

[Federal Register: December 6, 2007 (Volume 72, Number 234)]
[Notices]               
[Page 68907-68909]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de07-92]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28071; 812-13450]

 
Unified Series Trust and Envestnet Asset Management, Inc.; Notice 
of Application

November 30, 2007.
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 (``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 the Application: Applicants request an order permitting them 
to enter into and materially amend subadvisory agreements without 
shareholder approval and granting relief from certain disclosure 
requirements.

Applicants: Unified Series Trust (``Trust'') and Envestnet Asset 
Management, Inc. (``Adviser'').

Filing Dates: The application was filed on November 14, 2007. 
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 December 
26, 2007 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 by writing to the Commission's 
Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants, c/o Dee Anne 
Sjogren, Thompson Coburn LLP, One U.S. Bank Plaza, St. Louis, MO 63101.

FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202) 
551-6870, or Nadya B. Roytblat, Assistant Director, at (202) 551-6821 
(Office of Investment Company Regulation, Division of Investment 
Management).

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, 100 F Street, NE., Washington, DC 
20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. The Trust is organized as Ohio business trust and is registered 
under the Act as an open-end management investment company. The 
Adviser, a Delaware corporation, is registered as an investment adviser 
under the Investment Advisers Act of 1940 (``Advisers Act'').
    2. The Trust currently offers a number of series, each with its own 
investment objective(s), policies and restrictions. The Adviser will 
serve as the investment adviser to two of the series of the Trust 
(each, a ``Fund,'' and collectively, the ``Funds''). The Adviser will 
enter into an investment advisory agreement with the Trust for each 
Fund (each, an ``Advisory Agreement,'' and collectively, the ``Advisory 
Agreements'') 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 (the 
``Independent Trustees''), and the shareholders of each Fund.\1\
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    \1\ Applicants also request relief with respect to any future 
series of the Trust and any other existing or future registered 
open-end management investment company or series thereof that: (a) 
Is advised by the Adviser or any person controlling, controlled by, 
or under common control with the Adviser; (b) uses the management 
structure described in the application; and (c) complies with the 
terms and conditions contained in the application (included in the 
term ``Funds''). The Trust is the only existing investment company 
that currently intends to rely on the requested order. If the name 
of any Fund contains the name of a Subadviser (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 such Fund, or a trademark or trade name 
owned by them, will precede the name of the Subadviser.
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    3. The Advisory Agreement permits the Adviser to enter into 
separate advisory agreements (``Subadvisory Agreements'') with 
subadvisers (``Subadvisers''). Each Subadviser will be registered under 
the Advisers Act. The specific investment decisions for each Fund using 
a Subadviser will be made by that Subadviser, who will be granted 
discretionary authority to invest the assets, or a portion of the 
assets, of a particular Fund, subject to the general supervision by the 
Adviser and the Board. The Adviser will select Subadvisers based on an 
evaluation of their skills and proven abilities in managing assets 
pursuant to a specific investment style and will recommend their hiring 
to the Board. Subadvisers must be approved by the Board, including a 
majority of the Independent Trustees. The Adviser will monitor and 
evaluate the performance of Subadvisers and recommend to the Board 
their hiring, termination and replacement. The Adviser will compensate 
a Subadviser out of the management fee paid to the Adviser by the Fund 
under the Advisory Agreement.
    4. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
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 a Fund or the Adviser, other 
than by reason of serving as a Subadviser to one or more of the Funds 
(``Affiliated Subadviser'').
    5. Applicants also request an exemption from the various disclosure 
provisions described below that may require each Fund to disclose fees 
paid by the Adviser to the Subadvisers. An

[[Page 68908]]

exemption is requested to permit each Fund to disclose (both as a 
dollar amount and as a percentage of the Fund's net assets) the: (a) 
aggregate fees paid to the Adviser and any Affiliated Subadvisers; and 
(b) aggregate fees paid to Subadvisers other than Affiliated 
Subadvisers (collectively, ``Aggregate Fee Disclosure''). If a Fund 
employs an Affiliated Subadviser, the Fund 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 under 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 company affected by a matter must approve the 
matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 14(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. 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 Subadvisers.
    5. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of investment company 
registration statements and shareholders 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 provisions 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 
policies and provisions of the Act. Applicants state that the requested 
relief meets this standard for the reasons discussed below.
    7. Applicants assert that the Funds' shareholders rely on the 
Adviser to select and monitor the Subadvisers best suited to achieve a 
Fund's investment objectives. Applicants contend that, from the 
perspective of the investor, the role of the Subadvisers is comparable 
to that of individual portfolio managers employed by traditional 
investment advisory firms. Applicants state that requiring shareholder 
approval of each Subadvisory Agreement 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 Subadvisers use a ``posted'' rate 
schedule to set their fees. Applicants state that, while Subadvisers 
are willing to negotiate fees lower than those posted in the schedule, 
they are reluctant to do so when the fees are disclosed to other 
prospective and existing customers. Applicants submit that the 
requested relief will encourage potential Subadvisers to negotiate 
lower subadvisory fees with the Adviser.

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 
such Fund's shares are offered to the public.
    2. The prospectus for each Fund will disclose the existence, 
substance and effect of any order granted pursuant to the application. 
Each Fund will hold itself out to the public as employing the 
management structure described in the application. The prospectus will 
prominently disclose that the Adviser has ultimate responsibility, 
subject to oversight by the Board, to oversee the Subadvisers and 
recommend their hiring, termination, and replacement.
    3. Within 90 days of the hiring of any new Subadviser, the affected 
Fund's shareholders will be furnished all information about the new 
Subadviser that would be included in a proxy statement, except as 
modified to permit Aggregate Fee Disclosure. This information will 
include Aggregate Fee Disclosure and any change in such disclosure 
caused by the addition of a new Subadviser. To meet this obligation, 
the Fund will provide shareholders within 90 days of the hiring of a 
new Subadviser with an information statement meeting the requirements 
of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the 
Exchange Act, except as modified by the order to permit Aggregate Fee 
Disclosure.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser, 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 of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    6. When a Subadviser change is proposed for a Fund with an 
Affiliated Subadviser, 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 Adviser or the Affiliated Subadviser derives an 
inappropriate advantage.
    7. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, has been and will continue to 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 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 profitability 
of the hiring or termination of any Subadviser during the applicable 
period.

[[Page 68909]]

    9. Whenever a Subadviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
Adviser's profitability.
    10. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of the Fund's assets, and subject to review 
and approval of the Board, will: (a) Set each Fund's overall investment 
strategies; (b) evaluate, select and recommend Subadvisers to manage 
all or a part of a Fund's assets; (c) where appropriate, allocate and 
reallocate a Fund's assets among multiple Subadvisers; (d) monitor and 
evaluate the performance of Subadvisers; and (e) implement procedures 
reasonably designed to ensure that the Subadvisers comply with each 
Fund's investment objective, policies, and restrictions.
    11. No trustee or officer of the Trust or a Fund or director or 
officer of the Adviser will own any interest in a Subadviser, directly 
or indirectly (other than through a pooled investment vehicle that is 
not controlled by such person), 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 Subadviser or an entity that 
controls, is controlled by, or is under common control with a 
Subadviser.
    12. Each Fund will disclose in its registration statement the 
Aggregate Fee Disclosure.
    13. 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.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-23722 Filed 12-5-07; 8:45 am]

BILLING CODE 8011-01-P
