets to be managed by any
given Sub-Adviser and reallocating those assets as necessary from time
to time.
6. The Adviser has entered into sub-advisory agreements with
various Sub-Advisers (``Sub-Advisory Agreements'') to provide
investment management services to the Sub-Advised Series.\7\ The terms
of the Sub-Advisory Agreements comply fully with the requirements of
[[Page 20703]]
section 15(a) of the Act and were approved by the Board, including a
majority of the Independent Trustees and the shareholders of the
applicable Series, in accordance with sections 15(a) and 15(c) of the
Act and rule 18f-2 thereunder. The specific day-to-day investment
decisions for each applicable Series are made by that Series' Sub-
Adviser, which has discretionary authority to invest the assets or a
portion of the assets of that Series subject to the general supervision
of the Adviser and the Board. The Adviser currently compensates each
Sub-Adviser out of the advisory fees paid to the Adviser under the
Investment Advisory Agreement; in the future, Sub-Advised Series may
directly pay advisory fees to the Sub-Advisers.
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\7\ If the name of any Sub-Advised Series contains the name of a
Sub-Adviser, the name of the Adviser that serves as the primary
adviser to the Sub-Advised Series, or a trademark or trade name that
is owned by that Adviser, will precede the name of the Sub-Adviser.
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7. Sub-Advised Series will inform shareholders of the hiring of a
new Sub-Adviser pursuant to the following procedures (``Notice and
Access Procedures''): (a) Within 90 days after a new Sub-Adviser is
hired for any Sub-Advised Series, that Sub-Advised Series will send its
shareholders either a Multi-Manager Notice or a Multi-Manager Notice
and Multi-Manager Information Statement; \8\ and (b) the Sub-Advised
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 thereafter. In the
circumstances described in the application, a proxy solicitation to
approve the appointment of new Sub-Advisers provides no more meaningful
information to shareholders than the proposed Multi-Manager Information
Statement. Applicants state that each Board would comply with the
requirements of sections 15(a) and 15(c) of the Act before entering
into or amending a Sub-Advisory Agreement.
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\8\ 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-Adviser; (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 Sub-Advised 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.
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8. Applicants also request an order exempting the Sub-Advised
Series from certain disclosure obligations that may require each Sub-
Advised Series to disclose fees paid by the Adviser to each Sub-
Adviser. Applicants seek relief to permit each Sub-Advised Series to
disclose (as a dollar amount and a percentage of the Sub-Advised
Series' net assets): (a) The aggregate fees paid to the Adviser and any
Wholly-Owned Sub-Advisers; (b) the aggregate fees paid to Non-
Affiliated Sub-Advisers; and (c) the fee paid to each Affiliated Sub-
Adviser (collectively, the ``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 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 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 Adviser,
subject to the review and approval of the Board, to select the Sub-
Advisers that are suited to achieve the Series' investment objective.
Applicants assert that, from the perspective of the shareholder, the
role of the Sub-Adviser 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
Adviser to perform the duties for which the shareholders of the Sub-
Advised Series are paying the Adviser--the selection, supervision and
evaluation of the Sub-Adviser--without incurring unnecessary delays or
expenses is appropriate in the interest of the Series' shareholders and
will allow the Series to operate more efficiently. Applicants state
that the Investment Advisory 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 Board, including a majority of the Independent
Trustees, 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 Advisory Agreement.
7. Applicants assert that disclosure of the individual fees that
the Adviser would pay to the Sub-Advisers of Sub-Advised Series that
operate under the Manager of Managers Structure would not serve any
meaningful purpose. Applicants contend that the primary
[[Page 20704]]
reasons for requiring disclosure of individual fees paid to Sub-
Advisers are to inform shareholders of expenses to be charged by a
particular Sub-Advised 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 Adviser, or the Aggregate Fee Disclosure,
in the case of a Sub-Advised Series that directly compensates a Sub-
Adviser, will be fully disclosed and, therefore, shareholders will know
what the Sub-Advised Series' fees and expenses are and will be able to
compare the advisory fees a Sub-Advised Series is charged to those of
other investment companies. Applicants assert that the requested
disclosure relief would benefit shareholders of the Sub-Advised Series
because it would improve the Adviser's ability to negotiate the fees
paid to Sub-Advisers. Applicants state that the Adviser may be able to
negotiate rates that are below a Sub-Adviser's ``posted'' amounts if
the Adviser is not required to disclose the Sub-Advisers' fees to the
public. Applicants submit that the relief requested to use Aggregate
Fee Disclosure will encourage Sub-Advisers to negotiate lower sub-
advisory fees with the Adviser 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 Sub-Advised Series
in the manner described in the application must be approved by
shareholders of a Sub-Advised Series before that Sub-Advised 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-Advisers, and provide that shareholders are informed
when new Sub-Advisers are hired. Applicants assert that conditions 6,
7, 9, 10 and 11 are designed to provide the Board with sufficient
independence and the resources and information it needs to monitor and
address any conflicts of interest with affiliated persons of the
Adviser, including Wholly-Owned Sub-Advisers. 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 Sub-Advised Series may rely on the order requested in
the application, the operation of the Sub-Advised Series in the manner
described in the application, including the hiring of Wholly-Owned Sub-
Advisers, will be approved by a majority of the Sub-Advised Series'
outstanding voting securities as defined in the Act, or, in the case of
a Sub-Advised 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
Sub-Advised Series' shares to the public.
2. The prospectus for each Sub-Advised Series will disclose the
existence, substance, and effect of any order granted pursuant to the
application. Each Sub-Advised Series will hold itself out to the public
as employing the Manager of Managers Structure. Each prospectus will
prominently disclose that the Adviser has the 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 services to each
Sub-Advised Series, including overall supervisory responsibility for
the general management and investment of the Sub-Advised Series'
assets, and, subject to review and approval by the Board, the Adviser
will: (a) Set the Sub-Advised Series' overall investment strategies;
(b) evaluate, select, and recommend Sub-Advisers to manage all or a
portion of the Sub-Advised Series' assets; and (c) implement procedures
reasonably designed to ensure that the Sub-Advisers comply with a Sub-
Advised Series' investment objectives, policies and restrictions.
Subject to review by the Board, the Adviser will (a) when appropriate,
allocate and reallocate the Sub-Advised Series' assets among multiple
Sub-Advisers; and (b) monitor and evaluate the performance of Sub-
Advisers.
4. A Sub-Advised Series will not make any Ineligible Sub-Adviser
Changes without the approval of the shareholders of the applicable Sub-
Advised Series.
5. A Sub-Advised Series will inform shareholders of the hiring of a
new Sub-Adviser within 90 days after the hiring of the new Sub-Adviser
pursuant to the Notice and Access Procedures.
6. At all times, at least a majority of the Board will be
Independent Trustees, and the selection and nomination of new or
additional Independent Trustees will be placed within the discretion of
the then-existing Independent Trustees.
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 Sub-Advised Series basis. The information will reflect the impact
on profitability of the hiring or termination of any Sub-Adviser during
the applicable quarter.
9. Whenever a Sub-Adviser is hired or terminated, the Adviser will
provide the Board with information showing the expected impact on the
profitability of the Adviser.
10. Whenever a Sub-Adviser change is proposed for a Sub-Advised
Series with an Affiliated Sub-Adviser or a Wholly-Owned Sub-Adviser,
the Board, including a majority of the Independent Trustees, will make
a separate finding, reflected in the Trust's Board minutes, that such
change is in the best interests of the Sub-Advised Series and its
shareholders and does not involve a conflict of interest from which the
Adviser or the Affiliated Sub-Adviser or Wholly-Owned Sub-Adviser
derives an inappropriate advantage.
11. No trustee or officer of the Trust or of a Sub-Advised Series
or any partner, 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 Sub-Adviser
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 Sub-Adviser or an entity that controls, is controlled by, or
is under common control with a Sub-Adviser.
12. Each Sub-Advised 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.
14. For Sub-Advised Series that pay fees to a Sub-Adviser directly
from fund assets, any changes to a Sub-Advisory Agreement that would
result in an
[[Page 20705]]
increase in the total management and advisory fees payable by a Sub-
Advised Series will be required to be approved by the shareholders of
the Sub-Advised Series.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07947 Filed 4-4-13; 8:45 am]
BILLING CODE 8011-01-P