60838 Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices 

conditions of the order and agree to 

fulfill their responsibilities under the 

order. At the time of its investment in 

shares of an Unaffiliated Investment 

Company in excess of the limit set forth 

in section 12(d)(1)(A)(i), a Fund of 

Funds will notify the Unaffiliated 

Investment Company of the investment. 

At such time, the Fund of Funds will 

also transmit to the Unaffiliated 

Investment Company a list of the names 

of each Fund of Funds Affiliate and 

Underwriting Affiliate. The Fund of 

Funds will notify the Unaffiliated 

Investment Company of any changes to 

the list as soon as reasonably practicable 

after a change occurs. The Unaffiliated 

Investment Company and the Fund of 

Funds will maintain and preserve a 

copy of the order, the Participation 

Agreement and the list with any 

updated information for the duration of 

the investment and for a period of not 

less than six years thereafter, the first 

two years in an easily accessible place. 

9. Before approving any advisory 

contract under section 15 of the Act, the 

Board of each Fund of Funds, including 

a majority of the Independent Trustees, 

shall find that the advisory fees charged 

under the advisory contract are based on 

services provided that are in addition to, 

rather than duplicative of, services 

provided under the advisory contract(s) 

of any Underlying Fund in which the 

Fund of Funds may invest. Such 

finding, and the basis upon which the 

finding was made, will be recorded fully 

in the minute books of the appropriate 

Fund of Funds. 

10. The Manager will waive fees 

otherwise payable to it by a Fund of 

Funds in an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by an 

Unaffiliated Investment Company 

pursuant to rule 12b–1 under the Act) 

received from an Unaffiliated Fund by 

the Manager, or an affiliated person of 

the Manager, other than any advisory 

fees paid to the Manager or its affiliated 

person by an Unaffiliated Investment 

Company, in connection with the 

investment by the Fund of Funds in the 

Unaffiliated Fund. Any Subadviser will 

waive fees otherwise payable to the 

Subadviser, directly or indirectly, by the 

Fund of Funds in an amount at least 

equal to any compensation received by 

the Subadviser, or an affiliated person of 

the Subadviser, from an Unaffiliated 

Fund, other than any advisory fees paid 

to the Subadviser or an affiliated person 

of the Subadviser by the Unaffiliated 

Investment Company, in connection 

with the investment by the Fund of 

Funds in the Unaffiliated Fund made at 

the direction of the Subadviser. In the 

event that the Subadviser waives fees, 

the benefit of the waiver will be passed 

through to the Fund of Funds. 

11. With respect to Registered 

Separate Accounts that invest in a Fund 

of Funds, no sales load will be charged 

at the Fund of Funds level or at the 

Underlying Fund level. Other sales 

charges and service fees, as defined in 

NASD Conduct Rule 2830, if any, will 

only be charged at the Fund of Funds 

level or at the Underlying Fund level, 

not both. With respect to other 

investments in a Fund of Funds, any 

sales charges and/or service fees 

charged with respect to shares of a Fund 

of Funds will not exceed the limits 

applicable to funds of funds set forth in 

NASD Conduct Rule 2830. 

12. No Underlying Fund will acquire 

securities of any other investment 

company or company relying on section 

3(c)(1) or 3(c)(7) of the Act in excess of 

the limits contained in section 

12(d)(1)(A) of the Act, except to the 

extent that such Underlying Fund (a) 

Acquires such securities in compliance 

with section 12(d)(1)(E) of the Act; (b) 

receives securities of another 

investment company as a dividend or as 

a result of a plan of reorganization of a 

company (other than a plan devised for 

the purpose of evading section 12(d)(1) 

of the Act); or (c) acquires (or is deemed 

to have acquired) securities of another 

investment company pursuant to 

exemptive relief from the Commission 

permitting such Underlying Fund to: (i) 

acquire securities of one or more 

investment companies for short-term 

cash management purposes, or (ii) 

engage in interfund borrowing and 

lending transactions. 

Other Investments by Same Group 

Funds of Funds 

13. The Applicants will comply with 

all provisions of rule 12d1–2 under the 

Act, except for paragraph (a)(2) to the 

extent that it restricts any Same Group 

Fund of Funds from investing in Other 

Investments as described in the 

application. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–24654 Filed 9–30–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29444; File No. 812–13708] 

American Fidelity Dual Strategy Fund, 

Inc. and American Fidelity Assurance 

Company; Notice of Application 

September 27, 2010. 

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, as well as 

from certain disclosure requirements. 

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: American Fidelity Dual 

Strategy Fund, Inc. (the ‘‘Fund’’) and 

American Fidelity Assurance Company 

(the ‘‘Advisor’’). 

FILING DATES: The application was filed 

on October 1, 2009, and amended on 

March 15, 2010, and September 24, 

2010. 

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 22, 2010, 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, 2000 N. Classen 

Boulevard, Oklahoma City, OK 73106. 

FOR FURTHER INFORMATION CONTACT: 

Lewis Reich, Senior Counsel, at (202) 

551–6919, or Jennifer Sawin, 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 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices 60839 

1Quest Investment Management, Inc., The 

Renaissance Group, LLC, Beck, Mack & Oliver LLC 

and WEDGE Capital Management LLP. 

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 Fund, a Maryland corporation, 

is registered under the Act as an openend management investment company. 

The Advisor is registered as an 

investment adviser under the 

Investment Advisers Act of 1940 

(‘‘Advisers Act’’) and serves as the 

investment adviser of the Fund 

pursuant to an investment advisory 

agreement (‘‘Advisory Agreement’’) with 

the Fund. The Advisory Agreement was 

approved by the Fund’s board of 

directors (‘‘Board’’), including a majority 

of the directors who are not ‘‘interested 

persons,’’ as defined in section 2(a)(19) 

of the Act, of the Fund (‘‘Independent 

Directors’’) and by the shareholders of 

the Fund. Under the terms of the 

Advisory Agreement, the Advisor is 

responsible for providing a wide variety 

of services to the Fund including 

selecting and trading portfolio 

securities, and will have overall 

responsibility for the management and 

investment of the Fund’s assets. For the 

management and investment advisory 

services that it provides to the Fund, the 

Advisor receives the fee specified in the 

Advisory Agreement. The Advisory 

Agreement also permits the Advisor to 

operate the Fund with one or more 

subadvisers (‘‘Sub-Advisors’’), and the 

Advisor’s investment management 

services include selection of the Fund’s 

Sub-Advisors. Pursuant to this 

authority, the Advisor has entered into 

investment subadvisory agreements 

(‘‘Investment Subadvisory Agreements’’) 

with four Sub-Advisors 1 to provide 

investment advisory services to the 

Fund subject to the supervision of the 

Advisor and the Board. Each current 

Sub-Advisor is and each future SubAdvisor will be an investment adviser 

as defined in section 2(a)(20) of the Act 

and registered as an investment adviser 

under the Advisers Act. The Advisor 

will evaluate, allocate assets to, and 

oversee the Sub-Advisors, and make 

recommendations to the Board about 

their hiring, retention or release, at all 

times subject to the authority of the 

Board. The Advisor will compensate the 

Sub-Advisors out of the fees paid to the 

Advisor under the Advisory Agreement. 

2. Applicants request an order to 

permit the Advisor, subject to Board 

approval, to enter into and materially 

amend Investment Subadvisory 

Agreements without obtaining 

shareholder approval. The requested 

relief will not extend to any SubAdvisor that is an affiliated person, as 

defined in section 2(a)(3) of the Act, of 

the Fund or the Advisor, other than by 

reason of serving as a Sub-Advisor to 

the Fund (‘‘Affiliated Sub-Advisor’’). 

3. Applicants also request an 

exemption from the various disclosure 

provisions described below that may 

require the Fund to disclose fees paid by 

the Advisor to the Sub-Advisors. An 

exemption is requested to permit a Fund 

to disclose (as both a dollar amount and 

as a percentage of its net assets): (a) the 

aggregate fees paid to the Advisor and 

any Affiliated Sub-Advisors; and (b) the 

aggregate fees paid to Sub-Advisors 

other than Affiliated Sub-Advisors 

(collectively, ‘‘Aggregate Fee 

Disclosure’’). If the Fund employs an 

Affiliated Sub-Advisor, the Fund will 

provide separate disclosure of any fees 

paid to the Affiliated Sub-Advisor. 

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. 

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 of 

computing, 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 (‘‘1934 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 

investment company registration 

statements and shareholder 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. 

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 

standard for the reasons discussed 

below. 

6. Applicants assert that shareholders 

of the Fund expect the Advisor to select 

Sub-Advisors who have the appropriate 

skills and experience to manage the 

Fund’s assets allocated to them. 

Applicants assert that, from the 

perspective of the investor, the role of 

the Sub-Advisors is substantially 

equivalent to that of the individual 

portfolio managers employed in a 

traditional investment advisory 

structure. Applicants state that requiring 

shareholder approval of each 

Investment Subadvisory Agreement 

would impose costs and unnecessary 

delays on the Fund; the requested relief 

may enable the Fund to act more 

quickly when the Board and the Advisor 

feel that a change would benefit the 

Fund and its shareholders. Applicants 

note that the Advisory Agreement and 

any Investment Subadvisory Agreement 

with an Affiliated Sub-Advisor will 

remain subject to section 15(a) of the 

Act. 

7. Applicants assert that many 

advisers use a ‘‘posted’’ rate schedule to 

set their fees. Applicants state that, 

while advisers are willing to negotiate 

fees lower than those posted in the 

schedule, they are reluctant to do so 

where the fees are disclosed to other 

prospective and existing customers. 

Applicants submit that the requested 

relief will allow the Advisor to negotiate 

more effectively with each Sub-Advisor. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Before the 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 the Fund’s 

outstanding voting securities, as defined 

in the Act. 

2. The prospectus for the Fund will 

disclose the existence, substance, and 

effect of any order granted pursuant to 

the application. The Fund will hold 


emcdonald on DSK2BSOYB1PROD with NOTICES
60840 Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices 

itself out to the public as employing the 

manager of managers structure 

described in the application. The 

prospectus will prominently disclose 

that the Advisor has ultimate 

responsibility (subject to oversight by 

the Board) to oversee the Sub-Advisors 

and recommend their hiring, 

termination, and replacement. 

3. Within 90 days of the hiring of a 

new Sub-Advisor, the Fund’s 

shareholders will be furnished all 

information about the new Sub-Advisor 

that would be included in a proxy 

statement, except as modified by the 

order to permit Aggregate Fee 

Disclosure. This information will 

include Aggregate Fee Disclosure and 

any change in such disclosure caused by 

the addition of the new Sub-Advisor. To 

meet this obligation, the Fund will 

provide shareholders, within 90 days of 

the hiring of a new Sub-Advisor, with 

an information statement meeting the 

requirements of Regulation 14C, 

Schedule 14C and Item 22 of Schedule 

14A under the 1934 Act, except as 

modified by the order to permit 

Aggregate Fee Disclosure. 

4. The Advisor will not enter into an 

Investment Subadvisory Agreement 

with any Affiliated Sub-Advisor without 

that agreement, including the 

compensation to be paid thereunder, 

being approved by Fund shareholders. 

5. At all times, at least a majority of 

the Board will be Independent 

Directors, and the nomination of new or 

additional Independent Directors will 

be placed within the discretion of the 

then existing Independent Directors. 

6. When a Sub-Advisor change is 

proposed for the Fund with an 

Affiliated Sub-Advisor, the Board, 

including a majority of the Independent 

Directors, 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 

Advisor or the Affiliated Sub-Advisor 

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 Directors. The selection of 

such counsel will be within the 

discretion of the then existing 

Independent Directors. 

8. Whenever a Sub-Advisor is hired or 

terminated, the Advisor will provide the 

Board with information showing the 

expected impact on the profitability of 

the Advisor. 

9. The Advisor will provide general 

management services to the 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: (i) Set the 

Fund’s overall investment strategies, (ii) 

evaluate, select and recommend SubAdvisors to manage all or a part of the 

Fund’s assets, (iii) when appropriate, 

allocate and reallocate the Fund’s assets 

among multiple Sub-Advisors, (iv) 

monitor and evaluate the performance 

of Sub-Advisors, and (v) implement 

procedures reasonably designed to 

ensure that the Sub-Advisors comply 

with the Fund’s investment objective, 

policies and restrictions. 

10. No director or officer of the Fund, 

or director or officer of the Advisor, will 

own directly or indirectly (other than 

through a pooled investment vehicle 

that is not controlled by such person) 

any interest in a Sub-Advisor, except for 

(a) ownership of interests in the Advisor 

or any entity that controls, is controlled 

by, or is under common control with the 

Advisor, 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 SubAdvisor or an entity that controls, is 

controlled by or is under common 

control with a Sub-Advisor. 

11. The Fund will disclose in its 

registration statement the Aggregate Fee 

Disclosure. 

12. In the event 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. 

13. The Advisor will provide the 

Board, no less frequently than quarterly, 

with information about the profitability 

of the Advisor with respect to the Fund. 

The information will reflect the impact 

on profitability of the hiring or 

termination of any Sub-Advisor during 

the applicable quarter. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–24655 Filed 9–30–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29445; 812–13770] 

Highland Capital Management, L.P. 

and Highland Funds I; Notice of 

Application 

September 27, 2010. 

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. 

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: Highland Capital 

Management, L.P. (the ‘‘Adviser’’) and 

Highland Funds I (the ‘‘Trust’’ and 

collectively, ‘‘Applicants’’). 

FILING DATES: The application was filed 

on May 7, 2010, and amended on 

September 10, 2010, September 24, 

2010, and September 27, 2010. 

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 25, 2010, 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: The Trust and the 

Adviser, NexBank Tower, 13455 Noel 

Road, Suite 800, Dallas, TX 75240. 

FOR FURTHER INFORMATION CONTACT: Jean 

E. Minarick, Senior Counsel, at (202) 

551–6811, 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. The Trust, a Delaware statutory 

trust, is registered under the Act as an 

open-end management investment 


emcdonald on DSK2BSOYB1PROD with NOTICES