[Federal Register Volume 79, Number 204 (Wednesday, October 22, 2014)]
[Notices]
[Pages 63183-63186]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25083]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31291; File No. 812-13784]


BlackRock Advisors, LLC, et al.; Notice of Application

October 16, 2014.
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 with 
Wholly-Owned Subadvisers (as defined below) and non-affiliated 
subadvisers without shareholder approval and would grant relief from 
certain disclosure requirements.

Applicants: BlackRock Advisors, LLC (``BlackRock Advisors''), BlackRock 
Funds (the ``Trust''), and FDP Series, Inc. (the ``Corporation'').

Filing Dates: The application was filed on June 17, 2010, and amended 
on November 22, 2013, May 9, 2014, and October 3, 2014.

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 November 10, 2014, 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, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants, 55 East 52nd Street, 
New York, NY 10055.

FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Senior Counsel, at 
(202) 551-6882, or David P. Bartels, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's 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 for 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 Corporation is an open-end management investment company 
registered under the Act that is organized as a Maryland corporation. 
The Corporation is organized as a series fund (each, an ``FDP Series'') 
and currently consists of four FDP Series. The Trust is an open-end 
management investment company registered under the Act that is 
organized as a Massachusetts business trust. The Trust is organized as 
a series fund and currently consists of thirty-four series, only one of 
which, the BlackRock Multi-Manager Alternative Strategies Fund (the 
``Multi-Manager Fund''), currently intends to operate under the manager 
of managers structure described in the application (the ``Manager of 
Managers Structure''). BlackRock Advisors is a Delaware limited 
liability company that is registered with the Commission as an 
investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act'').
    2. Applicants request an order to permit the Adviser,\1\ subject to 
the approval of the board of directors or trustees of the Corporation 
or the Trust, as applicable (each a ``Board''),\2\ including a majority 
of the directors or trustees who are not ``interested persons'' as 
defined in section 2(a)(19) of the Act of the Corporation or the Trust, 
as applicable, or of the Adviser (the ``Independent Directors''), to 
take certain actions without obtaining shareholder approval as follows: 
(i) Select certain wholly-owned an non-affiliated investment advisers 
(each a ``Subadviser'' \3\) to manage all or a portion of the assets of 
one of more of the Subadvised Funds (as defined below) pursuant to an 
investment subadvisory agreement with each Subadviser (each a 
``Subadvisory Agreement''), and (ii) materially amend Subadvisory 
Agreement with such Subadvisers.\4\ Applicants request that

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the relief apply to the named applicants, as well as to any future FDP 
Series of the Corporation, any other existing or future series of the 
Trust, and any other existing or future registered open-end management 
investment company or series thereof \5\ that relies on the requested 
relief and (a) is advised by an Adviser, (b) uses Manager of Managers 
Structure, and (c) complies with the terms and conditions set forth in 
the application (the ``Subadvised Funds,'' and each a ``Subadvised 
Fund'').\6\ The requested relief will not extend to any subadviser, 
other than a Wholly-Owned Subadviser, who is an affiliated person, as 
defined in section 2(a)(3) of the Act, of the Subadvised Fund or of the 
Adviser, other than by reason of serving as a subadviser to one or more 
of the Subadvised Funds (``Affiliated Sub-Adviser'').
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    \1\ The term ``Adviser'' means (i) BlackRock Advisors and (ii) 
any entity controlling, controlled by or under common control with, 
BlackRock Advisors or its successor. 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.
    \2\ The term ``Board'' includes the board of directors or 
trustees of a Subadvised Fund.
    \3\ A ``Subadviser'' for a Subadvised Fund is (a) an indirect or 
direct ``wholly-owned subsidiary'' (as such term is defined in the 
Act) of the Adviser for that Subadvised Fund; (b) a sister company 
of the Adviser for that Subadvised Fund 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 Subadviser'' and 
collectively, the ``Wholly-Owned Subadvisers''), or (c) not an 
``affiliated person'' (as such term is defined in section 2(a)(3) of 
the Act) of the applicable Subadvised Fund, the Corporation or the 
Trust, as applicable, or the Adviser, except to the extent that an 
affiliation arises solely because the Subadviser serves as a 
subadviser to a Subadvised Fund (each, a ``Non-Affiliated 
Subadviser'').
    \4\ Shareholder approval will continue to be required for any 
other subadviser changes and material amendments to an existing 
subadvisory agreement with any subadviser other than a Non-
Affiliated Subadviser or Wholly-Owned Sub-Adviser (all such changes 
referred to as ``Ineligible Subadviser Changes''), except as 
otherwise permitted by applicable law or by rule.
    \5\ Any such existing or future series or investment company and 
any existing or future series of the Corporation or the Trust, a 
``Fund.''
    \6\ All registered open-end investment companies that currently 
intend to rely on the requested order are named as applicants. All 
funds that currently are, or that currently intend to be, Subadvised 
Funds (as defined below) are identified in the application. Any 
entity that relies on the requested order will do so only in 
accordance with the terms and conditions contained in the 
application. If the name of any Subadvised Fund contains the name of 
a Subadviser (as defined below), the name of the Adviser that serves 
as the primary adviser to that Subadvised Fund, or a trademark or 
trade name that is owned by or publicly used to identify that 
Adviser, will precede the name of the Subadviser.
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    3. BlackRock Advisors currently serves as investment adviser to 
each FDP Series and to the Multi-Manager Fund, pursuant to investment 
advisory agreements with the Corporation and the Trust, respectively 
(each, an ``Investment Advisory Agreement'').\7\ Any other Adviser will 
be registered with the Commission as an investment adviser under the 
Advisers Act. The terms of each Investment Advisory Agreement comply 
with section 15(a) of the Act, and applicants are not seeking an 
exemption from the provisions of the Act with respect to the Investment 
Advisory Agreements.
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    \7\ The term ``Investment Advisory Agreement'' includes each 
investment advisory agreement entered into by an Adviser with, or on 
behalf of, a Subadvised Fund that in the future seeks to rely on the 
order.
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    4. Applicants state that, under the terms of each Investment 
Advisory Agreement, subject to and in accordance with the investment 
objective and policies of a Subadvised Fund and any directions which 
the Board may issue to the Adviser, the Adviser has overall 
responsibility for the general management and investment of the assets 
and securities portfolios of the Subadvised Fund. In addition, the 
Adviser shall develop the overall investment program and strategies for 
the Subadvised Fund, or segments thereof, shall revise such program as 
necessary, and shall monitor and report periodically to the Board 
concerning the implementation of the program. For the investment 
management services it provides to a Subadvised Fund, the Adviser 
receives the fee specified in the Investment Advisory Agreement. Each 
Investment Advisory Agreement permits the Adviser, subject to the 
approval of the Board, to appoint one or more subadvisers to perform 
investment advisory services with respect to a Subadvised Fund. 
Applicants represent that, to the extent applicable, the Adviser shall 
research and evaluate subadvisers and shall advise the Board of the 
subadvisers that the Adviser believes are best-suited to invest the 
assets of a Subadvised Fund; shall monitor and evaluate the performance 
of each Subadviser; shall determine the portion of a Subadvised Fund's 
assets to be managed by each Subadviser; shall recommend to the Board 
changes or additions of Subadvisers when appropriate; and shall 
coordinate the investment activities of the Subadvisers. In addition, 
Applicants state that the Adviser may directly manage a portion or, 
from time to time, all of the assets of a Subadvised Fund.
    5. Pursuant to the authority under the Investment Advisory 
Agreements, the Adviser has entered into subadvisory agreements with 
subadvisers with respect to the existing FDP Series and the Multi-
Manager Fund. Applicants state that each of the current subadvisory 
agreements relating to the FDP Series and the Multi-Manager Fund has 
been approved by the respective Board, including by a majority of the 
Independent Directors, and the shareholders of the respective FDP 
Series and the Multi-Manager Fund, in accordance with Sections 15(a) 
and 15(c) of the Act and Rule 18f-2 under the 1940 Act. Applicants 
further state that, in the future, the Adviser may enter into new, 
additional or amended Subadvisory Agreements on behalf of the FDP 
Series, the Multi-Manager Fund or other Subadvised Funds, subject to 
(i) applicable Board and Independent Director approval and (ii) (a) any 
required shareholder approval or (b) any and all applicable terms and 
conditions set forth in the application. The terms of each Subadvisory 
Agreement will comply fully with the requirements of Section 15(a) of 
the Act.
    6. Each current subadviser is, and any future Subadviser will be 
either registered with the Commission as an investment adviser under 
the Advisers Act or not subject to such registration. Applicants state 
that the specific investment decisions for each Subadvised Fund will be 
made by that Subadviser which has discretionary authority to invest the 
assets or a portion of the assets of that Subadvised Fund, subject to 
the general supervision of the Adviser and the Board. For its services 
to a Subadvised Fund, a Subadviser will receive a fee paid by the 
Adviser from the fee the Adviser receives from the Subadvised Fund. 
None of the Subadvised Funds is responsible for paying subadvisory fees 
to any Subadviser.
    7. 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; \8\ 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. Applicants state that, in the 
circumstances described in the 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. Applicants also state that the applicable Board would comply 
with the requirements of

[[Page 63185]]

sections 15(a) and 15(c) of the Act before entering into or amending 
Subadvisory Agreements.
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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 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 to permit Aggregate Fee Disclosure. Multi-manager 
Information Statements will be filed with the Commission via the 
EDGAR system.
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    8. Applicants also request an order under section 6(c) of the Act 
exempting the Subadvised Fund from certain disclosure obligations that 
may require each Subadvised Fund to disclose fees paid by the Adviser 
to a subadviser. Applicants seek relief to permit each Subadvised Fund 
to disclose (as a dollar amount and a percentage of the Subadvised 
Fund's net assets) only: (a) The aggregate fees paid to the Subadvised 
Fund's Adviser and any Wholly-Owned Subadvisers; (b) the aggregate fees 
paid to Non-Affiliated Subadvisers; and (c) the fee paid to each 
Affiliated Subadviser (collectively, the ``Aggregate Fee Disclosure''). 
All other items required by Sections 6-07(2)(a), (b) and (c) of 
Regulation S-X will be disclosed.

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, may require a Subadvised Fund 
to disclose the fees paid to a Subadviser in connection with a 
Subadvisory Agreement or with shareholder action with respect to 
entering into, or materially amending, an advisory agreement or 
establishing, or increasing, advisory 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. These provisions could 
require a Subadvised Fund's financial statements to disclose 
information concerning fees paid to a subadviser.
    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 assert 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 
Subadvisers that the Adviser has reasonably determined are well 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 with a single investment adviser (a ``Single-Manager 
Fund''). Applicants believe that permitting the Adviser to perform the 
duties for which the shareholders of the Subadvised Fund are paying the 
Adviser (which include the selection, supervision and evaluation of the 
Subadvisers)--without incurring unnecessary delays or expenses is 
appropriate in the interest of the Subadvised Fund's shareholders and 
will allow such Subadvised Fund to operate more efficiently.
    7. Applicants state that a Subadvised Fund will be required to 
obtain shareholder approval of the Manager of Managers Structure before 
relying on the requested order. Applicants assert that conditions 6, 
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.
    8. Applicants believe that relief from disclosure of the individual 
fees that the Adviser would pay to the Subadvisers is necessary or 
appropriate in the public interest, consistent with the protection of 
investors and consistent with the purposes fairly intended by the 
policy and provisions of the Act, and should be granted for the 
following reasons: (1) The Adviser will operate the Subadvised Funds 
using the services of one or more Subadvisers in a manner different 
from that of Single-Manager Funds such that disclosure of the 
individual fees that the Adviser or Subadvised Funds would pay to each 
Subadviser would not be relevant to a shareholder or prospective 
shareholder in understanding the aggregate amount that the fund would 
pay for investment advisory services; (2) the relief would benefit 
shareholders by enabling the Subadvised Funds to operate in a less 
costly and more efficient manner, for example, by facilitating the 
Adviser's ability to negotiate and manage subadvisory relationships; 
and (3) the relief is subject to a number of conditions that adequately 
address disclosure concerns.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions: \9\
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    \9\ A Subadvised Fund relying on the order granted hereunder 
will comply with conditions 7, 8, 9 and 12 only if it relies on the 
relief that would allow it to provide Aggregate Fee Disclosure.
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    1. Before a Subadvised Fund may rely on the order requested in the 
application, the operation of the Subadvised Fund in the manner 
described in the application, including the hiring of Wholly-Owned 
Subadvisers, 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

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to oversight by the Board, to oversee the Subadvisers and recommend 
their hiring, termination, and replacement.
    3. 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 the review and approval by the Board, the Adviser will (a) 
set a Subadvised Fund's overall investment strategies, (b) evaluate, 
select, and recommend Subadvisers to manage all or a portion of the 
Subadvised Fund's assets, and (c) implement procedures reasonably 
designed to ensure that the Subadvisers comply with the Subadvised 
Fund's investment objectives, policies and restrictions. Subject to 
review by the Board, the Adviser will (a) when appropriate, allocate 
and reallocate the Subadvised Fund's assets among multiple Subadvisers; 
and (b) monitor and evaluate the performance of the Subadvisers.
    4. A Subadvised Fund will not make any Ineligible Subadviser 
Changes without the approval of the shareholders of the applicable 
Subadvised Fund.
    5. 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.
    6. At all times, at least a majority of the Board will be 
Independent Directors, and the selection and nomination of new or 
additional Independent Directors will be placed within the discretion 
of the then-existing Independent Directors.
    7. Independent Legal Counsel, as defined in rule 0-1(a)(16) under 
the Act, will be engaged to represent the Independent Directors. The 
selection of such counsel will be within the discretion of the then-
existing Independent Directors.
    8. The 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.
    9. 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.
    10. Whenever a subadviser change is proposed for a Subadvised Fund 
with an Affiliated Subadviser or a Wholly-Owned Sub-Adviser, the Board, 
including a majority of the Independent Directors, will make a separate 
finding, reflected in the Board minutes, that such 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 or Wholly-Owned Subadviser derives an 
inappropriate advantage.
    11. No Director or officer of the Trust, the Corporation, a 
Subadvised Fund, or partner, 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 (a) ownership of interests in the Adviser or any 
entity, other than a Wholly-Owned Subadviser, 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 any publicly traded company that is either a 
Subadviser or an entity that controls, is controlled by, or 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 requested in the 
application, the requested order will expire on the effective date of 
that rule.
    14. Any new subadvisory agreement or any amendment to a Subadvised 
Fund's existing Investment Advisory Agreement or subadvisory agreement 
that directly or indirectly results in an increase in the aggregate 
advisory fee rate payable by the Subadvised Fund will be submitted to 
the Subadvised Fund's shareholders for approval.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25083 Filed 10-21-14; 8:45 am]
BILLING CODE 8011-01-P