[Federal Register Volume 69, Number 90 (Monday, May 10, 2004)]
[Notices]
[Pages 25938-25940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10562]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26442; 812-13033]


RSI Retirement Trust and Retirement System Investors Inc.; Notice 
of Application

May 4, 2004.
AGENCY: Securities and Exchange Commission (``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.

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

Applicants: RSI Retirement Trust (the ``Trust'') and Retirement System 
Investors Inc. (the ``Adviser'').

Filing Dates: The application was filed on October 28, 2003 and amended 
on April 20, 2004.

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 June 1, 2004, 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: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, c/o Ryan M. Louvar, Esq., BISYS, 100 Summer 
Street, Suite 1500, Boston, MA 02110.

FOR FURTHER INFORMATION CONTACT: Shannon Conaty, Attorney-Adviser, at 
(202) 942-0527, or Annette M. Capretta, Branch Chief, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Trust, a New York common law trust, is registered under the 
Act as an open-end management investment company. The Trust is 
organized as a series investment company and has seven series (each 
series, a ``Fund'' and collectively, the ``Funds''), each with its own 
investment objectives, policies and restrictions. The Adviser, a 
Delaware corporation and wholly-owned subsidiary of Retirement System 
Group

[[Page 25939]]

Inc., a Delaware corporation, is registered as an investment adviser 
under the Investment Advisers Act of 1940 (``Advisers Act'').\1\
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    \1\ Applicants also request that any relief granted pursuant to 
the application apply to future series of the Trust and any other 
registered open-end management investment companies and their series 
that: (a) Are advised by the Adviser or any entity controlling, 
controlled by, or under common control with the Adviser; (b) use the 
manager of managers structure described in the application; and (c) 
comply with the terms and conditions in the application (``Future 
Funds,'' and together with the Funds, the ``Funds''). The Trust is 
the only existing registered open-end management investment company 
that currently intends to rely on the requested order. If the name 
of any Fund contains the name of a Sub-Adviser (as defined below), 
the name of the Adviser or the name of the entity controlling, 
controlled by, or under common control with the Adviser that serves 
as the primary adviser to the Fund will precede the name of the Sub-
Adviser.
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    2. The Adviser serves as investment adviser to the Funds pursuant 
to an investment advisory agreement between the Trust, on behalf of 
each Fund, and the Adviser (``Management Agreement'') that was approved 
by the Trust's board of trustees (``Board''), 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 
shareholder(s). The Management Agreement permits the Adviser to enter 
into separate investment advisory agreements (``Sub-Advisory 
Agreements'') with one or more sub-advisers (``Sub-Advisers''). Each 
Sub-Adviser has discretionary authority to invest that portion of the 
Fund's assets assigned to it by the Adviser. Each Sub-Adviser is or 
will be registered or exempt from registration under the Advisers Act. 
The Adviser monitors and evaluates the Sub-Advisers and recommends to 
the Board their hiring, termination, and replacement. The Adviser 
recommends Sub-Advisers based on a number of factors discussed in the 
application used to evaluate their skills in managing assets pursuant 
to particular investment objectives. The Adviser compensates the Sub-
Advisers out of the fee paid to the Adviser by a Fund.
    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Sub-Advisory 
Agreements without shareholder approval. The requested relief will not 
extend to any Sub-Adviser that is an affiliated person, as defined in 
section 2(a)(3) of the Act, of a Fund or the Adviser, other than by 
reason of serving as a Sub-Adviser to one or more of the Funds (an 
``Affiliated Sub-Adviser''). None of the current Sub-Advisers is an 
Affiliated Sub-Adviser.

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 the 
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 provision of the Act, or 
from any rule thereunder, if and to the extent that 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 the reasons discussed below.
    3. Applicants state that the Funds' shareholders rely on the 
Adviser to select the Sub-Advisers best suited to achieve a Fund's 
investment objectives. Applicants assert that, from the perspective of 
the investor, the role of the Sub-Advisers is comparable to that of 
individual portfolio managers employed by other investment advisory 
firms. Applicants contend that requiring shareholder approval of each 
Sub-Advisory 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 also note that the 
Management Agreements will remain subject to section 15(a) of the Act 
and rule 18f-2 under the Act.

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 
shares of such Fund are offered 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 this application. In addition, each Fund relying on the 
requested order will hold itself out to the public as employing the 
``manager of managers'' structure described in this application. Such 
Fund's prospectus will prominently disclose that the Adviser has 
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 and administrative 
services to each of the Funds, including overall supervisory 
responsibility for the general management and investment of each Fund's 
assets, and, subject to review and approval by the Board, will (i) set 
each Fund's overall investment strategies; (ii) evaluate, select and 
recommend Sub-Advisers to manage all or part of a Fund's assets; (iii) 
when appropriate, allocate and reallocate a Fund's assets among 
multiple Sub-Advisers; (iv) monitor and evaluate the performance of 
Sub-Advisers; and (v) implement procedures reasonably designed to 
ensure that the Sub-Advisers comply with the relevant Fund's investment 
objectives, policies and restrictions.
    4. At all times, 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.
    5. The Adviser will not enter into a Sub-Advisory Agreement with 
any Affiliated Sub-Adviser without such agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    6. When a Sub-Adviser change is proposed for a Fund with an 
Affiliated Sub-Adviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
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 an Affiliated Sub-Adviser derives an inappropriate 
advantage.
    7. No trustee or officer of the Trust 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 Sub-Adviser except for (i) ownership of interests in the Adviser 
or any entity that controls, is controlled by, or is under common 
control with the Adviser; or (ii) ownership of less than 1% of the 
outstanding securities of any class of equity or debt of a publicly-

[[Page 25940]]

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.
    8. Within 90 days of the hiring of any new Sub-Adviser, the Adviser 
will furnish the shareholders of the applicable Fund all information 
about the new Sub-Adviser that would be included in a proxy statement. 
To meet this obligation, the Adviser will provide the shareholders of 
the applicable Fund with an information statement meeting the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Exchange Act.
    9. The requested order will expire on the effective date of rule 
15a-5 under the Act, if adopted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-10562 Filed 5-7-04; 8:45 am]
BILLING CODE 8010-01-P