15(c) Process Web Seminar


15(c) Process Web Seminar

One of the most important duties imposed by the federal securities laws on the Board of Trustees is the consideration of the renewal of a mutual fundís investment advisory contract. As a mutual fund adviser, you play an important role in the process. Recent events continue to shape how the Board and fund advisers handle their respective responsibilities.

This web seminar features the SEI legal team and Morgan Lewis discussing the 15(c) process, with special attention paid to the Supreme Courtís recent decision in Jones v. Harris Associates. The discussion focuses on certain sections of the 15(c) questionnaire and what the Board is trying to understand from the information you provide.

You can view the transcript directly on this webpage by selecting "Show/Hide Transcript" below, or you can download†a pdf version†here.

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Chris Menconi
Joseph Gallo
Mike Beattie


Coordinator: Welcome to the Advisors Inner Circle 15C Web Seminar and Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will be given at that time. As a reminder, this conference is being recorded today, Thursday, June 24, 2010 at 2:00 p.m. EDT. I would now like to turn the conference over to our host, Mr. Mike Beattie, Director of Client Services. Please go ahead.

M. Beattie: Thank you. Iíd like to welcome everyone to todayís webinar focused on the 15C Advisory Contract Renewal Process for advisors and subadvisors in the Advisor Inner Circle Fund, Advisor Circle Fund Two, and Bishop Street Funds Trust. Before getting into the content of todayís webinar, Iíd like to take care of a few housekeeping items.

Todayís webinar will be approximately 45 minutes in length. If you would like to ask a question, there are two ways you can do so. You can ask at the end of the webinar when prompted by the operator or any time by using the Q&A button located on the live meeting toolbar. Following this webinar, you will be provided an e-mail to access the replay with the slideshow. With that out of the way, letís proceed with todayís topic.

The review of advisory contracts is one of the boardís most significant and important responsibilities. The outcome of their decision is of obvious importance to advisors and subadvisors alike. It is also an advisorís and sub advisorís primary, and in many cases only, interaction with the board. It is, therefore, in everyoneís best interest for the process to go as smoothly and efficiently as possible. We hope that a better understanding of what the board is focused on when reviewing the information we provide will help with this objective. We also would like to alert you to some additional information that will be requested from you going forward as a result of the Supreme Court ruling handed down earlier this year, in the excessive fee case of Jones vs. Harris Associates.

To take you through the agenda, Iím pleased to be joined by Joe Gallo, In-house Counselor at SEI and Chris Menconi from Morgan Lewis and Fund Counselor to the Trust. Joe, why donít you and Chris take it from here and help us navigate through this important process.

J. Gallo: As Mike said, the focus of todayís discussion is on the advisory agreement renewal process. If you take a look at slide three and the agenda items, we will go through a more general overview and background on the 15C process with the earlier topics and then try to drill down further into the weeds with some specific concerns advisors may have with the 15C process and questionnaires that they fill out each year.

To start, we want to provide everyone with some background on the regulatory requirement for approving mutual fund investment advisory agreements under the Investment Company Act of 1940. Section 15C of the act imposes a legal responsibility and duty for the board to request and evaluate and for advisors to provide such information as is reasonably necessary to evaluate the terms of an advisory agreement. While neither the 40 Act nor the rules under it set forth specific factors trustees must consider in approving an advisory agreement, over the years the federal courts have developed a framework by which trustees evaluate and consider the terms of the advisory agreement.

Advisors also have a fiduciary duty with respect to the compensation they receive from a mutual fund under 36(b) of the act. Chris, can you discuss Section 36(b) of the act and how litigation comes up in the context of shareholder claims based on excessive compensation received by investment advisors?

C. Menconi: Sure, Joe. Section 36(b) of the Investment Company Act imposes a unique fiduciary duty on investment advisors, and that is with respect to their receipt of compensation from a mutual fund. There is an interplay between section 15C of the 1940 act and Section 36(b) Ė they can be viewed as mutually reinforcing provisions. As you say, section 15C imposes duties on both the advisor and the board to request and furnish information, while Section 36(b) authorizes the SEC to bring a suit against an investment advisor for breaching its fiduciary duty. Section 36(b) also authorizes private litigation Ė that is shareholders can bring suits under Section 36(b). Some recent 36(b) excessive fee cases include cases against Harris Associates, Ameriprise, Cap Guardian, which is the investment advisor to the American Funds.

J. Gallo: So, in essence, this whole 15C process and due diligence we coordinate and assist the board with is not only to ensure that the board satisfies its obligations, but also theyíre to protect advisors from these types of shareholder claims, isnít that correct?

C. Menconi: Thatís absolutely right, Joe. This is a process-oriented approach to dealing with investment advisory contract. So process is just as important as the substance, and, yes, while the board has to make certain determinations pursuant to Section 15C and under Section 36(b), this process is prophylactic and protects investment advisors as well. Just to give you a little bit of background in terms of what we as fund counsel and what the other parties do here: we understand that investment advisors get the questionnaire that is prepared by fund counsel, but after you submit your responses as advisors, what happens next?

After you return the questionnaire to fund counsel, the next step in the process is that Fund counsel reviews the responses to the questionnaire and then consults with independent trustee counsel. The independent members of the board are represented by their own separate counsel, and independent trustee counsel, fund counsel, and SEI get together and review the questionnaire and provide a collective set of comments that go back to each of the individual advisors. The questionnaires are then revised by the advisors, and, once again, the revised responses are reviewed by all interested parties.

Then, independent trustee counsel meets with the independent members of the board in executive session prior to the board meeting to go over the information and responses that advisors have provided. At that point, the investment advisors appear before the board and make their oral presentation and provide additional information. Then the board makes a decision on whether or not to renew the advisory contract.

J. Gallo: Thank you. With 15C and Section 36(b) as a backdrop to the regulatory requirements for a board and advisors, courts have determined and provided specific guidance from factors to be considered in determining whether an advisory fee is excessive. The seminal case in this area is the Gartenberg Case from 1982, which has left us with the basic test for courts to consider as to whether or not thereís been a violation of the advisorís fiduciary duty under Section 36(b).

This case recently has been endorsed and adopted by the Supreme Court in the Jones v. Harris Case which we will discuss later. That test from Gartenberg is essentially whether the fee schedule represents the charge within the range that would have been negotiated at armís length in light of all the surrounding circumstances. To be guilty of a violation 36(b), an advisor must charge a fee that is so disproportionally large that there is no reasonable relationship to the services rendered and could not have been the product of an armís length bargaining.

What Gartenberg has given us, and what other court cases have refined over the years, is a list of factors boards should consider when approving investment advisory agreements. Those factors are laid out and listed in the next four slides and are the nature and quality of services, the advisors or subadvisors cost of and profits realized in providing services, economies of scale, and fallout benefits and the role of independent trustees.

C. Menconi: I think one important thing to point out here, before we move in to each of the factors, is that no one factor is dispositive or determinative or weighs any differently or heavily at the outset. The board gives such consideration to each factor as it deems appropriate or relevant.

J. Gallo: Thanks, Chris. I think thatís an important point. The first factor is the nature and quality of services being provided to the fund by advisors. Chris, maybe you wouldnít mind elaborating on what boards want to see and hear from advisors related to the nature and quality of services being provided?

C. Menconi: Sure. Although the board receives information about your fund throughout the year, under normal circumstances, the board hears from you and sees you only once a year. This is an opportunity for them to reacquaint themselves with your business and services, the folks who are providing those services, and whether there have been any material changes in the operation of your business or your personnel.

I happen to have the 15C questionnaire that we send to advisors in front of me, and it includes topical headings like ďDescription of the Advisorís Business,Ē ďAdvisors Personnel and Operations,Ē as well as ďInvestment Advisory Services to the Trust and other Clients.Ē So, these are the types of questions that the board is looking for answers to in responding to the factor: ďnature and quality of services that the advisor is providing.Ē

J. Gallo: Thanks. The next factor that is considered by our board is the advisor and sub advisorsí cost of and profits realized in providing services. This factor is really the most challenging aspect of the Gartenberg analysis. Calculating an advisorís profitability on a particular fund is difficult and not an exact science. Isnít that correct, Chris?

C. Menconi: Thatís right, Joe. This is the most sophisticated analysis or judgment that the board has to make, this determination or analysis with respect to profitability. Here, there really is no once size fits all approach, but there are a couple of important things to keep in mind. In providing information about profitability, you should provide a good description of the cost allocation methodology youíre using.

The second important point is to be consistent year-to-year, if at all possible. If there is a change in the methodology, the board would like for you to explain the reasons for the change. What the board is looking for here is a fund-by-fund analysis of profitability. This can differ among funds. The courts and Congress have said that the arrangement between an advisor and a fund is not a cost plus type of arrangement. Itís not similar to rate regulation, such as in the utilities industry. Advisors are entitled to make a profit, and the board understands that. Again, profitability is just one of many factors that the board considers. The weight that itís accorded or given by the board depends on all the facts and circumstances.

J. Gallo: Thanks, Chris. The next factor considered by boards is whether any economies of scale have been realized by the advisors, subadvisors, as fund asset levels have increased, and also the discussion of fall-out benefits. Chris, really what weíre talking about here is fee breakpoints and whether or not theyíre necessary or have been considered by advisors.

C. Menconi: I think thatís absolutely right, particularly in the context of the AIC, AIC II, and Bishop Street Funds. Breakpoints are one way to pass along cost savings resulting from economies of scale to shareholders. Itís important to understand that the board has a duty to ensure that fund shareholders share in the benefits of reduced costs, and breakpoints are one way of getting there. I think that the argument thatís made with respect to economies of scale is that the advisorís cost in providing services are relatively fixed Ė their salaries and their overhead Ė and the question comes up does it really cost that much more money to manage a $500 million dollar portfolio, for example, than it does $100 million dollar portfolio. Thatís the essence of economies of scale.

J. Gallo: Okay. Just touching on fall-out benefits. When advisors are considering fall-out benefits, what are some of examples of indirect benefits received by advisors that should be mentioned in responses to the 15C questionnaire?

C. Menconi: I think the Gartenberg analysis picks up fall-out benefits because it helps give the board a complete picture of advisor compensation, and Iím using that term broadly in the way the courts and the SEC think about itóthe total compensation to investment advisors. So, for example, one type of fall-out or indirect benefit is soft dollars. The advisor may direct the fund to use brokerage commissions that generate soft dollar credits. The research that is gained through soft dollars may be of benefit to the fund, but it may also be also of benefit to the advisorís other clients, and this is a benefit that the advisors didnít have to pay for out of their own pockets.

J. Gallo: Getting back to profitability, you mentioned, generally this analysis is done on a fund-by-fund basis. Thatís really the boardís expectation, isnít that correct?

C. Menconi: Thatís right, and I believe that is the way that it is laid out in the questionnaire. The responses that weíre eliciting with respect to profitability are on a fund-by-fund basis.

J. Gallo: If we look at slide nine, the next factor for consideration is the role of independent trustees, and this is really the final factor courts may look to in determining whether or not thereís been a violation of advisorís fiduciary duty under Section 36(b). This factor really takes into consideration the independent trusteeís expertise and the extent of care and conscientiousness with which they perform their duties in reviewing the advisory agreement and services provided as well as whether any concessions that may have been negotiated from the advisor or subadvisor. I guess, Chris, when weíre talking about concessions, itís really expense caps, right?

C. Menconi: I think thatís one concession. Certainly, the board may ask the investment advisor to place an expense limitation on the fund for a certain number of years. Oftentimes, thatís driven by market forces, but it may be a request of the board.

Another concession may be breakpoints in the advisory fee to the extent that the board, over the years, sees that maybe profitability is skewing upwards. They may ask for the economies to be shared with the shareholders through breakpoints. Another concession may be that the advisor comes to the board with a proposed advisory fee, and the board negotiates with the advisor to bring that proposed fee rate down.

J. Gallo: Okay. Then could you maybe discuss how advisors assist the board with this final factor with the role of independent trustees and the extent with which they review this information and whatís being provided to them.

C. Menconi: Sure. Again, this is process-oriented. The board is represented by its independent legal counsel, and, in considering this information, the board needs to have a complete record, and so does independent trustee counsel in order to advise the board on its duties. So, I think the biggest way that advisors can assist the board in making its determinations and insuring that the board is exercising the care and conscientiousness thatís required of it is by providing full and complete disclosure when completing the questionnaire and ensuring that the 15C process is a robust one in which all relevant factors have been considered by the board.

J. Gallo: Moving on to the Jones v. Harris case. Most of us are aware that excessive advisory fee court cases and the Gartenberg case have gotten a lot of press and attention lately, specifically, from the Supreme Court in the Jones v. Harris case. By way of background, the Jones v. Harris case made its way to the Supreme Court on appeal from the 7th Circuit. The 7th Circuit affirmed the lower courtís ruling that the advisor was not charging excessive advisory fees to mutual fund clients. However, that determination was based on an analysis that differed from the Gartenberg standard. The 7th Circuit stated that market competition keeps fees in line, and, so long as the board was given full disclosure and not misled, courts should not second guess a boardís decision. Chris, why donít you give us an overview as to what the Supreme Court said in the Jones opinion in response to the 7th Circuit decision.

C. Menconi: Sure. The 7th Circuit found in favor of the advisor in that case, and the Supreme Court found in favor of the advisor as well but for a completely different reason. The Supreme Court endorsed the Gartenberg standard, and that standard is the same standard that Joe mentioned earlier in the presentation, and that is that the fee has to be so disproportionately large that it bears no reasonable relationship to the services that are being rendered and that it couldnít have been the product of an armís length negotiation. A couple of important things, though. In addition to reaffirming Gartenberg and providing boards and advisors with comfort on the process that has been employed for over 25 to 30 years, there are a couple of additional important points raised by the Supreme Court.

First, the Court said that it is the duty of the board to consider all relevant factors. So, while weíre used to seeing the factors that Joe just ticked off from the Gartenberg standard, the board has to think outside the box and should also be considering other relevant factors. These things develop from time to time as weíll talk about in the coming moments. So, thatís one important thing Ėthe board is under a duty to consider all relevant factors.

The second important thing that the Supreme Court said is that if the board is fully informed and if thereís a robust process in place, the boardís decision on whether to renew an advisory contract shouldnít be subject to judicial second-guessing. So what this means is that boards and advisors should take a lot of comfort in the fact that if they know theyíve done the right thing through the 15C process, that full disclosure has been made, and the board has acted in the way itís supposed to Ė exercising that level of care and conscientiousness thatís required of it Ė then the decision on the approval of the contract and the fee itself will stand and wonít be second guessed by the court.

So, again, just to reiterate, both process and substance are important. The other thing that the court said is that, consistent with Gartenberg and consistent with Section 36(b), plaintiffs continue to bear the burden of proving that an advisory fee is excessive. And, again, this is not a standard that is based on reasonableness. The plaintiffs have the burden to prove that the fee is excessive.

And, finally, one last point. The court made clear that a deficiency alone in the process will not result in a violation of Section 36(b) or a breach of an advisorís fiduciary duty. Thatís important because there was another case that was working its way through the courts, that was the Ameriprise case, where the 8th Circuit Court of Appeals found that the fee itself wasnít excessive, but the way the board and the advisor went about getting there was deficient. The court found there that that constituted a breach or violation of Section 36(b). So, the Supreme Court clarifies that a deficiency in the process alone will not result in a 36(b) violation.

The focus here is on whether or not the fee itself is excessive. To the extent there is a deficiency in process or a deficiency in some other aspect of the renewal, then the courts will look to other aspects. Theyíll examine or probe more deeply on the various factors that are to be considered. Profitability may become more important. If profitability isnít a problem, then the nature and quality of services that are being provided may be probed a little more in depth. But, that being said, I think the take away from this case is that boards and advisors should take a lot of comfort in knowing that the business judgment of the board will be upheld and not second guessed by the court as long as thereís a robust process in place, and the substance has been provided by advisors and reviewed by the board.

J. Gallo: There was much discussed, Chris, in the opinion regarding comparable institutional account information. After the Jones opinion, where are advisors left in terms of disclosure and review of that type of information for the board.

C. Menconi: Well, the Jones v. Harris case did center on a comparison of the mutual fund advisory fee to the advisorís fees for its other accounts. The court took time to explain where it came out on that issue. Again, going back to the theme that the board must consider all relevant factors, the Supreme Court said, listen, this is a factor that may be important Ė the fees charged to institutional accounts Ė but we canít give it a categorical rule. Itís something that the board should look at, but, in so doing, it should also look at the reasons for which such fees may differ.

There may be different levels of services provided to mutual funds that arenít provided to the other types of accounts or funds. So, in essence, what the court did say is that boards should be wary, and courts should be wary, of inapt comparisons between mutual fund fees and institutional account fees in that there may be reasons that justify the differences.

J. Gallo: Maybe you can provide a few examples to those listening of some of the differences in services that are provided to a traditional registered mutual fund as opposed to an institutional account.

C. Menconi: Sure. Iíd be happy to do that. In terms of investment management in dealing with a mutual fund, you may have issues that you donít deal with with an institutional account. For example, mutual funds are redeeming and selling their shares on a daily basis. So you may have less predictable cash flows than you do for an institutional account. You have to manage, as an advisor, to 1940 Act and IRS restrictions and requirements, so, for example, you do have to satisfy, as a mutual fund manager, the 1940 Act diversification requirements and the subchapter M requirements under the Internal Revenue code.

As a mutual fund advisor, youíll have to adhere to leverage restrictions such as those under section 18(f) under the Investment Company Act. In terms of board support, moving away from investment management services, advisory personnel spend a lot of time and effort, as you know, dealing with the board in the production of 15C materials, in the analysis you provide, production of other materials and related support, and memos, in attending board meetings outside of the 15C process, and generally serving as a liaison to the board on various issues that arise during the year.

There are additional compliance and regulatory considerations that exist for funds that may not exist for institutional accounts. So, the fund is regularly putting out shareholder communications. They have prospectuses, SAIs, shareholder reports, and there are other fund related disclosure documents. You may not have similar documents or at least documents that require the level of rigor and review that go into a prospectus or shareholder report for your institutional accounts. You have to spend time responding to regulatory inquiries and exams that specifically target the fund, and, also you have to provide support to the fundís CCO when the CCO requests it.

In addition, you have service provider support. There are many service providers in addition to an investment advisor that provide services to funds. Those include transfer agents, independent accountants, the administrator, the custodian, and the distributor. You have to interface with them as well as personnel at the website and phone contact services center.

J. Gallo: Thanks, Chris. Another focus that has been recently added to the 15C questionnaire is a request for more information on the compensation of the advisorís key personnel. So, I guess, Chris, as fund counsel, what is driving this, and what is the board really getting into by requesting such information.

C. Menconi: Before I touch on that, I should take a step back and mention with respect to institutional account fees that the 15C questionnaire advisors have received over the years has always requested information on institutional account fees. There has been a change to it that youíll see going forward in light of the Jones v. Harris case, and that is weíre just asking advisors to spend a little bit of time in explaining the differences in the level of services that are provided to your institutional accounts so as to give a little bit of context to any difference in fees between the mutual fund and the institutional accounts.

J. Gallo: Thatís a greater focus, I think, at this point in time on those comparisons.

C. Menconi: Absolutely.

J. Gallo: I guess getting back to the key personnel compensation. What do you think is driving this and whatís the board getting at by requesting such information?

C. Menconi: Well, again, this goes back to the theme from Jones v. Harris, which is that the board is under a duty to consider all relevant factors and circumstances. There was a recent case involving the American Funds, in which the court looked at issues of the boardís analysis and whether or not the board considered compensation paid by the advisor to advisory employees. The court probed a little on that issue. This, having been raised by the court, has now become an area of consideration for boards, generally, and we have added a question about compensation to advisory personnel in light of that. But also, I think, what weíre looking here for are two things, really.

The first thing is the board is looking for some comfort that the advisor is paying its advisory employees in a manner that is designed to attract and retain highly qualified, competent people to provide advisory services to the fund. Thatís one.

Two, the board would also like to get a sense of whether or not the compensation is so out of line with competitors or so high that it effectively is having a negative impact on the profitability numbers that the advisors are showing. Is the profitability of the advisor being diluted by one of those overhead items, i.e. salaries, in other words bringing that profitability down ďartificially?Ē

J. Gallo: So, what to do you think is an acceptable response to the type of question in the questionnaire?

C. Menconi: Again, I think the question is fairly open-ended. I think weíre looking for - the questionnaire spells it out. This is the first go around with these questions, and I think advisors have to understand, and the board understands, that the questionnaire is kind of a living, breathing document. We try not to change it too much, but, given that the court has instructed the board to consider all relevant factors, itís going to change from time to time.

I think, as we go through the process, responses to these types of questions, these new questions, will get refined over time. I think itís just important for the advisors to make a good faith effort in responding. If thereís additional information that the board wants to see, there will be follow up questions.

J. Gallo: Thank you. Risk management oversight by the board is another area of increased SEC focus lately. We have seen recent amendments from the SEC to the Form N-1A that require funds to disclose what the board considers when overseeing general risk areas for funds. Advisors have a responsibility to know and understand the risks associated with the services they are providing a fund. Looking at slide 15, this shows the new questions that advisors will see related to this increased focus on risk oversight. So, Chris, what should an advisor consider and be prepared to answer regarding these types of questions that we see on the slide?

C. Menconi: Well, again, this is a new question. What advisors should understand is that the advisor is one of many service providers to the fund. Each service provider has a responsibility to manage risk with respect to the business and services that itís providing to the fund. So, for example, the administrator has a duty to manage risks in connection with its business. The custodian has a duty to manage risks in connection with its business, and the advisor has a duty to manage risks in connection with providing advisory services to the fund.

The board has a duty to oversee that risk management process. The only way that the board can effectively carry out its responsibilities is by being provided with robust information on each service providerís risk management processes. I donít think thereís any right or wrong answer to these questions. I just think that an advisor should be able to explain its process to the board and should be prepared to talk about it at the board meeting because questions may arise.

J. Gallo: Finally, the 15C questionnaire asks advisors for a lot of information related to their brokerage practices, best execution, and soft dollar arrangements. Advisors have a fiduciary duty to seek best execution on behalf of shareholders and avoid any conflict of interest. Generally, the questionnaire is seeking a description of the advisor or subadvisors policies and procedures for selecting broker dealers and how they may allocate brokerage services among other broker dealers.

Chris, maybe you can discuss generally the boardís expectations in this area. I know there are a lot of questions in the 15C questionnaire. There are charts in there and requests for amounts and figures, but, I guess in a nutshell, what is the board looking at here and what are their expectations when reviewing this information?

C. Menconi: Again, this is a situation where the board, as in many other aspects of the boardís responsibility, has oversight responsibility. It has direct oversight responsibility with respect to the trading practices of investment advisors and the use of fund commissions and assets in purchasing securities. The questions really serve a two-fold purpose. One is to enable the board to carry out its duty in overseeing the trading practices of investment advisors, and part two of that is tied into the 15C process and examining compensation to investment advisors in connection with their use of soft dollars.

As we discussed earlier, soft dollars is an indirect benefit to investment advisors, and the board wants to get a sense, and is required, to understand the circumstances under which the advisors use soft dollars and how advisors protect against conflict of interest. But for the safe harbor under the federal securities laws, mutual fund advisors wouldnít be able to engage in soft dollar practices, and that safe harbor has been narrowly construed by the SEC. So, itís important that the board understand the investment advisorís process behind broker selection, aggregation and allocations of trades, as well as soft dollar usage. So, itís a two-fold purpose that itís serving.

J. Gallo: Alright. I think Iím going to turn it back over to Mike Beattie for a wrap up, and I guess weíll take questions, if we have any questions.

M. Beattie: Thanks, Joe and Chris. That was very helpful and informative. Joe and Chris, we have one question that has come in and is related to economies to scale. You mentioned a lot about sharing economies by breakpoints and advisory fees. Are there any other ways to demonstrate that the economies are being appropriately shared?

C. Menconi: In this complex, itís probably breakpoints that are the biggest way to demonstrate that those economies are being passed along. Itís really hard to say. I know that, to the extent that economies are not being achieved, the board may ask questions about the efficiency of the advisorís operations, but, in connection with simply providing advisory services and not providing any other services for the fund itís largely breakpoints. This complex is somewhat unique in that the advisor is providing advisory services and doesnít step into different roles. Breakpoints are the main way for passing along those cost savings.

J. Gallo: And I guess, also, to the extent an advisor is reinvesting profits to enhance their services and can demonstrate that to the board. I think that would go a long way in terms of the board understanding whatís being done to, in essence, put into place economies of scale.

C. Menconi: Thatís exactly right. Thatís a big factor. If there has been reinvestment in the business thatís making an impact on the advisorís services to the fund that is something that advisors should bring to the boardís attention and bring it to them prominently. Absolutely.

M. Beattie: Thank you. We have one other question thatís come in. Itís to Joe and Chris. We have a complex with multiple funds. Some funds have grown to reasonable profitability, but other newer funds are not as profitable. Does the board look at complex-wide profitability?

C. Menconi: The board asks for profitability on a fund-by-fund basis. But that is not to say that the board wonít consider complex-wide profitability. I think, though, that that information would be additive. It would be in addition to fund-by-fund profitability. Then it would be up to the board to give that additional information whatever weight the board believed it merits. Yes. I think the answer to the question is if itís provided, the board will consider it. But it canít supplant fund-by-fund profitability or shouldnít supplant fund-by-fund.

M. Beattie: Okay, thanks. Ron, do we want to open up the questions over the phone?

Moderator: Thank you. There are no questions on the phone lines.

M. Beattie: Okay, thank you. Well, it looks like that will conclude todayís program. Again, thank you Joe and Chris. And thank you to everyone on the call for your time. I hope you found it worthwhile. As a reminder, we will be sending out a link to you via e-mail where you can access a replay, and we also follow up with a response to any other questions that come in after the call concludes. And, certainly, if you have any other questions or would like a transcript of todayís program, please contact your relationship manager. Thanks again.

Moderator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating and for using AT&T executive teleconference. You may now disconnect.