Members Mutual Funds, et al.; Notice of Application, 76377-76381 [E6-21656]
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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.
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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Personnel Manual and other outdated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
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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:
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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,
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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.
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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
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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
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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.
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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.
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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.
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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.
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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.
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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
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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
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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
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Frm 00111
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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
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]]>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]
=======================================================================
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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\
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\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
