
[Federal Register: November 30, 2009 (Volume 74, Number 228)]
[Notices]               
[Page 62610-62612]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no09-95]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29062; File No. 812-13654]

 
Members Mutual Funds, et al.; Notice of Application

November 23, 2009.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application 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: The requested order would permit certain 
registered open-end management investment companies to enter into and 
materially amend subadvisory agreements without shareholder approval.
    Applicants: Members Mutual Funds (``MMF''), Ultra Series Fund 
(``USF'') and Madison Asset Management, LLC (``MAM'').

DATES: Filing Dates: The application was filed on April 16, 2009, and 
amended on September 23, 2009 and November 23, 2009.
    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 December 18, 2009 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 reasons 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, W. Richard Mason, 
Esq., Corporate Counsel and CCO, Madison Asset Management, LLC c/o 
Madison/Mosaic Legal and Compliance Department, 8777 N. Gainey Center 
Drive, Suite 220, Scottsdale, AZ 85258.

FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel at 
(202) 551-6915, or Julia Kim Gilmer, 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. MMF and USF are open-end management investment companies 
registered under the Act. MMF is organized as a Delaware business 
trust. USF is organized as a Massachusetts business trust. MMF is 
currently comprised of 14 separate series and USF is currently 
comprised of 18 separate series each of which has its own investment 
objectives and policies (such series, together with the future series 
of MMF and USF, the ``Funds,'' and each a ``Fund''). Applicants also 
request relief with respect to current and future series of all 
registered open-end management investment companies and their series 
that are now, or in the future, advised by MAM or any entity 
controlling, controlled by or under common control (within the meaning 
of section 2(a)(9) of the Act) with MAM, or any successor to MAM 
(collectively, the ``Adviser'') that comply with the terms and 
conditions as set forth in the application and that

[[Page 62611]]

uses the services of one or more subadvisors to manage all or a portion 
of their investment portfolios (the ``Management Structure,'' and such 
companies and their series included in the term ``Funds''), as 
described more fully in the application.\1\
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    \1\ The term ``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. Any existing entity 
that currently intends to rely on the requested relief is named as 
an applicant. If a Fund has the name of any investment subadvisor in 
the Fund's name, the investment subadvisor's name will be preceded 
by the name of the Adviser.
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    2. MAM, a Wisconsin limited liability corporation, is registered as 
an investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''). MAM provides overall investment management to MMF, 
USF and each Fund, subject to the supervision of the board of directors 
or trustees of each Fund (``Board'') pursuant to written agreements 
(``Management Agreements'').\2\
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    \2\ Under a prior order, the Commission granted relief to 
Members Capital Advisors, Inc. (``MCA'') (f/k/a CIMCO, Inc.) and MMF 
from the provisions of section 15(a) of the Act and rule 18f-2 under 
the Act, pursuant to which MCA retained investment subadvisors for 
certain of the Funds. Members Mutual Funds and CIMCO, Inc., 
Investment Company Act Release Nos. 23365 (July 29, 1998) (notice) 
and 23400 (August 25, 1998) (order) (``Existing Order''). On April 
15, 2009, MCA, an indirectly wholly owned subsidiary of CUNA Mutual 
Insurance Society (``CMIS'') and CMIS entered into an agreement 
under which MAM would become the investment adviser to the Funds 
(the ``Transaction''). The Transaction was approved by Fund 
shareholders and MAM now serves as the Funds' investment adviser. 
The Funds wish to continue to operate in a manner consistent with 
the Existing Order. On June 30, 2009, MAM received a no-action 
letter (Ref. No. 2009-3-1CR), permitting MAM to rely on the Existing 
Order until the earlier of the receipt of any order granted by the 
Commission on the application or December 30, 2009.
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    3. The Management Agreements have been approved by a majority of 
the trustees who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, of the Board (the ``Independent Trustees'') and 
Fund shareholders in the manner required by sections 15(a) and (c) of 
the Act and rule 18f-2 under the Act. The Adviser will provide general 
management services to each Fund, including overall supervisory 
responsibility for the general management and investment of each Fund's 
assets subject to review and approval of the Board. For the investment 
management services the Adviser provides to the Funds, the Adviser will 
receive fees at an annual rate based on each Fund's average net assets. 
Each investment subadvisor will be recommended by the Adviser and 
selected and approved by the Board, including a majority of the 
Independent Trustees, and is (or will be) registered as an investment 
adviser under the Advisers Act. Each investment subadvisor has 
discretionary authority to invest all or a portion of the assets of a 
particular Fund pursuant to a written investment subadvisory agreement 
between the investment subadvisor and the Adviser. The fees of the 
investment subadvisors are paid by the Adviser at rates negotiated with 
the investment subadvisors by the Adviser and evaluated by the Board. 
The Adviser will monitor the performance of each investment subadvisor 
and of the Fund's portfolio and reallocate Fund assets among individual 
investment subadvisors, or recommend to the Board that the Fund employ 
or terminate particular investment subadvisors, to the extent the 
Adviser deems appropriate to achieve the Fund's overall investment 
objectives.
    4. Applicants request an order to eliminate the need for Funds to 
submit new investment subadvisory agreements, and material amendments 
to existing investment subadvisory agreements, to shareholders for 
their approval. The requested relief will not extend to any investment 
subadvisor who is an ``affiliated person,'' as defined in section 
2(a)(3) of the Act, of the Funds or the Adviser (other than by reason 
of serving as investment subadvisor to one or more Funds) (``affiliated 
investment subadvisor''). Shareholder approval will continue to be 
required for each investment subadvisory agreement with an affiliated 
investment subadvisor.

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 such 
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.
    3. Applicants state that investors in any subadvised Fund are, in 
effect, electing to have the Adviser select one or more investment 
subadvisors best suited to achieve a Fund's investment objectives. 
Applicants assert that, the role of the investment subadvisor, from the 
perspective of the investor, is comparable to that of individual 
portfolio managers employed by other investment company investment 
advisory firms. Applicants contend that requiring shareholder approval 
of investment subadvisory agreements would not serve the purpose 
intended by the Act. Such requirements would place costs and burdens on 
the Funds and their shareholders that would not advance such 
shareholders' interests and would merely increase the Fund's expenses 
and delay the prompt implementation of actions deemed advisable by the 
Adviser and the Board. Applicants also note that the Management 
Agreement between the Adviser and each of the Funds will be subject to 
the shareholder approval requirements in section 15(a) and 15(c) of the 
Act and rule 18f-2 under the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall 
be subject to the following conditions:
    1. The Adviser 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 the 
review and approval of the Board, will: (i) Set the overall investment 
strategies of the Funds; (ii) evaluate, select and recommend investment 
subadvisors to manage all or part of a Fund's assets; (iii) allocate 
and, when appropriate, reallocate the assets of the Funds among 
investment subadvisors in those cases where a Fund has more than one 
investment subadvisor; (iv) monitor and evaluate the investment 
performance of the investment subadvisors, including their compliance 
with the investment objectives, policies and restrictions of the Funds; 
and (v) implement procedures reasonably designed to ensure that the 
investment subadvisors comply with the relevant Fund's investment 
objective, policies and restrictions.
    2. Before any Fund may rely on the order requested in the 
application, the operation of the Fund in the manner described in the 
application will be approved by a majority of its outstanding voting 
securities, as defined in the Act, or, in the case of a Fund

[[Page 62612]]

whose public shareholders purchase shares on the basis of a prospectus 
containing the disclosure contemplated by condition 4 below, by the 
initial shareholder(s) before offering shares of such Fund to the 
public.
    3. Within 90 days of the hiring of any new investment subadvisor, 
the Adviser will furnish shareholders of the affected Fund with all 
information about such investment subadvisor that would be included in 
a proxy statement, including any change in such disclosure caused by 
the addition of the new investment subadvisor. To meet this condition, 
the Funds will provide shareholders with an information statement 
meeting the requirements of Regulation 14C, Schedule 14C, and Item 22 
of Schedule 14A under the Securities Exchange Act of 1934.
    4. Each Fund will disclose in its prospectus the existence, 
substance, and effect of any order granted pursuant to the application. 
In addition, 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 investment subadvisors 
and recommend their hiring, termination and replacement.
    5. No trustee or officer of any 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 any such director, 
trustee, or officer) any interest in an investment subadvisor except 
for: (i) Ownership of interests in the Adviser or any entity that 
controls, is controlled by, or under common control with the Adviser; 
or (ii) ownership of less than 1% of the outstanding securities of any 
class of equity or debt securities of any publicly-traded company that 
is either an investment subadvisor or an entity that controls, is 
controlled by or is under common control with an investment subadvisor.
    6. The Adviser will not enter into investment subadvisory 
agreements on behalf of a Fund with any affiliated investment 
subadvisor without such agreement, including the compensation to be 
paid under the agreement, being approved by the shareholders of the 
applicable Fund.
    7. 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.
    8. When a change of investment subadvisor is proposed for a Fund 
with an affiliated investment subadvisor, the Board, including a 
majority of the Independent Trustees, will make a separate finding, 
reflected in the minutes of meetings of the Board, that any such change 
of investment subadvisors is in the best interest of the Fund and its 
shareholders and does not involve a conflict of interest from which the 
Adviser or the affiliated investment subadvisor derives an 
inappropriate advantage.
    9. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the requested order, 
the requested order will expire on the effective date of that rule.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-28560 Filed 11-27-09; 8:45 am]
