Members Mutual Funds, et al.; Notice of Application, 76377-76381 [E6-21656]

Download as PDF Federal Register / Vol. 71, No. 244 / Wednesday, December 20, 2006 / Notices rm.html. Persons who do not have access to ADAMS or who encounter problems in accessing the documents located in ADAMS should contact the NRC PDR Reference staff by telephone at 1–800–397–4209, or 301–415–4737 or by e-mail to pdr@nrc.gov. Dated at Rockville, Maryland, this 13th day of December 2006. For the Nuclear Regulatory Commission. Alan B. Wang, Project Manager, Plant Licensing Branch IV, Division of Operating Reactor Licensing, Office of Nuclear Reactor Regulation. [FR Doc. E6–21673 Filed 12–19–06; 8:45 am] BILLING CODE 7590–01–P OFFICE OF PERSONNEL MANAGEMENT Proposed Collection: Comment Request for Review of New Information Collection Form: OPM Optional Form XX U.S. Office of Personnel Management. ACTION: Notice. sroberts on PROD1PC70 with NOTICES AGENCY: SUMMARY: In accordance with the Paperwork Reduction Act of 1995 (Pub. L. 104–13, May 22, 1995), this notice announces that the U.S. Office of Personnel Management (OPM) intends to submit to the Office of Management and Budget (OMB) a request for review of a new information collection document. Optional Form (OF) XX, Certificate of Medical Examination replaces the existing Civil Service Commission Standard Form (SF) 78, Certificate of Medical Examination, which was last revised in October 1969. Replacement is necessary because the SF–78 is no longer accurate. Revisions include making the form optional for agencies, incorporating changes required by 29 CFR 1630.13, which addresses prohibited medical examinations and inquiries, and deleting references to the Federal Personnel Manual and other outdated references. It will be used to collect medical information about individuals who are incumbents of positions which require physical fitness/agility testing and medical examinations, or who have been selected for such a position contingent upon meeting physical fitness/agility testing and medical examinations as a condition of their employment. This information is needed to ensure fair and consistent treatment of employees and job applicants, to adjudicate requests to pass over preference eligibles, and to adjudicate claims of discrimination VerDate Aug<31>2005 20:03 Dec 19, 2006 Jkt 211001 under the Americans with Disabilities Act (ADA). Approximately 45,000 forms are submitted annually. It takes approximately 30 total minutes to complete the form. The annual estimated burden is 22,500 hours. Comments are particularly invited on: • Whether this collection of information is necessary for the proper performance of functions of OPM, and whether it will have practical utility; • Whether our estimate of the public burden of this collection is accurate, and based on valid assumptions and methodology; • Ways we can enhance the quality, utility and clarity of the information collected; and • Ways we can minimize the burden of the collection of information on those who are to respond, through use of the appropriate technological collection techniques or other forms of information technology. For copies of this proposal, contact Mary Beth Smith-Toomey on (202) 606– 8358, Fax (202) 418–3251, or e-mail to mbtoomey@opm.gov. Please include a mailing address with your request. DATES: Comments on this proposal should be received within 60 calendar days from the date of this publication. ADDRESSES: Send or deliver comments to—J. C. Phillip Spottswood, J.D., M.P.H. by telephone at (202) 606–1389, by TTY at (202) 418–3134; by fax at (202) 606–0864; or by e-mail at phil.spottswood@opm.gov. Linda M. Springer, Director, U.S. Office of Personnel Management. [FR Doc. E6–21647 Filed 12–19–06; 8:45 am] BILLING CODE 6325–39–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27598; 812–13133] Members Mutual Funds, et al.; Notice of Application December 13, 2006. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act. AGENCY: The order would permit certain registered open- SUMMARY OF THE APPLICATION: PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 76377 end management investment companies to acquire shares of other registered open-end management investment companies and unit investment trusts (‘‘UITs’’) that are within and outside the same group of investment companies. Applicants: MEMBERS Mutual Funds (‘‘MMF’’), ULTRA Series Fund (‘‘USF’’) (each a ‘‘Trust’’, and together, the ‘‘Trusts’’), Members Capital Advisors, Inc. (‘‘MCA’’), and CUNA Mutual Life Insurance Company (‘‘CUNA Mutual’’) (collectively, the ‘‘Applicants’’). Applicants request that the order also extend to any future series of the Trusts, and any other existing or future registered open-end management investment companies and any series thereof that are part of the same group of investment companies as defined in section 12(d)(1)(G)(ii) of the Act, as the Trusts and are, or may in the future be, advised by MCA or any other investment adviser controlling, controlled by, or under common control with MCA (together with the existing series of the Trusts, the ‘‘Funds’’). FILING DATES: The application was filed on October 29, 2004 and amended on March 24, 2006 and December 6, 2006. Hearing or Notification of Hearing: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on January 8, 2007, 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 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, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090; Applicants: CUNA Mutual Group, 5910 Mineral Point Road, Madison, Wisconsin 53701–0391. FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at (202) 551–6876, or Nadya Roytblat, Assistant Director, at (202) 551–6821 (Office of Investment Company Regulation, Division of Investment Management). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Commission’s Public Reference Desk, E:\FR\FM\20DEN1.SGM 20DEN1 76378 Federal Register / Vol. 71, No. 244 / Wednesday, December 20, 2006 / Notices sroberts on PROD1PC70 with NOTICES 100 F Street, NE., Washington, DC 20549–0102 (telephone (202) 551–5850). Applicants’ Representations 1. CUNA Mutual is a life insurance company organized under the laws of Iowa. Through separate accounts (‘‘Separate Accounts’’) registered under the Act as UITs (the ‘‘Registered Separate Accounts’’) and a separate account not registered under the Act (the ‘‘Unregistered Separate Account’’), CUNA Mutual issues group and individual variable annuity contracts and variable life insurance policies (the ‘‘Variable Contracts’’) which offer the owners of such contracts the opportunity to indirectly invest in USF. 2. MMF is a statutory trust organized under the laws of Delaware and USF is a business trust organized under the laws of Massachusetts. Both Trusts are registered under the Act as open-end management investment companies. MMF and USF currently offer twelve and thirteen separate Funds, respectively. MCA, an Iowa corporation, is registered under the Investment Advisers Act of 1940 and serves as investment adviser to the Funds. 3. Applicants request relief to permit (a) a Fund (a ‘‘Fund of Funds’’) to acquire shares of registered open-end management investment companies that are not part of the same group of investment companies (as defined in section 12(d)(1)(G)(ii) of the Act) as the Fund of Funds (the ‘‘Unaffiliated Underlying Funds’’), (b) the Fund of Funds to acquire shares of UITs that are not part of the same group of investment companies as the Fund of Funds (the ‘‘Unaffiliated Underlying Trusts’’), (c) the Unaffiliated Underlying Funds and Trusts (collectively, the ‘‘Unaffiliated Funds’’) to sell their shares to the Fund of Funds, (d) the Fund of Funds to acquire shares of certain other Funds in the same group of investment companies as the Fund of Funds (the ‘‘Affiliated Funds,’’ and together with the Unaffiliated Funds, the ‘‘Underlying Funds’’) and (e) the Affiliated Funds to sell their shares to the Fund of Funds. Certain of the Unaffiliated Underlying Trusts or Unaffiliated Underlying Funds may be registered under the Act as either UITs or open-end management investment companies and have received exemptive relief to permit their shares be listed and traded on a national securities exchange at negotiated prices (‘‘ETFs’’). Each Fund of Funds also may invest in other securities and financial instruments. Applicants state that a Fund of Funds will provide an efficient and simple method of allowing investors to create a comprehensive asset allocation program. VerDate Aug<31>2005 20:03 Dec 19, 2006 Jkt 211001 Applicants’ Legal Analysis A. Section 12(d)(1) 1. Section 12(d)(1)(A) of the Act prohibits a registered investment company from acquiring shares of an investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company. Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter and any broker or dealer from selling the shares of the investment company to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company’s voting stock, or if the sale will cause more than 10% of the acquired company’s voting stock to be owned by investment companies generally. 2. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Applicants seek an exemption under section 12(d)(1)(J) to permit the Funds of Funds to acquire shares of the Underlying Funds and to permit the Underlying Funds, their principal underwriters and any broker or dealer to sell shares to the Funds of Funds beyond the limits set forth in sections 12(d)(1)(A) and (B) of the Act. 3. Applicants state that the proposed arrangement will not give rise to the policy concerns underlying sections 12(d)(1)(A) and (B), which include concerns about undue influence by a Fund of Funds or its affiliated persons over Underlying Funds, excessive layering of fees, and overly complex fund structures. Accordingly, applicants believe that the requested exemption is consistent with the public interest and the protection of investors. 4. Applicants state that the proposed arrangement will not result in undue influence by a Fund of Funds or its affiliated persons over the Underlying Funds. The concern about undue influence does not arise in connection with a Fund of Funds’ investment in the Affiliated Funds, since they are part of the same group of investment companies. To limit the control that a Fund of Funds or its affiliated persons may have over an Unaffiliated Fund, applicants propose a condition PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 prohibiting: (a) MCA and any person controlling, controlled by or under common control with MCA, any investment company and any issuer that would be an investment company but for section 3(c)(1) or section 3(c)(7) of the Act advised or sponsored by MCA or any person controlling, controlled by or under common control with MCA (collectively, the ‘‘Group’’), and (b) any investment adviser within the meaning of section 2(a)(20)(B) of the Act (‘‘SubAdviser’’) to a Fund of Funds, any person controlling, controlled by or under common control with the SubAdviser, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised by the Sub-Adviser or any person controlling, controlled by or under common control with the Sub-Adviser (collectively, the ‘‘Sub-Adviser Group’’) will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. 5. Applicants further state that condition 2 precludes a Fund of Funds and MCA, any Sub-Adviser, promoter or principal underwriter of a Fund of Funds, and any person controlling, controlled by or under common control with any of those entities (each, a ‘‘Fund of Funds Affiliate’’) from taking advantage of an Unaffiliated Fund, with respect to transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or the Unaffiliated Fund’s investment adviser(s), sponsor, promoter, principal underwriter or any person controlling, controlled by or under common control with any of these entities (each, an ‘‘Unaffiliated Fund Affiliate’’). Condition 5 precludes a Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying Trust) from causing an Unaffiliated Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an officer, director, trustee, member of an advisory board, investment adviser, Sub-Adviser, or employee of the Fund of Funds, or a person of which any such officer, director, trustee, investment adviser, Sub-Adviser, member of an advisory board, or employee is an affiliated person (each, an ‘‘Underwriting Affiliate,’’ except any person whose relationship to the Unaffiliated Fund is covered by section 10(f) of the Act is not an Underwriting E:\FR\FM\20DEN1.SGM 20DEN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 71, No. 244 / Wednesday, December 20, 2006 / Notices Affiliate). An offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an Underwriting Affiliate is an ‘‘Affiliated Underwriting.’’ 6. As an additional assurance that an Unaffiliated Underlying Fund understands the implications of an investment by a Fund of Funds under the requested order, prior to a Fund of Funds’ investment in the Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i), condition 8 requires that the Fund of Funds and Unaffiliated Underlying Fund execute an agreement stating, without limitation, that their boards of directors or trustees (‘‘Boards’’) and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order (‘‘Participation Agreement’’). Applicants note that an Unaffiliated Fund (other than an ETF whose shares are purchased by a Fund of Funds in the secondary market) will retain the right to reject an investment by a Fund of Funds.1 7. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. With respect to investment advisory fees, applicants state that, in connection with the approval of any investment advisory contract under section 15 of the Act, the Board of each Fund of Funds, including a majority of the trustees who are not ‘‘interested persons,’’ as defined in section 2(a)(19) of the Act (‘‘Disinterested Trustees’’), will find that the advisory fees charged under the advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided pursuant to any Underlying Fund’s advisory contract(s). Applicants further state that MCA will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Underlying Fund pursuant to rule 12b-1 under the Act) received from an Unaffiliated Fund by MCA, or an affiliated person of MCA, other than any advisory fees paid to MCA or an affiliated person of MCA by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. 8. Applicants state that with respect to Registered Separate Accounts that invest in a Fund of Funds, no sales load 1 An Unaffiliated Fund, including an ETF, would retain its right to reject any initial investment by a Fund of Funds in excess of the limit in section 12(d)(1)(A)(i) of the Act by declining to execute the Participation Agreement with the Fund of Funds. VerDate Aug<31>2005 20:03 Dec 19, 2006 Jkt 211001 will be charged at the Fund of Funds level or at the Underlying Fund level. Other sales charges and service fees (as defined in Rule 2830 of the Conduct Rules of the NASD, (‘‘Rule 2830’’)), if any, will only be charged at the Fund of Funds level or at the Underlying Fund level, not both. With respect to other investments in a Fund of Funds, any sales charges and/or service fees charged with respect to shares of the Fund of Funds will not exceed the limits applicable to funds of funds as set forth in Rule 2830.2 9. Applicants state that the proposed arrangement will not create an overly complex fund structure. Applicants note that an Underlying Fund will be prohibited from acquiring securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A), except to the extent that such Underlying Fund: (a) receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to: (i) acquire securities of one or more affiliated investment companies for short-term cash management purposes, or (ii) engage in interfund borrowing and lending transactions. Applicants also represent that a Fund of Funds’ prospectus and sales literature will contain concise, ‘‘plain English’’ disclosure designed to inform investors of the unique characteristics of the proposed Fund of Funds structure, including, but not limited to, its expense structure and the additional expenses of investing in Underlying Funds.3 B. Section 17(a) 1. Section 17(a) of the Act generally prohibits sales or purchases of securities between a registered investment company and any affiliated person of the company. Section 2(a)(3) of the Act 2 With respect to an investment by a Registered Separate Account in a Fund of Funds, the aggregate of all fees and charges at all levels will be reasonable in relation to the services rendered, the expenses expected to be incurred and the risks assumed by the applicable parties. This representation includes the fees and charges paid to CUNA Mutual and CUNA Mutual Insurance Society or any other insurance company controlling, controlled by, or under common control with CUNA Mutual. 3 Each Fund of Funds also will comply with the disclosure requirements concerning the aggregate expenses of investing in Underlying Funds set forth in Investment Company Act Release No. 27399. PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 76379 defines an ‘‘affiliated person’’ of another person to include (a) any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the other person; and (c) any person directly or indirectly controlling, controlled by, or under common control with the other person. 2. Applicants state that the Funds of Funds and the Affiliated Funds might be deemed to be under common control of MCA and therefore affiliated persons of one another. Applicants also state that the Funds of Funds and the Underlying Funds might be deemed to be affiliated persons of one another if a Fund of Funds acquires 5% or more of an Underlying Fund’s outstanding voting securities. In light of these possible affiliations, section 17(a) could prevent an Underlying Fund from selling shares to and redeeming shares from a Fund of Funds.4 3. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (b) the proposed transaction is consistent with the policies of each registered investment company involved; and (c) the proposed transaction is consistent with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt any person or transactions from any provision of the Act 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. 4. Applicants submit that the proposed transactions satisfy the standards for relief under sections 17(b) and 6(c) of the Act. Applicants state that the terms upon which an Underlying Fund will sell its shares to or purchase its shares from a Fund of Funds will be based on the net asset value of each 4 Applicants acknowledge that receipt of any compensation by (a) an affiliated person of a Funds of Funds, or an affiliated person of such person, for the purchase by the Fund of Funds of shares of an Underlying Fund or (b) an affiliated person of a Underlying Fund, or an affiliated person of such person, for the sale by the Underlying Fund of its shares to a Fund of Funds is subject to section 17(e) of the Act. The Participation Agreement also will include this acknowledgement. E:\FR\FM\20DEN1.SGM 20DEN1 76380 Federal Register / Vol. 71, No. 244 / Wednesday, December 20, 2006 / Notices Underlying Fund.5 Applicants also state that the proposed transactions will be consistent with the policies of each Fund of Funds and Underlying Fund, and with the general purposes of the Act. sroberts on PROD1PC70 with NOTICES Applicants’ Conditions Applicants agree that the order granting the requested relief shall be subject to the following conditions: 1. The members of the Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. The members of the Sub-Adviser Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. If, as a result of a decrease in the outstanding voting securities of an Unaffiliated Fund, the Group or the Sub-Adviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Unaffiliated Fund, then the Group or the Sub-Adviser Group (except for any member of the Group or the Sub-Adviser Group that is a Separate Account) will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares. This condition will not apply to the Sub-Adviser Group with respect to an Unaffiliated Fund for which the SubAdviser or a person controlling, controlled by, or under common control with the Sub-Adviser acts as the investment adviser within the meaning section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Underlying Fund) or as the sponsor (in the case of an Unaffiliated Underlying Trust). A Registered Separate Account will seek voting instructions from its contract holders and will vote its shares of an Unaffiliated Fund in accordance with the instructions received and will vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. An Unregistered Separate Account will either: (i) vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares; or (ii) seek voting instructions 5 Applicants note that a Fund of Funds generally would purchase and sell shares of an Underlying Fund that operates as an ETF through secondary market transactions at market prices rather than through principal transactions with the Underlying Fund at net asset value. Applicants would not rely on the requested relief from section 17(a) for such secondary market transactions. A Fund of Funds could seek to transact in ‘‘Creation Units’’ directly with an ETF pursuant to the requested section 17(a) relief. VerDate Aug<31>2005 20:03 Dec 19, 2006 Jkt 211001 from its contract holders and vote its shares in accordance with the instructions received and vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. 2. No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate. 3. The Board of each Fund of Funds, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to assure that MCA and any Sub-Adviser are conducting the investment program of the Fund of Funds without taking into account any consideration received by the Fund of Funds or a Fund of Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Fund of Funds in the securities of an Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Underlying Fund, including a majority of the Disinterested Trustees, will determine that any consideration paid by the Unaffiliated Underlying Fund to a Fund of Funds or a Fund of Funds Affiliate in connection with any services or transactions: (a) is fair and reasonable in relation to the nature and quality of the services and benefits received by the Unaffiliated Underlying Fund; (b) is within the range of consideration that the Unaffiliated Underlying Fund would be required to pay to another unaffiliated entity in connection with the same services or transactions; and (c) does not involve overreaching on the part of any person concerned. This condition does not apply with respect to any services or transactions between an Unaffiliated Underlying Fund and its investment adviser(s), or any person controlling, controlled by, or under common control with such investment adviser(s). 5. No Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying Trust) will cause an Unaffiliated Fund to purchase a security in any Affiliated Underwriting. 6. The Board of an Unaffiliated Underlying Fund, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 monitor any purchases of securities by the Unaffiliated Underlying Fund in an Affiliated Underwriting, once an investment by a Fund of Funds in the securities of the Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board of the Unaffiliated Underlying Fund will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Fund of Funds in the Unaffiliated Underlying Fund. The Board of the Unaffiliated Underlying Fund will consider, among other things: (a) Whether the purchases were consistent with the investment objectives and policies of the Unaffiliated Underlying Fund; (b) how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and (c) whether the amount of securities purchased by the Unaffiliated Underlying Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board of an Unaffiliated Underlying Fund will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interests of shareholders. 7. Each Unaffiliated Underlying Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase from an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of an Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth the: (a) Party from whom the securities were acquired, (b) identity of the underwriting syndicate’s members, (c) terms of the purchase, and (d) information or materials upon which the determinations of the Board of the E:\FR\FM\20DEN1.SGM 20DEN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 71, No. 244 / Wednesday, December 20, 2006 / Notices Unaffiliated Underlying Fund were made. 8. Prior to its investment in shares of an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the Unaffiliated Underlying Fund will execute a Participation Agreement stating, without limitation, that their Boards and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. At the time of its investment in shares of an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Underlying Fund of the investment. At such time, the Fund of Funds will also transmit to the Unaffiliated Underlying Fund a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Unaffiliated Underlying Fund of any changes to the list as soon as reasonably practicable after a change occurs. The Unaffiliated Underlying Fund and the Fund of Funds will maintain and preserve a copy of the order, the Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 9. Before approving any advisory contract under section 15 of the Act, the Board of each Fund of Funds, including a majority of the Disinterested Trustees, shall find that the advisory fees charged under the advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided under the advisory contract(s) of any Underlying Fund in which the Fund of Funds may invest. Such finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the appropriate Fund of Funds. 10. MCA will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Underlying Fund pursuant to rule 12b-1 under the Act) received from an Unaffiliated Fund by MCA, or an affiliated person of MCA, other than any advisory fees paid to MCA or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-Adviser will waive fees otherwise payable to the Sub-Adviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received by VerDate Aug<31>2005 20:03 Dec 19, 2006 Jkt 211001 the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser or its affiliated person by the Unaffiliated Underlying Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Underlying Fund made at the direction of the Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit of the waiver will be passed through to the Fund of Funds. 11. With respect to Registered Separate Accounts that invest in a Fund of Funds, no sales load will be charged at the Fund of Funds level or at the Underlying Fund level. Other sales charges and service fees, as defined in Rule 2830, if any, will only be charged at the Fund of Funds level or at the Underlying Fund level, not both. With respect to other investments in a Fund of Funds, any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in Rule 2830. 12. No Underlying Fund will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent that such Underlying Fund: (a) receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to: (i) acquire securities of one or more affiliated investment companies for short-term cash management purposes, or (ii) engage in interfund borrowing and lending transactions. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Nancy M. Morris, Secretary. [FR Doc. E6–21656 Filed 12–19–06; 8:45 am] BILLING CODE 8011–01–P PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 76381 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54936; File No. S7–24–89] Joint Industry Plan; Notice of Filing and Effectiveness of Amendment No. 18 to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for NasdaqListed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis, Submitted by the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the International Securities Exchange, Inc., the National Association of Securities Dealers, Inc., the National Stock Exchange, Inc., the Nasdaq Stock Market LLC, NYSE Arca, Inc., and the Philadelphia Stock Exchange, Inc. December 14, 2006. I. Introduction and Description Notice is hereby given that on December 13, 2006, the operating committee (‘‘Operating Committee’’ or ‘‘Committee’’) 1 of the Joint SelfRegulatory Organization Plan Governing the Collection, Consolidation, and Dissemination of Quotation and Transaction Information for NasdaqListed Securities Traded on Exchanges on an Unlisted Trading Privilege Basis (‘‘Nasdaq/UTP Plan’’ or ‘‘Plan’’) filed with the Securities and Exchange Commission (‘‘Commission’’) an amendment to the Plan pursuant to Rule 608 under the Securities Exchange Act of 1934 (the ‘‘Act’’) 2. This amendment represents Amendment 18 made to the Plan and reflects the modification of the Access Section to be consistent with Rule 610 of Regulation NMS.3 Amendment 18 was unanimously approved by the Committee on August 17, 2006.4 The Commission is publishing this notice of filing and effectiveness to solicit comments from 1 The Plan Participants (collectively, ‘‘Participants’’) are: the American Stock Exchange LLC (‘‘Amex’’), the Boston Stock Exchange, Inc. (‘‘BSE’’), the Chicago Stock Exchange, Inc. (‘‘CHX’’), the Chicago Board Options Exchange, Inc. (‘‘CBOE’’), the International Securities Exchange, Inc. (‘‘ISE’’), the National Association of Securities Dealers, Inc. (‘‘NASD’’), the National Stock Exchange, Inc. (‘‘NSX’’), the Nasdaq Stock Market LLC (‘‘Nasdaq’’), NYSE Arca, Inc. (‘‘NYSEArca’’), and the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’). 2 17 CFR 242.608. 3 17 CFR 242.610. 4 See letter from Bridget M. Farrell, Chairman, OTC/UTP Operating Committee, to Nancy M. Morris, Secretary, Commission, dated December 12, 2006. E:\FR\FM\20DEN1.SGM 20DEN1

Agencies

[Federal Register Volume 71, Number 244 (Wednesday, December 20, 2006)]
[Notices]
[Pages 76377-76381]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-21656]


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

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27598; 812-13133]


Members Mutual Funds, et al.; Notice of Application

December 13, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (``Act'') for an exemption from 
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and 
17(b) of the Act for an exemption from section 17(a) of the Act.

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

Summary of the Application: The order would permit certain registered 
open-end management investment companies to acquire shares of other 
registered open-end management investment companies and unit investment 
trusts (``UITs'') that are within and outside the same group of 
investment companies.

Applicants: MEMBERS Mutual Funds (``MMF''), ULTRA Series Fund (``USF'') 
(each a ``Trust'', and together, the ``Trusts''), Members Capital 
Advisors, Inc. (``MCA''), and CUNA Mutual Life Insurance Company 
(``CUNA Mutual'') (collectively, the ``Applicants''). Applicants 
request that the order also extend to any future series of the Trusts, 
and any other existing or future registered open-end management 
investment companies and any series thereof that are part of the same 
group of investment companies as defined in section 12(d)(1)(G)(ii) of 
the Act, as the Trusts and are, or may in the future be, advised by MCA 
or any other investment adviser controlling, controlled by, or under 
common control with MCA (together with the existing series of the 
Trusts, the ``Funds'').

Filing Dates: The application was filed on October 29, 2004 and amended 
on March 24, 2006 and December 6, 2006.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on January 8, 2007, 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 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, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090; Applicants: CUNA Mutual Group, 5910 
Mineral Point Road, Madison, Wisconsin 53701-0391.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876, or Nadya Roytblat, Assistant Director, at (202) 551-
6821 (Office of Investment Company Regulation, Division of Investment 
Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Desk,

[[Page 76378]]

100 F Street, NE., Washington, DC 20549-0102 (telephone (202) 551-
5850).

Applicants' Representations

    1. CUNA Mutual is a life insurance company organized under the laws 
of Iowa. Through separate accounts (``Separate Accounts'') registered 
under the Act as UITs (the ``Registered Separate Accounts'') and a 
separate account not registered under the Act (the ``Unregistered 
Separate Account''), CUNA Mutual issues group and individual variable 
annuity contracts and variable life insurance policies (the ``Variable 
Contracts'') which offer the owners of such contracts the opportunity 
to indirectly invest in USF.
    2. MMF is a statutory trust organized under the laws of Delaware 
and USF is a business trust organized under the laws of Massachusetts. 
Both Trusts are registered under the Act as open-end management 
investment companies. MMF and USF currently offer twelve and thirteen 
separate Funds, respectively. MCA, an Iowa corporation, is registered 
under the Investment Advisers Act of 1940 and serves as investment 
adviser to the Funds.
    3. Applicants request relief to permit (a) a Fund (a ``Fund of 
Funds'') to acquire shares of registered open-end management investment 
companies that are not part of the same group of investment companies 
(as defined in section 12(d)(1)(G)(ii) of the Act) as the Fund of Funds 
(the ``Unaffiliated Underlying Funds''), (b) the Fund of Funds to 
acquire shares of UITs that are not part of the same group of 
investment companies as the Fund of Funds (the ``Unaffiliated 
Underlying Trusts''), (c) the Unaffiliated Underlying Funds and Trusts 
(collectively, the ``Unaffiliated Funds'') to sell their shares to the 
Fund of Funds, (d) the Fund of Funds to acquire shares of certain other 
Funds in the same group of investment companies as the Fund of Funds 
(the ``Affiliated Funds,'' and together with the Unaffiliated Funds, 
the ``Underlying Funds'') and (e) the Affiliated Funds to sell their 
shares to the Fund of Funds. Certain of the Unaffiliated Underlying 
Trusts or Unaffiliated Underlying Funds may be registered under the Act 
as either UITs or open-end management investment companies and have 
received exemptive relief to permit their shares be listed and traded 
on a national securities exchange at negotiated prices (``ETFs''). Each 
Fund of Funds also may invest in other securities and financial 
instruments. Applicants state that a Fund of Funds will provide an 
efficient and simple method of allowing investors to create a 
comprehensive asset allocation program.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of an investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter and 
any broker or dealer from selling the shares of the investment company 
to another investment company if the sale will cause the acquiring 
company to own more than 3% of the acquired company's voting stock, or 
if the sale will cause more than 10% of the acquired company's voting 
stock to be owned by investment companies generally.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction, or any class or classes of 
persons, securities or transactions, from any provision of section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants seek an exemption under section 
12(d)(1)(J) to permit the Funds of Funds to acquire shares of the 
Underlying Funds and to permit the Underlying Funds, their principal 
underwriters and any broker or dealer to sell shares to the Funds of 
Funds beyond the limits set forth in sections 12(d)(1)(A) and (B) of 
the Act.
    3. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A) and (B), 
which include concerns about undue influence by a Fund of Funds or its 
affiliated persons over Underlying Funds, excessive layering of fees, 
and overly complex fund structures. Accordingly, applicants believe 
that the requested exemption is consistent with the public interest and 
the protection of investors.
    4. Applicants state that the proposed arrangement will not result 
in undue influence by a Fund of Funds or its affiliated persons over 
the Underlying Funds. The concern about undue influence does not arise 
in connection with a Fund of Funds' investment in the Affiliated Funds, 
since they are part of the same group of investment companies. To limit 
the control that a Fund of Funds or its affiliated persons may have 
over an Unaffiliated Fund, applicants propose a condition prohibiting: 
(a) MCA and any person controlling, controlled by or under common 
control with MCA, any investment company and any issuer that would be 
an investment company but for section 3(c)(1) or section 3(c)(7) of the 
Act advised or sponsored by MCA or any person controlling, controlled 
by or under common control with MCA (collectively, the ``Group''), and 
(b) any investment adviser within the meaning of section 2(a)(20)(B) of 
the Act (``Sub-Adviser'') to a Fund of Funds, any person controlling, 
controlled by or under common control with the Sub-Adviser, and any 
investment company or issuer that would be an investment company but 
for section 3(c)(1) or 3(c)(7) of the Act (or portion of such 
investment company or issuer) advised by the Sub-Adviser or any person 
controlling, controlled by or under common control with the Sub-Adviser 
(collectively, the ``Sub-Adviser Group'') will not control 
(individually or in the aggregate) an Unaffiliated Fund within the 
meaning of section 2(a)(9) of the Act.
    5. Applicants further state that condition 2 precludes a Fund of 
Funds and MCA, any Sub-Adviser, promoter or principal underwriter of a 
Fund of Funds, and any person controlling, controlled by or under 
common control with any of those entities (each, a ``Fund of Funds 
Affiliate'') from taking advantage of an Unaffiliated Fund, with 
respect to transactions between the Fund of Funds or a Fund of Funds 
Affiliate and the Unaffiliated Fund or the Unaffiliated Fund's 
investment adviser(s), sponsor, promoter, principal underwriter or any 
person controlling, controlled by or under common control with any of 
these entities (each, an ``Unaffiliated Fund Affiliate''). Condition 5 
precludes a Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying 
Trust) from causing an Unaffiliated Fund to purchase a security in an 
offering of securities during the existence of any underwriting or 
selling syndicate of which a principal underwriter is an officer, 
director, trustee, member of an advisory board, investment adviser, 
Sub-Adviser, or employee of the Fund of Funds, or a person of which any 
such officer, director, trustee, investment adviser, Sub-Adviser, 
member of an advisory board, or employee is an affiliated person (each, 
an ``Underwriting Affiliate,'' except any person whose relationship to 
the Unaffiliated Fund is covered by section 10(f) of the Act is not an 
Underwriting

[[Page 76379]]

Affiliate). An offering of securities during the existence of any 
underwriting or selling syndicate of which a principal underwriter is 
an Underwriting Affiliate is an ``Affiliated Underwriting.''
    6. As an additional assurance that an Unaffiliated Underlying Fund 
understands the implications of an investment by a Fund of Funds under 
the requested order, prior to a Fund of Funds' investment in the 
Unaffiliated Underlying Fund in excess of the limit in section 
12(d)(1)(A)(i), condition 8 requires that the Fund of Funds and 
Unaffiliated Underlying Fund execute an agreement stating, without 
limitation, that their boards of directors or trustees (``Boards'') and 
their investment advisers understand the terms and conditions of the 
order and agree to fulfill their responsibilities under the order 
(``Participation Agreement''). Applicants note that an Unaffiliated 
Fund (other than an ETF whose shares are purchased by a Fund of Funds 
in the secondary market) will retain the right to reject an investment 
by a Fund of Funds.\1\
---------------------------------------------------------------------------

    \1\ An Unaffiliated Fund, including an ETF, would retain its 
right to reject any initial investment by a Fund of Funds in excess 
of the limit in section 12(d)(1)(A)(i) of the Act by declining to 
execute the Participation Agreement with the Fund of Funds.
---------------------------------------------------------------------------

    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. With respect to investment advisory 
fees, applicants state that, in connection with the approval of any 
investment advisory contract under section 15 of the Act, the Board of 
each Fund of Funds, including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Disinterested Trustees''), will find that the advisory fees charged 
under the advisory contract are based on services provided that are in 
addition to, rather than duplicative of, services provided pursuant to 
any Underlying Fund's advisory contract(s). Applicants further state 
that MCA will waive fees otherwise payable to it by a Fund of Funds in 
an amount at least equal to any compensation (including fees received 
pursuant to any plan adopted by an Unaffiliated Underlying Fund 
pursuant to rule 12b-1 under the Act) received from an Unaffiliated 
Fund by MCA, or an affiliated person of MCA, other than any advisory 
fees paid to MCA or an affiliated person of MCA by the Unaffiliated 
Fund, in connection with the investment by the Fund of Funds in the 
Unaffiliated Fund.
    8. Applicants state that with respect to Registered Separate 
Accounts that invest in a Fund of Funds, no sales load will be charged 
at the Fund of Funds level or at the Underlying Fund level. Other sales 
charges and service fees (as defined in Rule 2830 of the Conduct Rules 
of the NASD, (``Rule 2830'')), if any, will only be charged at the Fund 
of Funds level or at the Underlying Fund level, not both. With respect 
to other investments in a Fund of Funds, any sales charges and/or 
service fees charged with respect to shares of the Fund of Funds will 
not exceed the limits applicable to funds of funds as set forth in Rule 
2830.\2\
---------------------------------------------------------------------------

    \2\ With respect to an investment by a Registered Separate 
Account in a Fund of Funds, the aggregate of all fees and charges at 
all levels will be reasonable in relation to the services rendered, 
the expenses expected to be incurred and the risks assumed by the 
applicable parties. This representation includes the fees and 
charges paid to CUNA Mutual and CUNA Mutual Insurance Society or any 
other insurance company controlling, controlled by, or under common 
control with CUNA Mutual.
---------------------------------------------------------------------------

    9. Applicants state that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that an Underlying 
Fund will be prohibited from acquiring securities of any investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in 
excess of the limits contained in section 12(d)(1)(A), except to the 
extent that such Underlying Fund: (a) receives securities of another 
investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed 
to have acquired) securities of another investment company pursuant to 
exemptive relief from the Commission permitting such Underlying Fund 
to: (i) acquire securities of one or more affiliated investment 
companies for short-term cash management purposes, or (ii) engage in 
interfund borrowing and lending transactions. Applicants also represent 
that a Fund of Funds' prospectus and sales literature will contain 
concise, ``plain English'' disclosure designed to inform investors of 
the unique characteristics of the proposed Fund of Funds structure, 
including, but not limited to, its expense structure and the additional 
expenses of investing in Underlying Funds.\3\
---------------------------------------------------------------------------

    \3\ Each Fund of Funds also will comply with the disclosure 
requirements concerning the aggregate expenses of investing in 
Underlying Funds set forth in Investment Company Act Release No. 
27399.
---------------------------------------------------------------------------

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include (a) any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5% or more of the outstanding voting securities of the other 
person; (b) any person 5% or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling, controlled by, or under common control with the 
other person.
    2. Applicants state that the Funds of Funds and the Affiliated 
Funds might be deemed to be under common control of MCA and therefore 
affiliated persons of one another. Applicants also state that the Funds 
of Funds and the Underlying Funds might be deemed to be affiliated 
persons of one another if a Fund of Funds acquires 5% or more of an 
Underlying Fund's outstanding voting securities. In light of these 
possible affiliations, section 17(a) could prevent an Underlying Fund 
from selling shares to and redeeming shares from a Fund of Funds.\4\
---------------------------------------------------------------------------

    \4\ Applicants acknowledge that receipt of any compensation by 
(a) an affiliated person of a Funds of Funds, or an affiliated 
person of such person, for the purchase by the Fund of Funds of 
shares of an Underlying Fund or (b) an affiliated person of a 
Underlying Fund, or an affiliated person of such person, for the 
sale by the Underlying Fund of its shares to a Fund of Funds is 
subject to section 17(e) of the Act. The Participation Agreement 
also will include this acknowledgement.
---------------------------------------------------------------------------

    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (a) the terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (b) the proposed transaction is consistent with the policies 
of each registered investment company involved; and (c) the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the Commission to exempt any person or 
transactions from any provision of the Act 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.
    4. Applicants submit that the proposed transactions satisfy the 
standards for relief under sections 17(b) and 6(c) of the Act. 
Applicants state that the terms upon which an Underlying Fund will sell 
its shares to or purchase its shares from a Fund of Funds will be based 
on the net asset value of each

[[Page 76380]]

Underlying Fund.\5\ Applicants also state that the proposed 
transactions will be consistent with the policies of each Fund of Funds 
and Underlying Fund, and with the general purposes of the Act.
---------------------------------------------------------------------------

    \5\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Underlying Fund that operates as an 
ETF through secondary market transactions at market prices rather 
than through principal transactions with the Underlying Fund at net 
asset value. Applicants would not rely on the requested relief from 
section 17(a) for such secondary market transactions. A Fund of 
Funds could seek to transact in ``Creation Units'' directly with an 
ETF pursuant to the requested section 17(a) relief.
---------------------------------------------------------------------------

Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:
    1. The members of the Group will not control (individually or in 
the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. The members of the Sub-Adviser Group will not 
control (individually or in the aggregate) an Unaffiliated Fund within 
the meaning of section 2(a)(9) of the Act. If, as a result of a 
decrease in the outstanding voting securities of an Unaffiliated Fund, 
the Group or the Sub-Adviser Group, each in the aggregate, becomes a 
holder of more than 25% of the outstanding voting securities of the 
Unaffiliated Fund, then the Group or the Sub-Adviser Group (except for 
any member of the Group or the Sub-Adviser Group that is a Separate 
Account) will vote its shares of the Unaffiliated Fund in the same 
proportion as the vote of all other holders of the Unaffiliated Fund's 
shares. This condition will not apply to the Sub-Adviser Group with 
respect to an Unaffiliated Fund for which the Sub-Adviser or a person 
controlling, controlled by, or under common control with the Sub-
Adviser acts as the investment adviser within the meaning section 
2(a)(20)(A) of the Act (in the case of an Unaffiliated Underlying Fund) 
or as the sponsor (in the case of an Unaffiliated Underlying Trust).
    A Registered Separate Account will seek voting instructions from 
its contract holders and will vote its shares of an Unaffiliated Fund 
in accordance with the instructions received and will vote those shares 
for which no instructions were received in the same proportion as the 
shares for which instructions were received. An Unregistered Separate 
Account will either: (i) vote its shares of the Unaffiliated Fund in 
the same proportion as the vote of all other holders of the 
Unaffiliated Fund's shares; or (ii) seek voting instructions from its 
contract holders and vote its shares in accordance with the 
instructions received and vote those shares for which no instructions 
were received in the same proportion as the shares for which 
instructions were received.
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in an 
Unaffiliated Fund to influence the terms of any services or 
transactions between the Fund of Funds or a Fund of Funds Affiliate and 
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
    3. The Board of each Fund of Funds, including a majority of the 
Disinterested Trustees, will adopt procedures reasonably designed to 
assure that MCA and any Sub-Adviser are conducting the investment 
program of the Fund of Funds without taking into account any 
consideration received by the Fund of Funds or a Fund of Funds 
Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate 
in connection with any services or transactions.
    4. Once an investment by a Fund of Funds in the securities of an 
Unaffiliated Underlying Fund exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Underlying 
Fund, including a majority of the Disinterested Trustees, will 
determine that any consideration paid by the Unaffiliated Underlying 
Fund to a Fund of Funds or a Fund of Funds Affiliate in connection with 
any services or transactions: (a) is fair and reasonable in relation to 
the nature and quality of the services and benefits received by the 
Unaffiliated Underlying Fund; (b) is within the range of consideration 
that the Unaffiliated Underlying Fund would be required to pay to 
another unaffiliated entity in connection with the same services or 
transactions; and (c) does not involve overreaching on the part of any 
person concerned. This condition does not apply with respect to any 
services or transactions between an Unaffiliated Underlying Fund and 
its investment adviser(s), or any person controlling, controlled by, or 
under common control with such investment adviser(s).
    5. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying 
Trust) will cause an Unaffiliated Fund to purchase a security in any 
Affiliated Underwriting.
    6. The Board of an Unaffiliated Underlying Fund, including a 
majority of the Disinterested Trustees, will adopt procedures 
reasonably designed to monitor any purchases of securities by the 
Unaffiliated Underlying Fund in an Affiliated Underwriting, once an 
investment by a Fund of Funds in the securities of the Unaffiliated 
Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
including any purchases made directly from an Underwriting Affiliate. 
The Board of the Unaffiliated Underlying Fund will review these 
purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by 
the Fund of Funds in the Unaffiliated Underlying Fund. The Board of the 
Unaffiliated Underlying Fund will consider, among other things: (a) 
Whether the purchases were consistent with the investment objectives 
and policies of the Unaffiliated Underlying Fund; (b) how the 
performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(c) whether the amount of securities purchased by the Unaffiliated 
Underlying Fund in Affiliated Underwritings and the amount purchased 
directly from an Underwriting Affiliate have changed significantly from 
prior years. The Board of an Unaffiliated Underlying Fund will take any 
appropriate actions based on its review, including, if appropriate, the 
institution of procedures designed to assure that purchases of 
securities in Affiliated Underwritings are in the best interests of 
shareholders.
    7. Each Unaffiliated Underlying Fund will maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures described in the preceding condition, and any modifications 
to such procedures, and will maintain and preserve for a period of not 
less than six years from the end of the fiscal year in which any 
purchase from an Affiliated Underwriting occurred, the first two years 
in an easily accessible place, a written record of each purchase of 
securities in an Affiliated Underwriting once an investment by a Fund 
of Funds in the securities of an Unaffiliated Underlying Fund exceeds 
the limit of section 12(d)(1)(A)(i) of the Act, setting forth the: (a) 
Party from whom the securities were acquired, (b) identity of the 
underwriting syndicate's members, (c) terms of the purchase, and (d) 
information or materials upon which the determinations of the Board of 
the

[[Page 76381]]

Unaffiliated Underlying Fund were made.
    8. Prior to its investment in shares of an Unaffiliated Underlying 
Fund in excess of the limit in section 12(d)(1)(A)(i) of the Act, the 
Fund of Funds and the Unaffiliated Underlying Fund will execute a 
Participation Agreement stating, without limitation, that their Boards 
and their investment advisers understand the terms and conditions of 
the order and agree to fulfill their responsibilities under the order. 
At the time of its investment in shares of an Unaffiliated Underlying 
Fund in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds 
will notify the Unaffiliated Underlying Fund of the investment. At such 
time, the Fund of Funds will also transmit to the Unaffiliated 
Underlying Fund a list of the names of each Fund of Funds Affiliate and 
Underwriting Affiliate. The Fund of Funds will notify the Unaffiliated 
Underlying Fund of any changes to the list as soon as reasonably 
practicable after a change occurs. The Unaffiliated Underlying Fund and 
the Fund of Funds will maintain and preserve a copy of the order, the 
Participation Agreement, and the list with any updated information for 
the duration of the investment and for a period of not less than six 
years thereafter, the first two years in an easily accessible place.
    9. Before approving any advisory contract under section 15 of the 
Act, the Board of each Fund of Funds, including a majority of the 
Disinterested Trustees, shall find that the advisory fees charged under 
the advisory contract are based on services provided that are in 
addition to, rather than duplicative of, services provided under the 
advisory contract(s) of any Underlying Fund in which the Fund of Funds 
may invest. Such finding, and the basis upon which the finding was 
made, will be recorded fully in the minute books of the appropriate 
Fund of Funds.
    10. MCA will waive fees otherwise payable to it by a Fund of Funds 
in an amount at least equal to any compensation (including fees 
received pursuant to any plan adopted by an Unaffiliated Underlying 
Fund pursuant to rule 12b-1 under the Act) received from an 
Unaffiliated Fund by MCA, or an affiliated person of MCA, other than 
any advisory fees paid to MCA or its affiliated person by the 
Unaffiliated Fund, in connection with the investment by the Fund of 
Funds in the Unaffiliated Fund. Any Sub-Adviser will waive fees 
otherwise payable to the Sub-Adviser, directly or indirectly, by the 
Fund of Funds in an amount at least equal to any compensation received 
by the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an 
Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser 
or its affiliated person by the Unaffiliated Underlying Fund, in 
connection with the investment by the Fund of Funds in the Unaffiliated 
Underlying Fund made at the direction of the Sub-Adviser. In the event 
that the Sub-Adviser waives fees, the benefit of the waiver will be 
passed through to the Fund of Funds.
    11. With respect to Registered Separate Accounts that invest in a 
Fund of Funds, no sales load will be charged at the Fund of Funds level 
or at the Underlying Fund level. Other sales charges and service fees, 
as defined in Rule 2830, if any, will only be charged at the Fund of 
Funds level or at the Underlying Fund level, not both. With respect to 
other investments in a Fund of Funds, any sales charges and/or service 
fees charged with respect to shares of a Fund of Funds will not exceed 
the limits applicable to funds of funds set forth in Rule 2830.
    12. No Underlying Fund will acquire securities of any other 
investment company or company relying on section 3(c)(1) or 3(c)(7) of 
the Act in excess of the limits contained in section 12(d)(1)(A) of the 
Act, except to the extent that such Underlying Fund: (a) receives 
securities of another investment company as a dividend or as a result 
of a plan of reorganization of a company (other than a plan devised for 
the purpose of evading section 12(d)(1) of the Act); or (b) acquires 
(or is deemed to have acquired) securities of another investment 
company pursuant to exemptive relief from the Commission permitting 
such Underlying Fund to: (i) acquire securities of one or more 
affiliated investment companies for short-term cash management 
purposes, or (ii) engage in interfund borrowing and lending 
transactions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6-21656 Filed 12-19-06; 8:45 am]
BILLING CODE 8011-01-P