[Federal Register Volume 77, Number 59 (Tuesday, March 27, 2012)]
[Notices]
[Pages 18277-18280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7282]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29984; 812-13971]


Domini Social Investment Trust and Domini Social Investments LLC; 
Notice of Application

March 21, 2012.
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 of Application: Applicants request 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: Domini Social Investment Trust (the ``Trust'') and Domini 
Social Investments LLC (the ``Adviser'') (collectively, 
``Applicants'').

DATES: Filing Dates: The application was filed October 26, 2011, and 
amended on March 15, 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

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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 16, 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: 
Megan L. Dunphy, Domini Social Investments LLC, 532 Broadway, 9th 
Floor, New York, NY 10012-3939.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, 
at (202) 551-6990, or Jennifer L. Sawin, Branch Chief, at (202) 551-
6821 (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 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 Massachusetts business trust, is registered under 
the Act as an open-end management investment company and currently 
offers three series of shares (each a ``Series''), each with its own 
distinct investment objectives, policies and restrictions.\1\ The 
Adviser is, and any future Adviser will be, registered as an investment 
adviser under the Investment Advisers Act of 1940 (``Advisers Act''). 
The Adviser serves as the investment adviser to each Series pursuant to 
an investment advisory agreement with the Trust (each an ``Investment 
Advisory Agreement'' and collectively, the ``Investment Advisory 
Agreements'').\2\ Each Investment Advisory Agreement was approved or 
will be approved by the board of trustees of the Trust (the ``Board''), 
including a majority of the trustees who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act, of the Trust, the 
Subadvised Fund, or the Adviser (``Independent Trustees'') and by the 
shareholders of the relevant Subadvised Fund in the manner required by 
sections 15(a) and 15(c) of the Act and rule 18f-2 under the Act.\3\
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    \1\ Applicants also request relief with respect to any future 
series of the Trust and to 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 
in the term ``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 this application 
(together with the current Series, each a ``Subadvised Fund'' and 
collectively, the ``Subadvised Funds''). The only existing 
registered open-end management investment company that currently 
intends to rely on the requested order is named as an Applicant. 
Each Series that is or currently intends to be a Subadvised Fund, 
and each Subadviser (as defined below) that currently intends to 
rely on the requested order, is identified in this application. 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. If the name of any 
Subadvised Fund contains the name of a Subadviser, the name of the 
Adviser that serves as the primary adviser to the Subadvised Fund 
will precede the name of the Subadviser.
    \2\ Each future investment advisory agreement between an Adviser 
and a Subadvised Fund is also included in the term ``Investment 
Advisory Agreement''.
    \3\ The term ``Board'' also includes the board of trustees or 
directors of a future Subadvised Fund.
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    2. Under the terms of each Investment Advisory Agreement, the 
Adviser, subject to the oversight of the Board, furnishes a continuous 
investment program for each Subadvised Fund. The Adviser periodically 
reviews investment policies and strategies of each Subadvised Fund and 
based on the need of a particular Subadvised Fund may recommend changes 
to the investment policies and strategies of the Subadvised Fund for 
consideration by its Board. For its services to each Subadvised Fund, 
the Adviser receives an investment advisory fee from that Subadvised 
Fund as specified in the applicable Investment Advisory Agreement based 
on that Subadvised Fund's average daily net assets. The terms of the 
Investment Advisory Agreements also permit the Adviser, subject to the 
approval of the relevant Board, including a majority of the Independent 
Trustees, and the shareholders of the applicable Subadvised Funds (if 
required by applicable law), to delegate portfolio management 
responsibilities of all or a portion of the assets of the Subadvised 
Fund to one or more subadvisers (``Subadvisers''). The Adviser has 
entered into subadvisory agreements (``Subadvisory Agreements'') with 
two Subadvisers to serve as Subadvisers to the Series.\4\ Each 
Subadviser is, and any future Subadviser will be, an investment adviser 
as defined in section 2(a)(20) of the Act as well as registered with 
the Commission as an ``investment adviser'' under the Advisers Act. The 
Adviser evaluates, allocates assets to and oversees the Subadvisers, 
and makes recommendations about their hiring, termination and 
replacement to the Board, at all times subject to the authority of the 
Board. The Adviser currently compensates each Subadviser out of the 
advisory fees paid to the Adviser under the relevant Investment 
Advisory Agreement; in the future, Subadvised Funds may directly pay 
advisory fees to the Subadvisers.
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    \4\ The Adviser has entered into Subadvisory Agreements with (i) 
Wellington Management Company LLP as a subadviser to manage the 
Domini Social Equity Fund and Domini International Social Equity 
Fund; and (ii) Seix Investment Advisors LLC as a subadviser to 
manage the Domini Social Bond Fund. Neither of the existing 
subadvisers is affiliated with the Adviser.
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    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to select certain Subadvisers to manage all or a 
portion of the assets of a Subadvised Fund pursuant to a Sub-Advisory 
Agreement and materially amend Sub-Advisory Agreements without 
obtaining shareholder approval. 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 or a Subadvised Fund or the Adviser, 
other than by reason of serving as a Subadviser to Subadvised Funds 
(``Affiliated Subadviser'').
    4. Applicants also request an order exempting the Subadvised Funds 
from certain disclosure provisions described below that may require the 
Applicants to disclose fees paid to each Subadviser by the Adviser or a 
Subadvised Fund. Applicants seek an order to permit each Subadvised 
Fund to disclose (as a dollar amount and a percentage of each 
Subadvised Fund's net assets) only: (a) the aggregate fees paid to the 
Adviser and any Affiliated Subadvisers; and (b) the aggregate fees paid 
to Subadvisers other than Affiliated Subadvisers (collectively, the 
``Aggregate Fee Disclosure''). A Subadvised Fund that employs an 
Affiliated Subadviser will provide separate disclosure of any fees paid 
to the Affiliated Subadviser.

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

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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 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 (``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 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. 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 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 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 
Subadvisers who are best suited to achieve the Subadvised Fund's 
investment objective. Applicants assert that, from the perspective of 
the shareholder, the role of the Subadviser is substantially equivalent 
to the role of the individual portfolio managers employed by an 
investment adviser to a traditional investment company. Applicants 
state that requiring shareholder approval of each Subadvisory Agreement 
would impose unnecessary delays and expenses on the Subadvised Funds 
and may preclude the Subadvised Funds from acting promptly when the 
Adviser and Board consider it appropriate to hire Subadvisers or amend 
Subadvisory Agreements. Applicants note that the Investment Advisory 
Agreements and any Subadvisory Agreement with an Affiliated Subadviser 
(if any) will continue to be subject to the shareholder approval 
requirements of section 15(a) of the Act and rule 18f-2 under the Act.
    7. If new Subadvisers are hired, the Subadvised 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 Subadvised Fund, 
that Subadvised Fund will send its shareholders either a Multi-manager 
Notice or a Multi-manager Notice and Multi-manager Information 
Statement; \5\ and (b) the Subadvised 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 this 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 applicable Board would comply with the requirements of 
Sections 15(a) and 15(c) of the 1940 Act before entering into or 
amending Sub-Advisory Agreements.
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    \5\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the 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 Subadvised 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, except as 
modified by the requested order to permit Aggregate Fee Disclosure. 
Multi-manager Information Statements will be filed electronically 
with the Commission via the EDGAR system.
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    8. Applicants assert that the requested disclosure relief would 
benefit shareholders of the Subadvised Funds because it would improve 
the Adviser's ability to negotiate the fees paid to Subadvisers. 
Applicants state that the Adviser may be able to negotiate rates that 
are below a Subadviser's ``posted'' amounts if the Adviser is not 
required to disclose the Subadvisers' fees to the public. Applicants 
submit that the requested relief will also encourage Subadvisers to 
negotiate lower subadvisory fees with the Adviser if the lower fees are 
not required to be made public.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Subadvised Fund may rely on the order requested herein, 
the operation of the Subadvised Fund in the manner described in the 
Application will be approved by a majority of the Subadvised Fund's 
outstanding voting securities as defined in the Act or, in the case of 
a Subadvised Fund whose public shareholders purchase shares on the 
basis of a prospectus containing the disclosure contemplated by 
condition 2 below, by the initial shareholder before such Subadvised 
Fund's shares are offered to the public.
    2. The prospectus for each Subadvised Fund will disclose the 
existence, substance, and effect of any order granted pursuant to the 
Application. In addition, each Subadvised Fund will hold itself out to 
the public as employing the Manager of Managers Structure. The 
prospectus will prominently disclose that the Adviser has the ultimate 
responsibility, subject to oversight by the Board, to oversee the 
Subadvisers and recommend their hiring, termination, and replacement.
    3. Subadvised 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 that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Subadvised 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. 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

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discretion of the then-existing Independent Trustees.
    7. Whenever a Subadviser change is proposed for a Subadvised Fund 
with an Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Board minutes, that the change is in the best interests of the 
Subadvised Fund and its shareholders, and does not involve a conflict 
of interest from which the Adviser or the Affiliated Subadviser derives 
an inappropriate advantage.
    8. Whenever a Subadviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    9. Each Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per Subadvised Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any Subadviser during the 
applicable quarter.
    10. The Adviser will provide general management services to each 
Subadvised Fund, including overall supervisory responsibility for the 
general management and investment of the Subadvised Fund's assets and, 
subject to review and approval of the Board, will: (i) Set the 
Subadvised Fund's overall investment strategies; (ii) evaluate, select, 
and recommend Subadvisers to manage all or a portion of the Subadvised 
Fund's assets; (iii) allocate and, when appropriate, reallocate the 
Subadvised Fund's assets among Subadvisers; (iv) monitor and evaluate 
the Subadvisers' performance; and (v) implement procedures reasonably 
designed to ensure that Subadvisers comply with the Subadvised Fund's 
investment objective, policies and restrictions.
    11. No Trustee or officer of the Trust or of a Subadvised Fund 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 Subadviser 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 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.
    12. Each Subadvised Fund will disclose in its registration 
statement the Aggregate Fee Disclosure.
    13. 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.
    14. For Subadvised Funds that pay fees to a Subadviser directly 
from fund assets, any changes to a Subadvisory Agreement that would 
result in an increase in the total management and advisory fees payable 
by a Subadvised Fund will be required to be approved by the 
shareholders of the Subadvised Fund.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-7282 Filed 3-26-12; 8:45 am]
BILLING CODE 8011-01-P