[Federal Register Volume 77, Number 185 (Monday, September 24, 2012)]
[Notices]
[Pages 58877-58880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-23483]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30206 ; 812-13988-01]


Neuberger Berman Alternative Funds, et al.; Notice of Application

 September 18, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940, as amended (``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: Neuberger Berman Alternative Funds (the ``Trust''), 
Neuberger Berman Management LLC (``NB Management'') and NB Alternative 
Investment Management LLC (``NBAIM'').

DATES: Filing Dates: The application was filed on December 8, 2011, and 
amended on January 19, 2012, April 9, 2012, and August 16, 2012. 
Applicants have agreed to file an amendment during the notice period, 
the substance of which is reflected in this notice.

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 October 12, 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: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants: Trust and NB 
Management, 605 Third Avenue 2nd Floor, New York, 10158-0180; NBAIM, 
605 Third Avenue 22nd Floor, New York, New York 10158-0180.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at 
(202) 551-6868, or Daniele Marchesani 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 Delaware statutory trust organized as a series 
investment company, is registered under the Act as an open-end 
management investment company.\1\ NB Management is, and any

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Manager will be, registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act''). A Manager will 
serve as the investment adviser to each Fund pursuant to an investment 
advisory agreement (the ``Management Agreement'') approved by the board 
of trustees of the Trust (``Board''),\2\ 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 Adviser or the Manager 
(``Independent Trustees'') and by the initial shareholder of the Fund. 
Like NB Management, NBAIM is a wholly-owned indirect subsidiary of 
Neuberger Berman Group and is registered as an investment adviser under 
the Advisers Act.\3\
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    \1\ Applicants request relief with respect to existing and 
future registered open-end management investment company or series 
thereof that: (a) Is advised by NB Management or NBAIM, or any 
entity controlling, controlled by or under common control with NB 
Management or NBAIM or their respective successors (NB Management, 
NB Management's successor, and any such affiliated entity that may 
in the future act in the same role as NB Management, each a 
``Manager''; NBAIM, NBAIM's successor, and any such affiliated 
entity that may in the future act in the same role as NBAIM, each an 
``Adviser''); (b) uses the multi-manager structure described in the 
application (the ``Manager of Managers Structure'') and (c) complies 
with the terms and conditions of the application (each, a ``Fund and 
collectively, the ''Funds''). For the purposes of the requested 
order, ``successor'' is limited to an entity or entities that result 
from a reorganization into another jurisdiction or a change in the 
type of business organization. All entities that currently intend to 
rely on the requested relief are named as applicants. If the name of 
any Fund contains the name of a Sub-Adviser (as defined below), the 
name of the Manager or Adviser that serves as the primary adviser to 
the Fund will precede the name of the Sub-Adviser.
    \2\ The term ``Board'' also includes the board of trustees or 
directors of a future Fund.
    \3\ Any Adviser will be registered as an investment adviser 
under the Advisers Act.
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    2. Under the terms of each Management Agreement, the Manager, 
subject to the oversight of the Board, will be responsible for the 
overall management of the assets of each Fund. For the investment 
management services that it provides to the Fund, the Manager will 
receive the fee specified in the Management Agreement from such Fund 
based on the Fund's average daily net assets.
    3. The Manager may delegate certain portfolio management 
responsibilities for one or more Funds to the Adviser pursuant to an 
investment advisory agreement (the ``Investment Advisory Agreement'') 
between the Manager and the Adviser. The ultimate responsibility to 
provide continuous investment management of the assets of each Fund 
rests with the Manager, and the Manager has the authority to terminate 
the Adviser at any time. For the services it will provide to a Fund, 
the Adviser will receive a fee specified in the Investment Advisory 
Agreement based on the Fund's average daily net assets, which fee will 
be paid by the Manager out of the fee paid to the Manager. Any Adviser 
of a Fund will be controlled or under common control with the Manager 
of the Fund.
    4. The Management Agreement also permits the Manager to retain one 
or more Sub-Advisers for the purpose of managing the investment of all 
or a portion of the assets of a Fund.\4\ Each Sub-Adviser will be 
registered as an investment adviser under the Advisers Act. The Manager 
will evaluate and allocate assets to and oversee the Sub-Advisers, and 
make recommendations to the Board about their hiring, termination and 
replacement, at all times subject to the authority of the Board. The 
Manager will compensate each Sub-Adviser out of the fee paid to the 
Manager under the Management Agreement. For Funds where the Adviser is 
used, the Adviser will have the responsibility to evaluate and 
recommend to the Manager Sub-Advisers to manage the assets of a Fund. 
It will also have the authority to allocate and, when appropriate, 
reallocate the Fund's assets among Sub-Advisers. The Adviser will not 
have any authority to select any Sub-Adviser.
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    \4\ Currently the Trust offers the Neuberger Berman Absolute 
Return Multi-Manager Fund (the ``NB ARMM Fund''), which seeks 
capital appreciation with an emphasis on absolute return. The 
Manager and Adviser have entered into a sub-advisory agreement 
(``Sub-Advisory Agreement'') with the following Sub-Advisers for the 
NB ARMM Fund: The Boston Company Asset Management, LLC, Cramer 
Rosenthal McGlynn, LLC, GAMCO Asset Management Inc., Levin Capital 
Strategies, L.P., MacKay Shields LLC, Sound Point Capital 
Management, L.P., Turner Investments, L.P., and Visium Asset 
Management, LP.
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    5. Applicants request an order to permit the Manager, subject to 
Board approval, to select certain Sub-Advisers to manage all or a 
portion of the assets of a Fund pursuant to Sub-Advisory Agreements and 
materially amend Sub-Advisory Agreements without obtaining 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 
the Trust, a Fund, the Manager or the Adviser, other than by reason of 
serving as a Sub-adviser to the Fund (``Affiliated Sub-Adviser''). The 
Applicants also are not seeking any exemptions from the provisions of 
the 1940 Act with respect to the requirement that the Investment 
Advisory Agreement be approved by the shareholders of the relevant 
Funds.
    6. Applicants also request an exemption from certain disclosure 
provisions described below that may require the Funds to disclose fees 
paid by the Manager to each Sub-Adviser. Applicants seek an order to 
permit each Fund to disclose (as both a dollar amount and as a 
percentage of the respective Fund's net assets): (a) The aggregate fees 
paid to the Manager and any Affiliated Sub-Advisers; and (b) the 
aggregate fees paid to Sub-Advisers (collectively, ``Aggregate Fee 
Disclosure''). Any Fund that employs an Adviser or Affiliated Sub-
Adviser will provide separate disclosure of any fees paid to such 
Adviser or 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 a 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 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 
that a registered investment company to include in its financial 
statement information about 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

[[Page 58879]]

standard for the reasons discussed below.
    6. Applicants assert that the shareholders will rely on the 
Adviser's expertise to select one or more Sub-Advisers best suited to 
achieve a Fund's investment objectives. Applicants assert that, from 
the perspective of the shareholder, the role of the Sub-Advisers is 
substantially equivalent to that of the individual portfolio managers 
employed by traditional advisory firms. Applicants state that requiring 
shareholder approval of each Sub-Advisory Agreement would subject a 
Fund to unnecessary expenses and delays associated with conducting a 
formal proxy solicitation. Applicants note that the Management 
Agreement, Investment Advisory Agreement, and any Sub-Advisory 
Agreement with an Affiliated Sub-Adviser will remain subject to section 
15(a) of the Act and rule 18f-2 under the Act.
    7. If a new Sub-Adviser is retained in reliance on the requested 
order, the Funds will inform shareholders of the hiring of a new Sub-
Adviser pursuant to the following procedures (``Modified Notice and 
Access Procedures''): (a) Within 90 days after a new Sub-Adviser 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 Sub-Advisers 
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 1940 Act before entering into or amending Subadvisory 
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 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 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 Funds 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-Advisors' fees to the public. If one Sub-
Adviser is aware of the advisory fee paid to another Sub-Adviser, the 
Sub-Adviser is unlikely to decrease its advisory fee below that amount.

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 relying on the requested order 
will hold itself out to the public as utilizing the Manager of Managers 
Structure described in the application. The prospectus will prominently 
disclose that the Manager has ultimate responsibility (subject to 
oversight by the Board) to oversee the Sub-Advisers and recommend their 
hiring, termination, and replacement. The role of the Adviser, if any, 
will also be disclosed.
    3. Funds 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 Modified Notice and Access Procedures.
    4. The Manager 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.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination and selection of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    6. Whenever 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 
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 Manager, the Adviser or the Affiliated Sub-
Adviser derives an inappropriate advantage.
    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 Manager will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Manager, and 
if applicable, the Adviser, on a per-Fund 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 Manager will 
provide the Board with information showing the expected impact on the 
profitability of the Manager, and if applicable, the Adviser.
    10. The Manager 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, either alone or together with a Fund's 
Adviser: (a) Set each Fund's overall investment strategies; (b) 
evaluate, select and recommend Sub-Advisers 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 Sub-Advisers; (d) monitor and evaluate 
the performance of Sub-Advisers; and (e) implement procedures 
reasonably designed to ensure that the Sub-Advisers comply with each 
Fund's investment objective, policies and restrictions.
    11. No trustee or officer of the Trust or a Fund, or director, 
manager, or officer of the Manager or 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

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Manager or the Adviser or any entity that controls, is controlled by, 
or is under common control with the Manager or 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 Sub-
Adviser or an entity that controls, is controlled by, or is under 
common control with a Sub-Adviser.
    12. Each Fund will disclose in its registration statement the 
Aggregate Fee Disclosure.
    13. In the event that 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. 2012-23483 Filed 9-21-12; 8:45 am]
BILLING CODE 8011-01-P