[Federal Register Volume 67, Number 40 (Thursday, February 28, 2002)]
[Notices]
[Pages 9338-9340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-4839]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25444; 812-11220]


Alpha Select Funds, et al.; Notice of Application

February 22, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: 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, as well as 
certain disclosure requirements.

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SUMMARY OF THE APPLICATION: Applicants seek 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:
    Alpha Select Funds (``Alpha Select''), Turner Funds (``Turner,'' 
collectively with Alpha Select, the ``Trusts''), Concentrated Capital 
Management, LP (``CCM''), and Turner Investment Partners, Inc. 
(``TIP,'' collectively with CCM, the ``Advisers'').
    Filing Dates:
    The application was filed on July 16, 1998, and amended on May 16, 
2001 and February 22, 2002.
    Hearing or Notification of Hearing:
    An order granting the application will be issued unless the SEC 
orders a hearing. Interested persons may request a hearing by writing 
to the SEC's Secretary and serving applicant with a copy of the 
request, personally or by mail. Hearing requests should be received by 
the SEC by 5:30 p.m. on March 21, 2002 and should be accompanied by 
proof of service on applicant, 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 may request notification of a hearing by 
writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street, NW, Washington, DC 20549-
0609. Applicants, Alpha Select and CCM, 150 First Avenue, Suite 600, 
King of Prussia, PA 19406-2816, Turner and TIP, 1235 West Lakes Drive, 
Suite 350, Berwyn, PA 19312.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 942-0634 or Nadya B. Roytblat, Assistant Director, at (202) 942-
0564 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 5th Street, NW, Washington, DC 
20549-0102 (telephone (202 942-8090).

Applicants' Representations

    1. Alpha Select, a Delaware business trust, and Turner, a 
Massachusetts business trust, are registered under the Act as open-end 
management investment companies. Alpha Select and Turner are comprised 
of one or more series (each a ``Fund,'' collectively the ``Funds''), 
each with its own investment objectives and policies.\1\ CCM and TIP 
are registered as investment advisers under the Investment Advisers Act 
of 1940 (the ``Advisers Act''). CCM currently serves as the investment 
adviser to Alpha Select and TIP serves as the investment adviser to 
Turner.
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    \1\ Applicants also request relief with respect to future series 
of the Trusts and any other registered open-end management 
investment companies and series thereof that (a) are advised by the 
Advisers or any entity controlling, controlled by, or under common 
control with the Advisers; (b) use the multi-manager structure 
described in the application; and (c) comply with the terms and 
conditions in the application (``Future Funds,'' included in the 
term ``Funds''). If the name of any Fund should, at any time, 
contain the name of a Manager (as defined below), it will also 
contain the name of the Adviser, which will appear before the name 
of the Manager.
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    2. Alpha Select and Turner have entered into separate investment 
management agreements with CCM and TIP (``Advisory Agreements''), 
respectively, that were approved by the Trusts' respective boards of 
trustees (the ``Boards''), 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 shareholders. The Advisory 
Agreements permit the Advisers to enter into separate investment 
advisory agreements (``Subadvisory Agreements'') with subadvisers 
(``Managers'') to whom each Adviser may delegate portfolio management 
responsibilities for a Fund.
    3. Each Adviser monitors and evaluates the Managers and recommends 
to the respective Board their hiring, retention or termination. Each 
Manager will be an investment adviser that is registered under the 
Advisers Act. Each Manager's fees will be paid by the respective 
Adviser out of the management fees received by that Adviser from each 
of the Funds. In the future, some Funds may compensate the Managers 
directly.
    4. Applicants request relief to permit the Advisers, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without shareholder approval. The requested relief will not 
extend to a Manager that is an affiliated person, as defined in section 
2(a)(3) of the Act, of the Fund or the Adviser, other than by reason of 
serving as a Manager to one or more of the Funds (an ``Affiliated 
Manager'').
    5. Applicants also request an exemption from the various disclosure

[[Page 9339]]

provisions described below that may require the Funds to disclose the 
fees paid by an Adviser to the Managers. An exemption is requested to 
permit the Funds to disclose (as both a dollar amount and as a 
percentage of a Fund's net assets): (a) Aggregate fees paid to the 
Adviser and Affiliated Managers; and (b) aggregate fees paid to the 
Managers other than Affiliated Managers (``Aggregate Fees''). If a Fund 
employs an Affiliated Manager, the Fund will provide separate 
disclosure of any fees paid to the Affiliated Manager.

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 such 
matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 15(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 (the ``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. Form N-SAR is the semi-annual report filed with the Commission 
by registered investment companies. Item 48 of Form N-SAR requires 
investment companies to disclose the rate schedule for fees paid to 
their investment advisers, including the Managers.
    5. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of investment company 
registration statements and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require 
that investment companies include in their financial statements 
information about investment advisory fees.
    6. 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 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 reasons discussed below.
    7. Applicants assert that each Fund's shareholders have determined 
to rely on the Adviser to select, monitor and replace Managers. 
Applicants contend that from the perspective of the investor, the role 
of the Managers is comparable to individual portfolio managers employed 
by other firms. Applicants contend that requiring shareholder approval 
of the Subadvisory Agreements would impose unnecessary costs and 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 will remain subject to section 15(a) of the Act and 
rule 18f-2 under the Act.
    8. Applicants assert that many Managers charge their customers for 
advisory services according to a ``posted'' rate schedule. Applicants 
state that while Managers are willing to negotiate fees lower than 
those posted in the schedule, particularly with large institutional 
clients, they are reluctant to do so when the fees are disclosed to 
other prospective and existing customers. Applicants submit that the 
relief will encourage Managers to negotiate lower advisory fees with 
the Advisers, the benefits of which are likely to be passed on to Fund 
shareholders.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before any 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 shareholders 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 shares of the Fund to the 
public.
    2. The prospectus for each Fund will disclose the existence, 
substance, and effect of any order granted pursuant to the application. 
In addition, each Fund will hold itself out to the public as employing 
the ``manager of managers'' approach described in the application. The 
prospectus for each Fund will prominently disclose that the Adviser has 
ultimate responsibility (subject to oversight by the Board) to oversee 
the Managers and recommend their hiring, termination, and replacement.
    3. Within 90 days of the hiring of any new Manager, the Adviser 
will furnish shareholders all information about the new Manager that 
would be included in a proxy statement, except as modified by the order 
to permit the disclosure of Aggregate Fees. This information would 
include the disclosure of Aggregate Fees and any change in such 
disclosure caused by the addition of a new Manager. The Adviser will 
meet this obligation by providing shareholders with an information 
statement meeting the requirements of Regulation 14C, Schedule 14C, and 
Item 22 of Schedule 14A under the 1934 Act, except as modified by the 
order to permit the disclosure of Aggregate Fees.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Manager without such agreement, including the compensation 
to be paid thereunder, being approved by the shareholders of the 
applicable Fund.
    5. At all times, a majority of each Fund's Board will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be at the discretion of the then-existing 
Independent Trustees.
    6. When a Manager change is proposed for a Fund with an Affiliated 
Manager, the Fund's Board, including a majority of the Independent 
Trustees, will make a separate finding, reflected in the applicable 
Fund's Board minutes, that the 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 Manager 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 securities portfolio, and, 
subject to Board review and approval, will: (a) Set each Fund's overall 
investment strategies; (b) recommend and select Managers; (c) allocate, 
and when appropriate, reallocate a Fund's assets among its Managers 
when the Fund has more than one Manager; (d) monitor and evaluate 
Manager performance; and (e) implement procedures designed to

[[Page 9340]]

ensure that the Manager complies with the Fund's investment objectives, 
policies, and restrictions.
    8. No Trustee, director, or officer of the Funds or officer or 
director of the Adviser will own directly or indirectly (other than 
through a pooled investment vehicle over which such person does not 
have control) any interest in a Manager 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 Manager or an entity that 
controls, is controlled by, or is under common control with a Manager.
    9. Each Fund will disclose in its registration statement the 
Aggregate Fees.
    10. Independent counsel knowledgeable about the Act and the duties 
of Independent Trustees will be engaged to represent the Independent 
Trustees. The selection of such counsel will be within the discretion 
of the then-existing Independent Trustees.
    11. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the Adviser's profitability on a per-
Fund basis. This information will reflect the impact on the 
profitability of the hiring or termination of any Manager during the 
applicable quarter.
    12. Whenever a Manager is hired or terminated, the Adviser will 
provide the Board information showing the expected impact on the 
Adviser's profitability.
    13. For any Fund that compensates a Manager directly, any change to 
a Subadvisory Agreement that would result in an increase in the overall 
management and advisory fees payable by the Fund will be required to be 
approved by the shareholders of the Fund.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-4839 Filed 2-27-02; 8:45 am]
BILLING CODE 8010-01-P