[ Janus Letterhead ]
October 31, 2005
VIA E-MAIL AND EDGAR
U.S. Securities and Exchange Commission
Division of Investment Management
901 E Street, NW
Washington, DC 20549
Attention: Messrs. Larry Greene, Patrick Scott and Richard Pfordte
Re: JANUS INVESTMENT FUND ("JIF")
1933 Act File No. 2-34393
1940 Act File No. 811-1879
JANUS ADVISER SERIES ("JAD")
1933 Act File No. 333-33978
1940 Act File No. 811-09885
JANUS ASPEN SERIES ("JAS")
1933 Act File No. 33-63212
1940 Act File No. 811-7736
Preliminary Proxy Statements filed September 22, 2005
Dear Gentleman:
The purpose of this letter is to respond to comments of the staff (the "Staff")
of the Securities and Exchange Commission (the "Commission" or the "SEC"), as
communicated in telephone conferences on September 29, 2005, October 3, 2005,
October 4, 2005, October 18, 2005, October 19, 2005, October 20, 2005, and
October 24, 2005, with respect to the preliminary proxy statements (the "Proxy
Statements") and accompanying materials of JIF, JAS and JAD (each a "Fund" and
collectively, the "Funds") filed on September 22, 2005, relating to a special
meeting of shareholders of each Fund to be held on November 22, 2005. Such Proxy
Statements seek shareholder approval of certain proposals previously approved
unanimously by each Fund's Board of Trustees as follows:
o Elect nine Trustees (all Funds);
o Approve the elimination of a fundamental investment policy
regarding investments in income-producing securities
(shareholders of Janus Flexible Bond Fund, Janus Aspen
Flexible Bond Portfolio and Janus Adviser Flexible Bond Fund
only);
o Approve certain amendments to the Amended and Restated Trust
Instrument (JAD and JAS)
o Approve conforming amendments to certain investment advisory
agreements between a Fund and Janus Capital Management ("JCM")
(applies to certain series of each Fund);
o Approve amended investment advisory agreements between the
Funds and JCM, on behalf of certain series, to implement a
performance-based investment advisory fee structure (applies
to certain series of each Fund); and
o Approve amended subadvisory agreements between JCM and
Enhanced Investment Technologies LLC ("INTECH") on behalf of
each of Janus Risk-Managed Stock Fund, Janus Adviser
Risk-Managed Core Fund and Janus Aspen Risk-Managed Core
Portfolio, to change the subadvisory fee structure.
Our responses to your comments and the supplementary information requested are
set forth below.
1. COMMENT: With respect to the proposed performance fees, add examples
for the Funds showing how the performance fee will be determined and
applied. Refer to the SEC's 1972 release on performance fees that
discusses certain requirements related to calculating performance fees.
RESPONSE: We have included examples in accordance with your request.
2. COMMENT: Confirm that the proposal on performance fees (and any related
proxy disclosure) is consistent with the requirements in the SEC's 1972
release on performance fees.
RESPONSE: Under the revised Performance Fee Proposal, the investment
advisory fee to be paid by each Fund will consist of two components:
(1) a base management fee calculated and accrued daily and paid monthly
by applying a specified fixed-rate to the Fund's average daily net
assets during the previous month ("Base Fee"), plus or minus (2) a
performance-fee adjustment ("Performance Adjustment") calculated and
paid monthly and accrued daily by applying a variable rate of up to
0.15% to the Fund's average daily net assets during the performance
measurement period. The performance measurement period generally will
be the previous 36 months, although no Performance Adjustment will be
made until the proposed amendment to the investment advisory agreement
has been in effect for at least 12 months, and when a proposed
amendment has been in effect for at least 12 months, but less than 36
months, the performance measurement period will be equal to the time
that has elapsed since the proposed amendment took effect.
We have reviewed the SEC's 1972 releases, "Factors to be Considered in
Connection with Investment Company Advisory Contracts Containing
Incentive Fee Arrangements," Investment Company Act Release No. 7113
(April 6, 1972), and "Adoption of Rule 205-2 under the Investment
Advisers Act of 1940, as Amended, Defining 'Specified Period' over
which the Asset Value of the Company or Fund under Management Is
Averaged," Investment Company Act Release No. 7484 (November 10, 1972),
collectively, the
"1972 Releases") and confirm that the Performance Fee Proposal is
consistent with the 1972 Releases.
3. COMMENT: In the Janus Adviser Series proxy statement, page 40 under
"Description of the Proposed New Advisory Agreements," the second
paragraph appears to be missing a word within the following phrase "...
over a rolling 36 month period, that (i) no Performance Adjustment...."
RESPONSE: The missing word was "except, " i.e., . . . period, except
that . . . ." However, that sentence no longer appears in the Janus
Adviser Series proxy statement (or any of the other Proxy Statements).
4. COMMENT: On page 40 of the Janus Adviser Series proxy statement, under
the heading "Description of the Proposed New Advisory Agreements," in
the third paragraph, suggest adding "for the previous month" to the
following sentence: "For purposes of computing the Base Fee and the
Performance Adjustment, net assets for the previous month are averaged
over different periods (average daily net assets for the Base Fee
versus average net assets over the performance measuring period for the
Performance Adjustment."
RESPONSE: This suggestion has been incorporated into the disclosure.
5. COMMENT: (a) Why was a 36 month rolling period selected for calculating
the performance adjustment rather than a 12 month rolling period? We
have seen more of the 12 month rolling period. (b) In addition, assume
a Fund was outperforming its benchmark for 35 months and then its
performance began declining versus its benchmark. Investors who come in
after this 35 month period of good performance are paying for
performance that they did not enjoy. How do you handle this scenario?
(c) How would you also address a scenario (either separately from or in
combination with the above scenario) where the average net assets over
the 36 month period were large but then over the next several months
thereafter the Fund experiences significant outflows?
RESPONSE: With respect to comment (a) above, as noted in the revised
Proxy Statements, the Performance Fee Proposal was the product of
extensive deliberations by the Funds' independent trustees and their
independent fee consultant, in consultation with their independent
legal counsel. In the course of those deliberations, the independent
trustees decided upon the performance measurement period described
(i.e., a rolling 36 month period, with the phase-in period described in
the Proxy Statements). The independent trustees determined that this
performance measurement period was of appropriate length to ensure
proper correlation and to prevent fee adjustments from being based upon
random or insignificant differences between the performance of the Fund
and of the index and further, to provide an incentive for the
investment adviser to strive for long-term performance.
We note that some of the largest funds using performance fee structures
designed to comply with Section 205(b)(2) employ a rolling 36 month
performance measurement period, e.g., Vanguard Windsor Funds, Vanguard
Wellington Fund, and Fidelity Magellan Fund.
With respect to comment (b) above, we believe that the anomaly you
describe (i.e. that recent investors entering a fund after a period of
good performance may pay for performance that they did not enjoy) is
inherent in Section 205(b)(2), as interpreted in the 1972 Releases,
which effectively requires use of a period long enough to minimize the
possibility that payments will be based upon random or short term
fluctuations. We note also that, for the same reason, investors
entering a fund after a period of poor performance would get a reduced
fee, notwithstanding the fact that they did not participate in the poor
performance.
Similarly, the anomaly you refer to in comment (c) is inherent in
Section 205(b)(2), as interpreted in the 1972 Releases, which requires
that any performance adjustment be based upon net assets averaged over
the performance period. Please note that in the section entitled
"Performance Adjustment Examples," we have included the following
disclosure in the introduction:
"Each example assumes that the average daily net assets of the relevant
Fund remain constant during a 36 month performance measurement period.
The Performance Adjustment would be a smaller percentage of current
assets if the net assets of the Fund were increasing during the
performance measurement period, and a greater percentage of current
assets if the net assets of the Fund were decreasing during the
performance measurement period."
We note that, all other factors being equal, a fund with poor
performance will be more likely to shrink than a fund with excellent
performance. For this reason, an entering investor will be more likely
to have the benefit of a fee that is reduced by more than 0.15% of
current net assets as a result of large outflows, than the cost of a
fee that is increased by more than 0.15% of current net assets as a
result of large outflows.
6. COMMENT: With respect to the advisory fee rate, if average assets for
the 36 month rolling period were large but closing assets were
moderate, could the effective advisory fee rate be more than 15 bps
(more than the maximum rate disclosed in the proxy statement)? The
tables provided in the proxy statement showing the advisory fee rate
for each Fund at various levels of outperformance and underperformance
versus the Fund's benchmark index only seem to be valid if current
assets and rolling 36 month assets are the same.
RESPONSE: Please see our response to Comment 5. We agree with the
Staff's comment and have revised the Proxy Statements accordingly.
7. COMMENT: The potential 30 basis point swing in the Performance
Adjustment is described in the proxy statement as calculated against
closing assets. Is this correct?
RESPONSE: We have revised the disclosure to clarify that the Base Fee
is calculated on current net assets and the Performance Adjustment,
once it is fully in effect, will be calculated on average assets over a
trailing 36 month period.
8. COMMENT: Given that the performance fee consists of two components
calculated from two different asset bases, the proxy statement needs to
accurately describe (in plain English) how this calculation works, in
particular since the adjustment is not intended to move more than 15
bps up or down over the 36 month rolling period.
RESPONSE: Please see our responses to the prior comments. We have
revised the disclosure to clarify how the Base Fee and the Performance
Adjustment are applied.
9. COMMENT: The proxy disclosure should describe both the upside and
downside risk of the performance fee as it is currently structured
(Base Fee calculated monthly on current assets and Performance
Adjustment on a 36 month rolling period). This disclosure should
include the amount/level by which the Fund must outperform its index
before the Performance Adjustment applies for such Fund.
RESPONSE: We have revised the proxy statement to address these
comments.
10. COMMENT: The selection of the benchmark index by which the Performance
Adjustment is measured is a material component of the investment
advisory contract and therefore, changing to another benchmark will
require shareholder approval. This is the current view of the SEC.
RESPONSE: We have included disclosure to that effect in each Proxy
Statement.
11. COMMENT: Change "Proposed" to "Pro Forma" in the fee table.
RESPONSE: We have incorporated the Staff's suggestion.
12. COMMENT: In the text immediately preceding the fee table, add detail
regarding the assumptions around the pro forma calculation, such as the
time period for which the Performance Adjustment is being calculated.
RESPONSE: We have incorporated the disclosure requested.
13. COMMENT: The last two columns of the fee table, "Expense Waiver" and
"Net Annual Operating Expenses," cannot be shown for the pro forma
numbers for any Fund for which there is no contractual fee waiver
through January 1, 2008. The standard rule is that expense waivers and
resulting net annual operating expenses may only be included in the fee
table when the waiver is contractual and covers at least the time
period of the
fee table. Given that the pro forma numbers shown in the fee table
estimate the expenses (and the management fee), as if the Performance
Adjustment was already calculated over a 36 month rolling period, and
the Performance Adjustment does not actually get implemented until
January 1, 2007, any disclosure of pro forma numbers in the fee table
should cover the January 1, 2007 to January 1, 2008 period.
RESPONSE: We have eliminated the "Expense Waiver" and "Net Operating
Expenses" columns from the fee table in each Proxy Statement.
14. COMMENT: Move the footnotes that accompany the fee table to follow
immediately after the examples to the fee table rather than after the
fee table.
RESPONSE: Although we believe that placing the footnotes that accompany
the fee table after the example to the fee table (which may be several
pages after the fee table) rather than immediately following the fee
table may create confusion for a shareholder, given the numerous
reiterations by the Staff to reflect the footnotes in this manner, we
have revised the disclosure in accordance with the suggestion.
15. COMMENT: For Janus Aspen Series, immediately preceding the fee table,
include disclosure that indicates that if charges or expenses incurred
at the contract level were included in the numbers shown in the fee
table, the fees and expenses shown would be higher.
RESPONSE: We have incorporated the disclosure requested.
16. COMMENT: In the fee table for Janus Adviser Contrarian Fund, why are
there no pro forma numbers?
RESPONSE: Janus Adviser Contrarian Fund only commenced operations on
August 1, 2005; therefore, we do not have sufficient information to
provide pro forma numbers. We have included disclosure to this effect.
17. COMMENT: Provide disclosure in the proxy statement regarding when the
performance fee will accrue in a Fund's net asset value, the timing of
cash payments made to the adviser, and, clarify how the performance fee
is accrued and paid.
RESPONSE: We have incorporated the disclosure requested.
18. COMMENT: Your proposed fee structure on performance fees is a
bifurcated structure in that the Base Fee and Performance Adjustment
are calculated using assets over different time periods. Any time you
use a bifurcated approach, there may be circumstances where the adviser
may need to reimburse the Fund. Add disclosure to this effect to the
proxy statement, as well as to the upcoming applicable prospectuses and
statements of additional information.
RESPONSE: We have incorporated the disclosure requested to each Proxy
Statement and will incorporate similar disclosure in upcoming filings
to a Fund's registration statement, as appropriate.
19. COMMENT: The table in the performance fee proposal section that has
three columns showing the Funds that are proposing performance fees,
the proposed benchmarks, and the proposed base fee, add two additional
columns. One additional column should reflect the incentive adjustment
(+/- 0.15%) and the second column should reflect the total performance
fee (Base Fee + Performance Adjustment) that will show the maximum and
minimum a shareholder could pay.
RESPONSE: As noted above, the Base Fee and the Performance Adjustment
will be calculated as a percentage of net assets over different time
periods, and accordingly, there is no absolute minimum or maximum fee,
calculated in terms of monthly average net assets. For this reason, we
believe it would be misleading to include the suggested columns.
20. COMMENT: Suggest adding a footnote to the fee table to clarify that the
15 basis point adjustment is based on a rolling 36 month period.
RESPONSE: Please see our response to comment 19.
21. COMMENT: Why are there no pro forma numbers shown in the fee table for
Janus Research Fund (series of JIF)?
RESPONSE: Janus Research Fund commenced operations on February 25,
2005; therefore, we do not have sufficient information to provide pro
forma numbers to the shareholders. We have included disclosure to this
effect.
22. COMMENT: Given that your Base Fee and Performance Adjustment are
calculated over different periods, consider the situation where assets
dropped for a couple of months but the Fund was outperforming its
benchmark. Under this scenario, the advisory fee increases. Couldn't
this resulting advisory fee be considered excessive?
RESPONSE: Please see our response to Comment 5(c). Any potential harm
to shareholders resulting from the anomaly inherent in Section
205(b)(2) may be reduced or eliminated by any fee waiver then in
effect. The investment adviser and the Funds' independent trustees
intend to continue to monitor the impact that the performance fee have
on shareholder expenses.
23. COMMENT: Will the contractual fee waivers for the various funds remain
in effect once a Fund enters into the Performance Adjustment period?
RESPONSE: The contractual fee waivers that are currently in place were
implemented and approved by the Trustees prior to the approval by the
Trustees of the current proposed
performance fees for these Funds. In some cases, the period of the fee
waiver overlaps with a portion of the period when the Performance
Adjustment will be implemented (January 1, 2007). One of the reasons
the fee waiver was approved for this time period was to provide net
annual operating expenses in the prospectus. The Trustees will have an
opportunity to review the appropriateness of each fee waiver at their
next 15(c) meeting which will occur prior to the time the Performance
Adjustment period is implemented (January 1, 2007).
24. COMMENT: Does having a fee waiver in place when the advisory fee has a
performance fee structure with both a Base Fee component and a
Performance Adjustment component create a conflict of interest for the
adviser? In essence, is there a situation in which it would be
financially beneficial for the adviser to set the fee waiver at a rate
that increases the Fund's Performance Adjustment and may therefore
increase the overall performance fee paid by the Fund.
RESPONSE: Janus does not believe that having a fee waiver in place when
the advisory fee has a performance fee structure with both a Base Fee
component and a Performance Adjustment component creates a conflict of
interest for the adviser. Please see our response to comment 26.
25. COMMENT: Is having a fee waiver based on current assets whereas the
performance fee is calculated over a 36 month period a potential
violation of Section 205 of the Advisers Act of 1940? Should the fee
waiver also be calculated on the same time period as the performance
adjustment?
RESPONSE: We are not aware of any authority suggesting that a fee
waiver based on current net assets contravenes Section 205 of the
Advisers Act. Indeed, we note that in other situations the Staff has
generally been supportive of efforts to reduce the effective advisory
fee rate paid by shareholders. See, e.g. Limited Term Municipal Fund,
Inc. (November 17, 1992)(no-action letter permitting reduction of
investment advisory fee without obtaining shareholder approval). As is
implicit in certain of the Staff's prior comments (e.g. Comment 21), it
is the fund's current expense ratio that is most meaningful to
shareholders, particularly those shareholders who have entered the fund
recently. As noted above, any potential harm to shareholders resulting
from the potential anomaly inherent in Section 205(b)(2) could be
reduced or eliminated by any fee waiver then in effect.
26. COMMENT: The Staff is concerned about the effect of fee waivers on fund
performance, namely that the adviser can, to some degree, determine the
performance of a fund by adjusting the amount of the waiver.
If a fund need only beat the index by 7% rather than a larger amount of
10%, it tends to exacerbate the conflict, while the 3-year rolling
period tends to ameliorate the conflict; but this could still be
considered material, particularly for a new fund.
For example, a 1 basis point waiver for a new fund may result in a
smaller amount of cash, but the performance it generates can mean a
greater fee when the fund gets larger in subsequent months.
Consider additional disclosure to the effect that:
o the fact that performance is determined to a material degree
on the amount of fee waivers;
o the conflict of interest that this creates;
o the fact that the Board considered this fact when approving
the performance-based fee arrangements; and
o what the Funds will do to monitor this.
Consider also additional disclosure showing the effects of the fee
waivers over the period when the performance fee is in effect to
indicate, in essence, that a dollar waived today can be worth more in
current assets in the Fund over the performance measurement period,
thereby increasing the Fund's performance. The Staff's assumption is
that when a Fund caps its fees, the Fund's assets will increase, giving
the appearance of improved performance, hence any waiver of the
management fee is of benefit to the adviser at some later date.
RESPONSE: We respectfully disagree with the Staff's comment. As a
practical matter, Janus anticipates that the negative impact of a fee
waiver on the investment adviser's revenues will substantially exceed
any future opportunities to recoup that lost revenue through any
increased performance fees resulting from fee waivers. Moreover, the
current impact of a fee waiver in terms of lost revenue is certain,
whereas the ability to recoup that amount through a more favorable
Performance Adjustment is contingent. In addition, as discussed, for
any Fund that has a fee waiver in place during a period when the
performance adjustment is in effect, the adviser would not receive any
additional advisory fees resulting from a Fund's outperformance
relative to the performance of its benchmark index when those fees
exceed the fee cap. The fee waivers currently in place are contractual
and historically have been implemented for future periods of up to 23
months from the date of approval by the Fund's Trustees. With respect
to implementation of the current expense waivers for a Fund, see the
Response to Comment #23.
With respect to the final paragraph above in Comment #26 regarding
additional disclosure on the effects of the fee waiver, although we
believe that there are numerous assumptions that need to occur under
extreme circumstances for the scenario discussed to occur, we have
added the following to each Proxy Statement: "Because a fee waiver will
have a positive effect upon the Fund's performance, a fee waiver that
is in place during the period when the Performance Adjustment applies
may effect the Performance Adjustment in a way that is favorable to
JCM. It is possible that the cumulative dollar
amount of additional compensation ultimately payable to JCM will, under
some circumstances, exceed the cumulative dollar amount of fees waived
by JCM."
27. COMMENT: Since each performance fee proposal is voted on separately by
the respective Fund, unbundle the proposal in each Proxy Statement so
that there is a separate proposal on performance fees for each Fund.
RESPONSE: The performance fee proposal as described in each Proxy
Statement has been revised as suggested.
28. COMMENT: The second paragraph under the section titled "Description of
the Proposed Amendments on Performance Fees," confirm that the
description of the performance fee is accurate in how the fee will
apply. What is meant by "applicable performance measurement period as
issued in this paragraph?"
RESPONSE: We believe the referenced disclosure accurately describes the
two components of the performance fee and the applicable performance
measurement period. The applicable performance measurement period, as
described in this paragraph in each Proxy Statement, generally will be
the previous 36 months, although no performance adjustment will be made
until a proposed amendment to the investment advisory agreement
("Proposed Amendment") that contains the performance fee has been in
effect for at least 12 months. When a Proposed Amendment has been in
effect for at least 12 months, but less than 36 months, the performance
measurement period will be equal to the time that has elapsed since the
Proposed Amendment took effect. For example, if the Proposed Amendment
has been in effect for 25 months, the performance measurement period
would be 25 months; if the Proposed Amendment has been in effect for 40
months, the performance measurement period would be the prior 36
months.
29. COMMENT: In the third paragraph under "Description of the Proposed
Amendments on Performance Fees," there is the following sentence: "In
accordance with regulatory requirements, for purposes of computing the
Base Fee and the Performance Adjustment, net assets will be averaged
over different periods (average net assets during the previous month
for the Base Fee, versus average net assets during the performance
measurement period for the Performance Adjustment). Are you intending
to say that regulatory requirements require the Base Fee and
Performance Adjustment to be calculated over different periods? Also,
consider adding "daily" to the phrase "average net assets" in this
sentence so that it reads "average daily net assets."
RESPONSE: We have revised this sentence to remove "In accordance with
regulatory requirements." We have added "daily" to the sentence as
suggested.
30. COMMENT: In the third paragraph under "Description of the Proposed
Amendments on Performance Fees," there is the following sentence:
"Because the Performance Adjustment is tied to the performance of a
Fund's benchmark index, the Performance Adjustment could increase JCM's
fee even if the Fund's shares lose value during the
performance measurement period and could decrease JCM's fee even if the
Fund's shares increase in value during the performance measurement
period." Consider providing an example of how this may occur.
RESPONSE: We respectfully believe that existing disclosure addresses
the Staff's comment. As discussed, this disclosure was added pursuant
to Staff comments from a prior telephone conference, as were the
examples to describe how the Performance Adjustment is applied in
calculating the performance fee. We have added examples in each Proxy
Statement that describe various scenarios including, among others,
examples (the "changing assets examples") applicable to all Funds
discussing: (i) shrinking assets over the performance measurement
period when the Fund's current net assets are less than the net assets
during the performance measurement period, and (ii) growing assets over
the performance measurement period when the Fund's current assets are
greater than the net assets during the performance measurement period.
These changing assets examples are analogous to the suggested example
in that each is intended to help a shareholder understand how the
performance fee is calculated and the differences in the performance
fee that may result due to changes in the variables involved in
calculating the Performance Adjustment (whether due to changes in
assets or share value). Providing an additional example regarding the
impact to the performance fee from changes in a Fund's share value may
be duplicative and not provide additional benefit to the shareholder.
31. COMMENT: In the narrative prior to the fee table for each Fund, include
disclosure describing why the pro forma management fee is higher or
lower, as applicable, than the Base Fee, whether due to assets
increasing or decreasing over the performance measurement period
compared to the current period and performance of the Fund relative to
its benchmark index.
RESPONSE: We have added disclosure as suggested describing, for the
applicable period, whether a Fund outperformed or underperformed its
benchmark index and the difference between current net assets and net
assets over the performance measurement period that resulted in the pro
forma management fee shown in the fee table.
32. COMMENT: Consider adding disclosure showing the net assets for each
Fund for the last two fiscal years of the Fund (or shorter time period,
as applicable). We believe it is important that shareholders get a
sense of the trend in asset levels for funds proposing the adoption of
a performance fee.
RESPONSE: We have added this disclosure for each Fund as suggested.
33. COMMENT: Consider adding an example that shows how the performance fee
works when assets are increasing or decreasing over the performance
measurement period.
RESPONSE: As discussed in our response to Comment #30 above, we have
included changing assets examples applicable to all Funds that
demonstrates the impact on the
performance fee when net assets are (a) increasing, on the one hand,
and (b) decreasing, on the other hand, during a performance measurement
period.
34. COMMENT: For the Performance Adjustment examples for each Fund that
show, assuming constant assets, the differences in investment advisory
fees depending on whether a Fund underperformed or outperformed its
benchmark index, restate each example so that it shows the total
advisory fee rate for a month given maximum outperformance of a Fund
relative to its benchmark index of 0.15% of average net assets over the
36 month performance measurement period.
RESPONSE: We have revised each of the examples as suggested. In
addition, for consistency, we have also revised the changing assets
examples applicable to each Fund to show the advisory fee rate for a
month given maximum underperformance or outperformance of a Fund
relative to its benchmark index of 0.15% of average net assets during a
hypothetical 36 month performance measurement period.
35. COMMENT: For the narrative examples that show the dollar amounts paid
to the adviser and the differences in the investment advisory fee,
assuming current net assets vary from net assets over the performance
measurement period and assuming net assets are increasing or
decreasing, consider revising to show these examples in a table format.
RESPONSE: We tried revising the narrative changing assets examples to a
table format. However, as we have discussed, we believe that it is
easier to read and understand the changing assets examples in narrative
form. We have made some formatting changes to the narrative changing
assets examples to offset the numbers in a manner that attempts to make
it easier to read.
36. COMMENT: With respect to expense waivers currently in effect that are
described with each fee table, include disclosure regarding the period
of the waiver and if there is recoupment of any fees waived.
RESPONSE: As discussed, the footnotes to the fee table for each Fund
that currently has an expense waiver include disclosure on the period
in which the expense waiver agreement is in effect. Also, as discussed,
none of the expense waiver agreements for the Funds currently proposing
a performance fee contain provisions providing that the adviser may
recoup any such waivers. We have added disclosure to each respective
footnote to the effect that the "applicable expense waiver agreement
does not contain any provisions for recoupment of fees".
37. COMMENT: Indent headings to the fee table, as appropriate, for easier
reading.
RESPONSE: As discussed, the revised draft of the performance fee
proposal provided to the SEC prior to the definitive filing was a Word
document that had been converted from a pdf. We have made appropriate
formatting changes to the fee tables that will be appear in the
definitive proxy statements.
38. COMMENT: Each Proxy Statement indicates that the Performance Adjustment
is accrued on a daily basis and calculated monthly. Expand on this
disclosure to describe how this calculation works.
RESPONSE: As discussed, we have modified the disclosure to indicate
that the Performance Adjustment is calculated monthly in arrears and is
accrued evenly each day throughout the month.
39. COMMENT: Disclosure regarding the Trustees having the ability to change
the class of shares selected for purposes of measuring a Fund's
performance relative to its benchmark index should indicate that it is
the opinion of the Staff that any changes to such selected class
require shareholder approval of the applicable Fund.
RESPONSE: We have added disclosure to each Proxy Statement that
indicates that it is currently the Staff's position that shareholder
approval is required to change the class of shares selected for
purposes of calculating the Performance Adjustment. Each Proxy
Statement indicates that if there is a change in the Staff's position,
the Trustees will notify the shareholders of such change in position at
such time as the Trustees may determine that a change in the selected
class is appropriate.
40. COMMENT: Each Proxy Statement provides numerous hypothetical examples
of how the performance fee is calculated. These examples show various
scenarios including: (i) the advisory fee rate for a given month
assuming constant assets over a 36 month performance measurement period
when a Fund tracks its benchmark index as well as when it outperforms
or underperforms its benchmark index, assuming the maximum Performance
Adjustment rate of 0.15% of average net assets, and (ii) the investment
advisory fee rate as well as dollars earned by the adviser assuming
current net assets are increasing as well as decreasing from the net
assets over the performance measurement period. The Staff recognizes
that each of these examples was included at its request. There is
disagreement between the Staff regarding inclusion in each Proxy
Statement of the examples described in (i). Given this disagreement,
the Staff has determined that JCM may make the decision to include or
exclude such examples (with the examples described in (ii) remaining).
RESPONSE: We understand that there is disagreement between the Staff
regarding inclusion of certain hypothetical examples in each Proxy
Statement that were provided in response to prior SEC comments. While
we also understand that examples that assume constant assets over the
36 month performance period may not seem helpful to a shareholder given
that the actual calculation of the performance fee involves measuring
net assets over different periods (Base Fee on current net assets and
the Performance Adjustment on net assets over the performance
measurement period), there is generally no way of predicting when a
Fund will shrink or grow, or the amount of any such change in assets.
Thus, showing examples that assume constant assets seems at least as
meaningful as examples that assume a particular size or direction of
change in assets. In
consultation with counsel to the Independent Trustees, we have decided
to leave in the examples referenced in (i) in Comment #40 above in each
Proxy Statement.
41. COMMENT: The Staff advised JCM of its new policy related to responding
to SEC comments, specifically noting that the response must be in
writing with a Tandy provision and filed as a separate correspondence
filing.
RESPONSE: We acknowledge the new policy and have included the Tandy
provision as requested.
42. COMMENT: Add disclosure regarding how proxies are voted in the event of
adjournment.
RESPONSE: The Staff was directed to the relevant disclosure on
adjournments described in the Proxy Statements, in particular under the
section titled "Additional Information."
COMMENT: Add disclosure describing how broker-non votes and abstentions
are treated for purposes of adjournment of the meeting.
RESPONSE: The disclosure for each Proxy Statement is modified under
"Additional Information" to clarify the treatment of broker non-votes
and abstentions for purposes of adjournment.
43. COMMENT: Number the proposals described in the Chairman's letter to
shareholders consistent with the same disclosure included at the
beginning of each Proxy Statement.
RESPONSE: The letter to shareholders of each Fund has been modified as
suggested.
44. COMMENT: Certain disclosure (as it appears in EDGAR) is in all capital
letters and the SEC discourages the use of all capital letters to
emphasize disclosure.
RESPONSE: As discussed, the disclosure referenced appears in bold face
type within each Proxy Statement, not all capital letters. Certain bold
face type is provided to comply with certain proxy rules requiring
"prominent" disclosure. The EDGAR process converts bold face type into
all capital letters.
45. COMMENT: The Proxy Statements should include disclosure indicating that
the Trustee nominees have consented to serve and be named in the Proxy
Statements.
RESPONSE: The disclosure in each Proxy Statement currently indicates
that each nominee has consented to serve as Trustee. The disclosure
indicating that the nominees have consented to be named in the Proxy
Statement has been added as suggested.
46. COMMENT: For each Proxy Statement, with respect to the table naming
each Trustee/nominee and providing such Trustees'/nominees'
occupation(s) and other directorships, the Staff commented to include a
brief description of the purpose of a
company included in the descriptions (as a parenthetical after the
company name) when such information is not evident from the name of the
company.
RESPONSE: The disclosure has been modified as suggested.
47. COMMENT: If the Nominating and Governance Committee has a written
charter, include disclosure to that effect.
RESPONSE: As discussed, the Nominating and Governance Committee has a
written charter that delineates its duties. Disclosure to this effect
is already included in each Proxy Statement at the beginning of the
section entitled "Committees of the Board of Trustees." A copy of the
Charter is also attached as an exhibit to each Proxy Statement.
48. COMMENT: Ensure that the Proxy Statements include the new disclosure,
as applicable, on nominations for trustees as provided in Item
7(d)(2)(ii) of the proxy rules, in particular subsections (J), (K) and
(L).
RESPONSE: The Proxy Statements contain all applicable disclosure
required by Item 7(d)(2)(ii) of the proxy rules. With respect to
subsections (K) and (L) of Item 7(d)(2)(ii), there is no disclosure to
include as the Funds have not paid any third party to identify,
evaluate or assist in identifying or evaluating potential nominees
(subsection (K)) and, to the best knowledge of each Fund, no nominees
were recommended as described in subsection (L).
49. COMMENT: The table heading of the Trustee Compensation table should
include "Independent" in the title to distinguish that this
compensation was paid to the Independent Trustees.
RESPONSE: Each Proxy Statement has been modified as suggested.
50. COMMENT: For the JAS and JAD Proxy Statements, confirm that the
disclosure in Proposal 2.a. related to shareholder voting rights
(changing share-weighted voting to dollar-weighted voting) conforms
with guidance provided in the SEC no-action letter Sentinel Group
Funds, Inc. (pub. avail. Oct. 27, 1992).
RESPONSE: We have reviewed this no-action letter and believe that the
related disclosure contained in Proposal 2.a. is appropriate as
reflected.
51. COMMENT: The Proxy Cards for JAS and JAD should reflect separately
Proposals 2.a., 2.b. and 2.c. In addition, the proposals described on
the proxy card for each Fund should adequately describe the proposal to
be voted on.
RESPONSE: The proxy cards have been revised as suggested.
52. COMMENT: With respect to the JAS and JAD Proxy Statements, is Proposal
2.b
(Reorganization of the Trust, its Funds or Classes) providing the
Trustees with authority to take action that should be left to a
shareholder vote?
RESPONSE: The Trust Instrument for each of JAS and JAD is more
restrictive than federal law with respect to actions the Trustees can
take on reorganization without shareholder approval. Proposal 2.b. is
intended to provide the Trustees with the authority to unilaterally
approve a reorganization of the Trust, a Fund or class thereof as is
permitted pursuant to Rule 17a-8 under the 1940 Act.
53. COMMENT: Add a definition of "1940 Act Majority" as reflected under
"Required Vote" in Proposal 3 (JAS and JAD) and Proposal 2 (JIF).
RESPONSE: As discussed, page 3 of each Proxy Statement contains a
definition of "1940 Act Majority."
54. COMMENT: Define "plurality" as used under the section titled
"Additional Information" in each Proxy Statement.
RESPONSE: A definition of "plurality" has been added as suggested.
55. COMMENT: Revise the disclosure under "Shareholder Proposals for
Subsequent Meetings" to reflect the time required for a shareholder to
include a proposal for vote at the shareholder meeting including if
such additional proposal was made "from the floor" on the meeting date.
RESPONSE: The disclosure has been modified as suggested for consistency
with Rule 14a-8 of Regulation 14A of the Proxy Rules ("Shareholder
Proposals").
56. COMMENT: Include disclosure regarding how each person identified as a
proxy holder will vote broker non-votes on the proposals related to
approvals of amended investment advisory agreements.
RESPONSE: As discussed, each Proxy Statement indicates that for all
proposals, except for the trustee election, broker non-votes have the
same effect as a "no" vote. The disclosure has been revised to indicate
that broker non-votes on such proposals unrelated to the trustee
election effectively will be a vote against these proposals.
57. COMMENT: With respect to the performance fee proposal, as a rule of
thumb, the Staff considers 10% to be an appropriate maximum amount by
which a Fund may beat its index for purposes of calculating a
performance fee. The Funds described in the Proxy Statements have
varying slopes by which they underperform or outperform their benchmark
index, none of which are at 10%. Add disclosure regarding the factors
considered when determining the appropriate amount by which each Fund
over/under performs its benchmark index.
RESPONSE: We have added disclosure to each Proxy Statement regarding
the factors considered by the Trustees when approving the performance
fee for each Fund and determining the appropriateness of the maximum
amount by which a Fund may underperform or outperform its benchmark
index.
58. COMMENT: In the performance fee proposal and the second paragraph under
the section "Description of the Proposed Amendments on Performance
Fees," add "(positive or negative)" after the reference to "0.15%" in
the first sentence discussing the components of the performance fee.
RESPONSE: We have added the disclosure as suggested.
59. COMMENT: In the performance fee proposal and the third paragraph under
the section "Description of the Proposed Amendments on Performance
Fees," you have added disclosure in response to Staff comments
regarding the impact of an increase or decrease in a Fund's share value
to the performance fee paid to the adviser. Expand this disclosure to
provide that the Performance Adjustment is tied to a Fund's relative
performance to its benchmark index and not a Fund's absolute
performance.
RESPONSE: We have added disclosure to each Proxy Statement as suggested
to indicate that "Because the Performance Adjustment is tied to a
Fund's relative performance to its benchmark index (and not its
absolute performance), the Performance Adjustment could increase JCM's
fee even if the Fund's shares lose value during the performance
measurement period and could decrease JCM's fee even if the Fund's
shares increase in value during the performance measurement period."
60. COMMENT: The disclosure in each Proxy Statement regarding the Trustees'
selection of an index or class of a Fund that is used to calculate the
Performance Adjustment should indicate that the current position of the
Staff is that any change to such index or class requires shareholder
approval.
RESPONSE: As discussed, each Proxy Statement already includes
disclosure regarding the Staff's position on any changes to a selected
index or class for the purpose of calculating the Performance
Adjustment.
61. COMMENT: The proxy cards should reflect separately proposals 2.a., 2.b.
and 2.c. for voting on changes to the Trust Instrument (JAD and JAS)
and proposals related to the performance fee proposal (all Funds).
RESPONSE: The proxy cards show separate voting on the proposals as
suggested.
Each Fund acknowledges responsibility for the adequacy and accuracy of
the disclosure in each Fund's Definitive Proxy Statement filed on October 28,
2005. In addition, each Fund acknowledges that Staff comments, or changes to
disclosure in response to Staff comments, in the Preliminary Proxy Statement for
each Fund filed on September 22, 2005 and reviewed by the
Staff, do not foreclose the Commission from taking any action with respect to
the filing, and the Funds may not assert Staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
If you have any concerns regarding the above responses, please call me at (303)
394-6459. Thank you for your assistance in this matter.
Very truly yours,
/s/ Stephanie Grauerholz-Lofton
Stephanie Grauerholz-Lofton
Associate Counsel
cc: Kelley A. Howes, Esq.
Richard Noyes, Esq.
Donna L. Brungardt