Document ID: SEC-2009-0937-0001
Agency: sec
Document Type: Notice
Title: GE Funds, et al.,; Notice of Application
Posted Date: 2009-07-10T04:00Z

[Federal Register: July 10, 2009 (Volume 74, Number 131)]
[Notices]               
[Page 33311-33313]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10jy09-91]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28808; 812-13545]

 
GE Funds, et al.,; Notice of Application

July 2, 2009.
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 without 
shareholder approval and would grant relief from certain disclosure 
requirements.

APPLICANTS:  GE Funds, GE Institutional Funds, GE Investments Funds, 
Inc. (each, a ``Company'' and collectively, the ``Companies''), and GE 
Asset Management Incorporated (the ``Adviser'').

FILING DATES: The application was filed on July 9, 2008, and amended on 
November 8, 2008, May 8, 2009, and June 29, 2009. Applicants have 
agreed to file an amendment during the notice period, the substance of 
which is contained in this notice.

HEARING OR NOTIFICATION OF HEARING: An order granting the applications 
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 July 27, 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 be 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, GE Asset Management 
Incorporated, 3001 Summer Street, Stamford, CT 06905.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879, or Mary Kay Frech, 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. GE Funds, a Massachusetts business trust, is registered under 
the Act as an open-end management investment company and currently 
offers sixteen series, each with separate investment objectives, 
policies and restrictions (each, a ``Fund'' and collectively, the 
``Funds''). GE Institutional Funds, a Delaware statutory trust, is 
registered under the Act as an open-end management investment company 
and currently offers nine Funds, each with separate investment 
objectives, policies and restrictions. GE Investments Funds, Inc., a 
Virginia corporation, is registered under the Act an an open-end 
management investment company and currently offers fourteen series, 
each with separate investment objectives, policies and restrictions.\1\ 
The Adviser, a wholly owned subsidiary of General Electric Company, is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Adviser Act''). The Adviser serves as investment adviser to 
each Fund under an investment advisory agreement with each Company 
(``Advisory Agreement'') that has been approved by the shareholders of 
each Fund and by the board of trustees or directors of the Companies 
(``Board''), including a majority of the trustees or directors who are 
not ``interested persons,'' as defined in section 2(a)(19) of the Act, 
of any Company or the Adviser (``Independent Board Members'').
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    \1\ Applicants also request relief with respect to future Funds 
and any other existing or future registered open-end management 
investment company or series thereof that: (a) is advised by the 
Adviser or a person controlling, controlled by, or under common 
control with the Adviser (included in the term ``Adviser''); (b) 
uses the investment management structure described in the 
application; and (c) complies with the terms and conditions of the 
application (included in the term ``Funds''). The only existing 
registered open-end management companies that currently intend to 
rely on the requested order are named as applicants. If the name of 
any Fund contains the name of a Subadviser (as defined below), the 
name of the Adviser will precede the name of the Subadviser.
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    2. Under the terms of each Advisory Agreement, the Adviser provides 
a Fund with investment research, advice and

[[Page 33312]]

supervision, and furnishes an investment program for the Fund 
consistent with the Fund's investment objectives and policies. For the 
investment management services it provides to each Fund, the Adviser 
receives the fee specified in the Advisory Agreement from the Fund. The 
Advisory Agreements also permit, or would be amended (with appropriate 
Board and shareholder approval) to permit, the Adviser to enter into 
investment subadvisory agreements (``Subadvisory Agreements'') with one 
or more subadvisers (``Subadvisers''). Pursuant to its authority under 
certain Advisory Agreements, the Adviser (having obtained appropriate 
Board and shareholder approval) has entered into Subadvisory Agreements 
with various Subadvisers to provide investment advisory services to 
ceertain Funds. Each Subadviser is, and every future Subadviser will 
be, registered as an investment adviser under the Advisers Act. The 
Adviser will monitor and evaluate the Subadvisers and recommend to the 
Board their hiring, retention or termination. Subadvisers recommended 
to the Board by the Adviser will be selected and approved by the Board, 
including a majority of the Independent Board Members. Each Subadviser 
will have discretionary authority to invest all or a portion of the 
assets of a particular Fund, subject to the general supervision of the 
Adviser and the Board. The Adviser will compensate each Subadviser out 
of the fees paid to the Advisory by the Fund.
    3. Applicants request an order to permit the Adviser, subject to 
the Board approval, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any Subadviser who is an affiliated person, as 
defined in section 2(a)(3) of the Act, of the Companies or the Adviser, 
other than by reason of serving as a Subadviser to one or more of the 
Funds (``Affiliated Subadviser'').
    4. Applicants also request an exemption from the various disclosure 
provisions described below that may require the Funds to disclose fees 
paid by the Adviser to each Subadviser. An exemption is requested to 
permit a Fund to disclose (as both a dollar amount and as a percentage 
of the Fund's net assets): (a) the aggregate fees paid to the Adviser 
and any Affiliated Subadvisers; and (b) the aggregate fees paid to 
Subadvisers other than Affiliated Subadvisers (``Aggregate Fee 
Disclosure''). Any Fund that employs an Affiliated Subadviser 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 pursuant to 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 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 14(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.\2\
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    \2\ Form N-1A was recently amended by the Commission, effective 
March 31, 2009, and Item 14(a)(3) should be read to refer to Item 
19(a)(3) for each Fund when that Fund begins using the revised form.
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    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. 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 shareholder reports filed with the 
Commission. Section 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 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 their requested relief meets this standard 
for the reasons discussed below.
    7. Applicants assert that the shareholders rely on the Adviser's 
experience to select one or more Subadvisers best suited to achieve the 
Fund's investment objectives. Applicants assert that, from the 
perspective of the investor, the role of the Subadvisers is comparable 
to that of the individual portfolio managers employed by traditional 
investment company advisory firms. Applicants state that requiring 
shareholder approval of each Subadvisory Agreement would impose costs 
and unnecessary 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 Agreements and any Subadvisory 
Agreement with an Affiliated Subadviser will remain subject to section 
15(a) of the Act and rule 18f-2 under the Act.
    8. Applicants assert that many Subadvisers used a ``posted'' rate 
schedule to set their fees. Applicants state that while Subadvisers are 
willing to negotiate fees that are lower than those posted on 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 Adviser to negotiate more effectively 
with each Subadviser.
    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 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, 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 
sole initial shareholder before offering the Fund's shares 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.

[[Page 33313]]

    3. Within 90 days of the hiring of a 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 the new Subscriber. 
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 1934 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 that 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 Board Members, and the nomination of new or additional 
Independent Board Members will be placed within the discretion of the 
then-existing Independent Board Members.
    6. When a Subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Board Members, 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, will be engaged to represent the Independent Board Members. 
The selection of such counsel will be within the discretion of the then 
existing Independent Board Members.
    8. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per-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 Advisor will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    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) when 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 director, trustee or officer of any Company, or 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 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. 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.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-16332 Filed 07/09/2009 at 8:45 am; Publication Date: 07/10/
2009]