
[Federal Register Volume 79, Number 182 (Friday, September 19, 2014)]
[Notices]
[Pages 56409-56411]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22339]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. IC-31250; File No. 812-14293]


Evanston Alternative Opportunities Fund and Evanston Capital 
Management, LLC; Notice of Application

September 15, 2014.
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 Sections 18(c) 
and 18(i) of the Act, and for an order pursuant to Section 17(d) of the 
Act and Rule 17d-1 under the Act.

-----------------------------------------------------------------------

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
registered closed-end management investment companies to issue multiple 
classes of shares, units or interests (``Shares'') with varying sales 
loads and asset-based service and/or asset-based distribution fees.

APPLICANTS: Evanston Alternative Opportunities Fund (``Fund'') and 
Evanston Capital Management, LLC (``Adviser'').

DATES: Filing Dates: The application was filed on March 31, 2014, and 
amended on July 16, 2014 and on August 7, 2014.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested 
relief 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 10, 2014 and should be accompanied by proof of 
service on the applicants, in the form of an affidavit, or, for 
lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act, 
hearing requests should state the nature of the writer's interest, any 
facts bearing upon the desirability of a hearing on the matter, 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: Evanston Alternative 
Opportunities Fund and Evanston Capital Management, LLC, 1560 Sherman 
Avenue, Suite 960, Evanston, IL 60201.

FOR FURTHER INFORMATION CONTACT: Rochelle Kauffman Plesset, Senior 
Counsel, at (202) 551-6840, or Nadya Roytblat, Assistant Chief Counsel 
at (202) 551-0825 (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 Fund is a Delaware statutory trust that is registered under 
the Act as a non-diversified, closed-end management investment company. 
The Fund's primary investment objective is to seek attractive long-term 
risk adjusted returns. The Fund is a ``fund of funds'' and seeks to 
achieve its objective by investing substantially all of its assets in 
investment vehicles, often referred to as ``hedge funds,'' that are 
managed by independent investment managers.
    2. The Adviser is a Delaware limited liability company and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940. The

[[Page 56410]]

Adviser serves as investment adviser to the Fund.
    3. The Fund currently issues a single class of Shares (``Initial 
Class''). The Shares are continuously offered and are registered under 
the Securities Act of 1933. Shares of the Fund are not listed on any 
securities exchange, nor quoted on any quotation medium. The Shares are 
not offered or traded on a secondary market. In order to provide a 
limited degree of liquidity, the Fund may from time to time offer to 
repurchase Shares at their then-current net asset value pursuant to 
Rule 13e-4 under the Securities Exchange Act of 1934 (``Exchange 
Act''). Repurchases will be made at such times, in such amounts and on 
such terms as may be determined by the Fund's board of directors 
(``Board'') in its sole discretion. The Adviser expects to recommend 
ordinarily that the Board authorize the Fund to offer to repurchase 
Shares from shareholders quarterly.
    4. The Fund's Initial Class is subject to a sales load, but is not 
subject to any service or distribution fee. Shareholders of the Initial 
Class are subject to a repurchase fee if the interval between the date 
of purchase of the Shares and the valuation date with respect to the 
repurchase of Shares is less than one year.
    5. The Applicants seek an order to permit the Fund to issue 
multiple classes of Shares, with varying sales loads and asset-based 
service and/or asset-based distribution fees. Applicants request that 
the order also apply to any other continuously-offered registered 
closed-end management investment company existing now or in the future 
for which the Adviser or any entity controlling, controlled by, or 
under common control with the Adviser, acts as investment adviser, and 
which provides periodic liquidity to its Shares pursuant to Rule 13e-4 
under the Exchange Act (together with the Fund, the ``Funds'').\1\
---------------------------------------------------------------------------

    \1\ Any Fund relying on this relief in the future will do so in 
a manner consistent with the terms and conditions of the 
application. Applicants represent that each entity presently 
intending to rely on the requested relief is listed in the 
application as an Applicant.
---------------------------------------------------------------------------

    6. If the requested relief is granted, the Fund intends to offer 
multiple classes of Shares of the Fund. Each class would be offered at 
net asset value. Because of different class expenses, the net income 
attributable to, and any dividends payable on, each class of Shares may 
differ from each other from time to time. As a result, the net asset 
value per Share of the classes may differ over time.
    7. Applicants represent that each new class of Shares may charge a 
front-end sales load and an annual asset-based service and/or 
distribution fee. Applicants further represent that any distribution 
fee would be paid pursuant to a plan of distribution adopted by the 
Fund in compliance with the provisions of Rules 12b-1 and 17d-3 under 
the Act as if those rules applied to closed-end management investment 
companies. In addition, any asset-based service fee and distribution 
fee for each class of Shares will comply with the provisions of NASD 
Rule 2830 (``NASD Sales Charge Rule'').\2\ Any repurchase fee will 
apply equally to all shareholders of the Fund, regardless of the class, 
consistent with Section 18 of the Act and Rule 18f-3 under the Act.
---------------------------------------------------------------------------

    \2\ Any reference to the NASD Sales Charge Rule includes any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority (``FINRA'').
---------------------------------------------------------------------------

    8. Applicants state that the Fund does not currently intend to 
impose a contingent deferred sales load (``CDSC''). In the event that 
the Fund does impose a CDSC, however, Applicants represent that it 
would only do so in compliance with Rule 6c-10 under the Act as if the 
rule applied to closed-end management investment companies. With 
respect to any waiver of, scheduled variation in, or elimination of the 
CDSC, the Fund will comply with Rule 22d-1 under the Act as if the Fund 
were an open-end investment company and will be applied uniformly to 
all shareholders of the Fund.
    9. Applicants represent that all expenses incurred by the Fund will 
be allocated among the various classes of Shares based on the net 
assets of the Fund attributable to each class, except that the net 
asset value and expenses of each class will reflect distribution fees, 
service fees, and any other expenses of that class. Expenses of the 
Fund allocated to a particular class of Shares will be borne on a pro 
rata basis by each outstanding Share of that class. Applicants state 
that each Fund will comply with the provisions of Rule 18f-3 under the 
Act as if it were an open-end investment company.
    10. Applicants state that, from time to time, the Fund may create 
and offer additional classes of Shares, the terms of which may differ, 
including in the following respects: (i) The amount of fees permitted 
by different distribution plans and/or different service fee 
arrangements; (ii) voting rights with respect to a distribution plan 
and/or service plan of a class; (iii) different class designations; 
(iv) the impact of any class expenses directly attributable to a 
particular class of Shares allocated on a class basis as described in 
this application; (v) any differences in dividends and net asset values 
per Share resulting from differences in fees under a distribution plan 
and/or service plan or in class expenses; (vi) any sales load 
structure; and (vii) any conversion features as permitted under the 
Act.
    11. Applicants state that any repurchase offers made by the Fund 
will be made to all classes of Shares at the same time, in the same 
proportional amounts and on the same terms, except for differences in 
net asset values per Share resulting from differences in fees under a 
distribution plan and/or service plan or in class expenses.
    12. Applicants represent that the Fund will disclose in its 
prospectus the fees, expenses and other characteristics of each class 
of Shares offered for sale by the prospectus, as is required for open-
end multiple class investment companies under Form N-1A. As is required 
for open-end management investment companies, the Fund will disclose 
its expenses in shareholder reports, and disclose any arrangements that 
result in breakpoints in, or elimination of, sales loads in its 
prospectus.\3\ In addition, Applicants will comply with applicable 
enhanced fee disclosure requirements for fund of funds, including 
registered funds of hedge funds.\4\
---------------------------------------------------------------------------

    \3\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release); Disclosure 
of Breakpoint Discounts by Mutual Funds, Investment Company Act 
Release No. 26464 (June 7, 2004) (adopting release).
    \4\ Fund of Funds Investments, Investment Company Act Rel. No. 
27399 (Jun. 20, 2006) (adopting release). See also Rules 12d1-1, et 
seq. of the Act.
---------------------------------------------------------------------------

    13. The Fund will comply with any requirements that the Commission 
or FINRA may adopt regarding disclosure at the point of sale and in 
transaction confirmations about the costs and conflicts of interest 
arising out of the distribution of open-end investment company shares, 
and regarding prospectus disclosure of sales loads and revenue sharing 
arrangements as if those requirements applied to the Fund. In addition, 
each Fund will contractually require that any distributor of the Fund's 
Shares comply with such requirements in connection with the 
distribution of such Shares.

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(c) of the Act provides, in relevant part, that a 
closed-end

[[Page 56411]]

investment company may not issue or sell any senior security if, 
immediately thereafter, the company has outstanding more than one class 
of senior security. Applicants state that the creation of multiple 
classes of shares of the Fund may be prohibited by Section 18(c), as a 
class may have priority over another class as to payment of dividends 
because shareholders of different classes would pay different fees and 
expenses.
    2. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that multiple classes of Fund Shares may 
violate Section 18(i) of the Act because each class would be entitled 
to exclusive voting rights with respect to matters solely related to 
that class.
    3. 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 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 request an exemption under Section 
6(c) from Sections 18(c) and 18(i) to permit the Fund to issue multiple 
classes of shares.
    4. Applicants submit that the proposed allocation of expenses and 
voting rights among multiple classes is equitable and will not 
discriminate against any group or class of shareholders. Applicants 
submit that the proposed arrangements would permit a Fund to facilitate 
the distribution of its shares and provide investors with a broader 
choice of shareholder services. Applicants assert that the proposed 
closed-end investment company multiple class structure does not raise 
the concerns underlying Section 18 of the Act to any greater degree 
than open-end investment companies' multiple class structures that are 
permitted by Rule 18f-3 under the Act. Applicants state that each Fund 
will comply with the provisions of Rule 18f-3 as if it were an open-end 
investment company.

CDSCs

    1. Applicants believe that the requested relief meets the standards 
of Section 6(c) of the Act. Rule 6c-10 under the Act permits open-end 
investment companies to impose CDSCs, subject to certain conditions. 
Applicants state that any CDSC imposed by the Fund will comply with 
Rule 6c-10 under the Act as if the rule were applicable to closed-end 
investment companies. The Fund also will disclose CDSCs in accordance 
with the requirements of Form N-1A concerning CDSCs as if the Fund were 
an open-end investment company. Applicants further state that the Fund 
will apply the CDSC (and any waivers or scheduled variations of the 
CDSC) uniformly to all shareholders in a given class and consistently 
with the requirements of Rule 22d-1 under the Act.

Asset-Based Service and/or Distribution Fees

    1. Section 17(d) of the Act and Rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under Section 17(d) 
and Rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis different from or 
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from Section 
17(d) and Rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to Rule 12b-1 under the Act. 
Applicants request an order under Section 17(d) and Rule 17d-1 under 
the Act to the extent necessary to permit the Fund to impose asset-
based service and/or distribution fees. Applicants have agreed to 
comply with Rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of 
Rules 6c-10, 12b-1, 17d-3, 18f-3 and 22d-1 under the Act, as amended 
from time to time, as if those rules applied to closed-end management 
investment companies, and will comply with the NASD Sales Charge Rule, 
as amended from time to time, as if that rule applied to all closed-end 
management investment companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22339 Filed 9-18-14; 8:45 am]
BILLING CODE 8011-01-P


