PowerShares Exchange-Traded Fund Trust, et al.; Notice of Application January 31, 2007., 5759-5764 [07-529]

Download as PDF Federal Register / Vol. 72, No. 25 / Wednesday, February 7, 2007 / Notices Dated at Region 1, 475 Allendale Road, King of Prussia, PA this 30th day of January, 2007. For the Nuclear Regulatory Commission. James P. Dwyer, Chief, Commercial and R&D Branch, Division of Nuclear Materials Safety, Region 1. [FR Doc. E7–2041 Filed 2–6–07; 8:45 am] BILLING CODE 7590–01–P NUCLEAR REGULATORY COMMISSION Sunshine Act Federal Register Notice AGENCY HOLDING THE MEETINGS: Nuclear Regulatory Commission. DATE: Weeks of February 5, 12, 19, 26, March 5, 12, 2007. PLACE: Commissioners’ Conference Room, 11555 Rockville Pike, Rockville, Maryland. STATUS: Public and Closed. MATTERS TO BE CONSIDERED: Week of February 5, 2007 There are no meetings scheduled for the Week of February 5, 2007. Week of February 12, 2007—Tentative Thursday, February 15, 2007 9:25 a.m.—Affirmation Session (Public Meeting) (Tentative) a. System Energy Resources, Inc. (Early Site Permit for Grand Gulf ESP) (Tentative). 9:30 a.m.—Briefing on Office of Chief Financial Officer (OCFO) Programs, Performance, and Plans (Public Meeting) (Contact: Edward New, 301–415–5646). This meeting will be webcast live at the Web address—http://www.nrc.gov. Week of February 19, 2007—Tentative There are no meetings scheduled for the Week of February 19, 2007. Week of February 26, 2007—Tentative Wednesday, February 28, 2007 9:30 a.m.—Periodic Briefing on New Reactor Issues (Public Meeting) (Contact: Donna Williams, 301– 415–1322). This meeting will be webcast live at the Web address—http://www.nrc.gov. Week of March 5, 2007—Tentative sroberts on PROD1PC70 with NOTICES Monday, March 5, 2007 1 p.m.—Meeting with Department of Energy on New Reactor Issues (Public Meeting). This meeting will be webcast live at the Web address—http://www.nrc.gov. VerDate Aug<31>2005 21:36 Feb 06, 2007 Jkt 211001 Tuesday, March 6, 2007 1 p.m.—Discussion of Management Issues (Closed—Ex. 2) (Tentative). Wednesday, March 7, 2007 9:30 a.m.—Briefing on Office of Nuclear Security and Incident Response (NSIR) Programs, Performance, and Plans (Public Meeting) (Contact: Miriam Cohen, 301–415–0260). This meeting will be webcast live at the Web address—http://www.nrc.gov. 1 p.m.—Discussion of Security Issues (Closed—Ex. 1 and 3). Thursday, March 8, 2007 10 a.m.—Briefing on Office of Nuclear Materials Safety and Safeguards (NMSS) Programs, Performance, and Plans (Public Meeting) (Contact: Gene Peters, 301–415– 5248). This meeting will be webcast live at the Web address—http://www.nrc.gov. 1 p.m.—Briefing on Office of Nuclear Reactor Regulation (NRR) Programs, Performance, and Plans (Public Meeting) (Contact: Reginald Mitchell, 301–415–1275). This meeting will be webcast live at the Web address—http://www.nrc.gov. Week of March 12, 2007—Tentative There are no meetings scheduled for the Week of March 12, 2007. * * * * * * The schedule for Commission meetings is subject to change on short notice. To verify the status of meetings call (recording)—(301) 415–1292. Contact person for more information: Michelle Schroll, (301) 415–1662. * * * * * Additional Information: Affirmation of 1. AmerGen Energy Company, LLC (License Renewal for Oyster Creek Nuclear Generating Station) Docket No. 50–0219, Remaining Legal challenges to LBP–06–07 (Tentative), 2. Nuclear Management Co., LLC (Palisades Nuclear Plant, license renewal application); response to ‘‘Notice’’ relating to San Louis Obispo Mothers for Peace (Tentative), and 3. System Energy Resources, Inc. (Early Site Permit for Grand Gulf ESP Site); response to NEPA/terrorism issue (Tentative) previously scheduled on Monday, January 29, 2007, at 10:50 a.m. was postponed and will be rescheduled. By a vote of 5–0 on February 1, 2007, the Commission determined pursuant to U.S.C. 552b(e) and § 9.107(a) of the Commission’s rules that ‘‘Affirmation of David Geisen, ‘Order (Denying Government’s Request to Stay Proceeding)’ (Jan. 12, 2007)’’ be held PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 5759 February 1, 2007, and on less than one week’s notice to the public. * * * * * The NRC Commission Meeting Schedule can be found on the Internet at: http://www.nrc.gov/what-we-do/ policy-making/schedule.html. * * * * * The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings, or need this meeting notice or the transcript or other information from the public meetings in another format (e.g. braille, large print), please notify the NRC’s Disability Program Coordinator, Deborah Chan, at 301–415–7041, TDD: 301–415–2100, or by e-mail at DLC@nrc.gov. Determinations on requests for reasonable accommodation will be made on a case-by-case basis. * * * * * This notice is distributed by mail to several hundred subscribers; if you no longer wish to receive it, or would like to be added to the distribution, please contact the Office of the Secretary, Washington, DC 20555 (301–415–1969). In addition, distribution of this meeting notice over the Internet system is available. If you are interested in receiving this Commission meeting schedule electronically, please send an electronic message to dkw@nrc.gov. Dated: February 1, 2007. R. Michelle Schroll, Office of the Secretary. [FR Doc. 07–551 Filed 2–5–07; 10:52 am] BILLING CODE 7590–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27693; 812–13343] PowerShares Exchange-Traded Fund Trust, et al.; Notice of Application January 31, 2007. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (the ‘‘Act’’) for 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 management investment companies and unit investment trusts to acquire shares of other registered open-end SUMMARY OF THE APPLICATION: E:\FR\FM\07FEN1.SGM 07FEN1 5760 Federal Register / Vol. 72, No. 25 / Wednesday, February 7, 2007 / Notices management investment companies and unit investment trusts that operate as exchange-traded funds and that are not part of the same group of investment companies. The order would also amend a condition in a prior order. PowerShares ExchangeTraded Fund Trust (the ‘‘Trust’’), PowerShares Capital Management LLC (the ‘‘Adviser’’) and AIM Distributors, Inc. (the ‘‘Distributor’’). APPLICANTS: The application was filed on November 15, 2006 and amended on January 30, 2007. FILING DATES: 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 February 26, 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. HEARING OR NOTIFICATION OF HEARING: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC, 20549– 1090. Applicants: PowerShares Capital Management LLC and PowerShares Exchange-Traded Fund Trust, 301 W. Roosevelt Rd., Wheaton, IL 60187; AIM Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, TX 77046–1173. ADDRESSES: FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202) 551–6813, and Mary Kay Frech, Branch Chief, at (202) 551–6821 (Office of Investment Company Regulation, Division of Investment Management). The following is a summary of the application. The complete application may be obtained for a fee at the Commission’s Public Reference Branch, 100 F Street, NE., Washington, DC 20549–0102 (tel. (202) 551–5850). SUPPLEMENTARY INFORMATION: sroberts on PROD1PC70 with NOTICES Applicants’ Representations 1. The Trust is an open-end management investment company registered under the Act and organized as a Massachusetts business trust. The Trust currently offers 70 series (the ‘‘Current Index Funds’’) in reliance on a prior exemptive order (the ‘‘Prior VerDate Aug<31>2005 21:36 Feb 06, 2007 Jkt 211001 Order’’).1 The Trust intends to establish additional series in the future in reliance on the Prior Order (‘‘Future Index Funds’’). The Current Index Funds and Future Index Funds are together referred to as the ‘‘Index Funds.’’ 2 The Adviser is a Delaware limited liability company that is registered as an investment adviser under the Investment Advisers Act of 1940 (‘‘Advisers Act’’) and provides advisory services to each of the Index Funds. The Distributor is a Delaware corporation that is registered as a broker-dealer under the Securities Exchange Act of 1934. Each of the Adviser and the Distributor is an indirect wholly-owned subsidiary of AMVESCAP PLC, a public limited company organized in the United Kingdom. 2. Applicants request an exemption to permit: (i) management investment companies or series thereof (‘‘Purchasing Management Companies’’) and unit investment trusts or series thereof (‘‘Purchasing Trusts,’’ and together with Purchasing Management Companies, ‘‘Purchasing Funds’’) registered under the Act that are not sponsored or advised by the Adviser or an entity controlling, controlled by or under common control with the Adviser and not part of the same ‘‘group of investment companies,’’ as defined in section 12(d)(1)(G)(ii) of the Act, as the Index Funds, to acquire shares (‘‘Fund Shares’’) of (a) an Index Fund and (b) each open-end management investment company or series thereof or unit investment trust or series thereof registered under the Act that operates as an exchange-traded fund (an ‘‘ETF’’), is currently or subsequently part of the same ‘‘group of investment companies’’ as each Index Fund and is advised or sponsored by the Adviser or an entity controlling, controlled by or under common control with the Adviser (such open-end ETFs, including the Index Funds, are referred to herein as ‘‘Openend Funds’’ and such unit investment trust ETFs are referred to herein as ‘‘UIT Funds’’) (collectively, the ‘‘Investee Funds’’), beyond the limitations in section 12(d)(1)(A); and (ii) Open-end Funds, the Distributor and any broker or dealer to sell shares to the Purchasing Funds beyond the limits of section 1 PowerShares Exchange-Traded Fund Trust, Investment Company Act Rel. Nos. 25961 (Mar. 4, 2003) (notice) and 25985 (Mar. 28, 2003) (order). 2 All entities that currently intend to rely on the requested order are named as applicants. Any other entity that relies on the order in the future will comply with the terms and conditions of the application. A Purchasing Fund, as defined below, may rely on the requested order only to invest in the Investee Funds, as defined below, and not in any other registered investment company. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 12(d)(1)(B). Applicants also seek an exemption from section 17(a) of the Act to permit an Investee Fund to sell Fund Shares to, and redeem Fund Shares from, and engage in certain in-kind transactions with, a Purchasing Fund of which the Investee Fund is an affiliated person or an affiliated person of an affiliated person. 3. Each Purchasing Management Company will be advised by an investment adviser within the meaning of section 2(a)(20)(A) of the Act (‘‘Purchasing Fund Adviser’’) and may be sub-advised by investment adviser(s) within the meaning of section 2(a)(20)(B) of the Act (‘‘Purchasing Fund Sub-Adviser’’). Any investment adviser to a Purchasing Management Company will be registered as an investment adviser under the Advisers Act. A sponsor to a Purchasing Trust is a ‘‘Purchasing Trust Sponsor.’’ 4. Applicants state that the Investee Funds will offer the Purchasing Funds an easy way to gain instant exposure to a variety of markets, segments, sectors, geographic regions and groups of industries through a single, relatively low cost transaction. 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, or any other broker or dealer from selling its shares 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. 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. 2. Applicants assert that the proposed transactions will not lead to any of the abuses that section 12(d)(1) was designed to prevent. Applicants submit E:\FR\FM\07FEN1.SGM 07FEN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 72, No. 25 / Wednesday, February 7, 2007 / Notices that the proposed conditions to the requested relief address the concerns underlying the limits in section 12(d)(1), which include concerns about undue influence, excessive layering of fees and overly complex structures. 3. Applicants state that the proposed arrangement will not result in undue influence by a Purchasing Fund or its affiliates over an Investee Fund. To limit the control that a Purchasing Fund may have over an Investee Fund, applicants propose a condition prohibiting the Purchasing Fund Adviser or Purchasing Trust Sponsor; any person controlling, controlled by, or under common with the Purchasing Fund Adviser or Purchasing Trust Sponsor; and any investment company or issuer that would be an investment company but for sections 3(c)(1) or 3(c)(7) of the Act that is advised or sponsored by the Purchasing Fund Adviser or advised or sponsored by the Purchasing Trust Sponsor, or any person controlling, controlled by, or under common control with the Purchasing Fund Adviser or Purchasing Trust Sponsor (‘‘Purchasing Fund’s Advisory Group’’) from controlling (individually or in the aggregate) an Investee Fund within the meaning of section 2(a)(9) of the Act. The same prohibition would apply to any Purchasing Fund Subadviser; any person controlling, controlled by, or under common control with the Purchasing Fund 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 or sponsored by the Purchasing Fund Subadviser or any person controlling, controlled by, or under common control with the Purchasing Fund Subadviser (‘‘Purchasing Fund’s Sub-Advisory Group’’). 4. To limit further the potential for undue influence by a Purchasing Fund over an Investee Fund, applicants propose conditions 2 through 7, stated below, to preclude a Purchasing Fund and certain of its affiliates from taking advantage of an Investee Fund and certain Investee Fund affiliates with respect to transactions between the entities and to ensure the transactions will be on an arm’s length basis. 5. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. The board of directors or trustees of each Purchasing Management Company, including a majority of the disinterested directors or trustees, before approving any advisory contract under section 15 of the Act, will be required to determine that the advisory fees charged to the Purchasing VerDate Aug<31>2005 21:36 Feb 06, 2007 Jkt 211001 Management Company are based on services provided that will be in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Open-end Fund in which the Purchasing Management Company may invest. In addition, the Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor of a Purchasing Fund, as applicable, will waive fees otherwise payable to it by the Purchasing Fund in an amount at least equal to any compensation received from an Investee Fund by the Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor, or an affiliated person of the Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor (other than any advisory fees), in connection with the investment by the Purchasing Fund in the Investee Funds. Applicants also state that any sales charges and/or service fees charged with respect to shares of a Purchasing Fund will not exceed the limits applicable to a fund of funds set forth in Conduct Rule 2830 of the NASD (‘‘Rule 2830’’). 6. Applicants submit that the proposed arrangement will not create an overly complex fund structure. Applicants note that an Investee Fund will be prohibited from acquiring securities of any investment company, or of any 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. 7. To ensure that Purchasing Funds are aware of the terms and conditions of the requested order, the Purchasing Funds must enter into an agreement with the respective Investee Funds (‘‘Purchasing Fund Agreement’’). The Purchasing Fund Agreement will include an acknowledgement from the Purchasing Fund that it may rely on the order only to invest in the Investee Funds and not in any other investment company. The Purchasing Fund Agreement will further require any Purchasing Fund that exceeds the 5% or 10% limitations in section 12(d)(1)(A)(ii) and (iii) to disclose in its prospectus that it may invest in ETFs and disclose, in ‘‘plain English,’’ in its prospectus the unique characteristics of the Purchasing Funds investing in investment companies, including but not limited to the expense structure and any additional expenses of investing in investment companies. Each Purchasing Fund will comply with the disclosure requirements concerning the aggregate costs of investing in the Investee Funds set forth in Investment Company Act Release No. 27399. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 5761 B. Section 17(a) 1. Section 17(a) of the Act generally prohibits an affiliated person of a registered investment company or an affiliated person of such person (‘‘second tier affiliate’’), from selling any security to or purchasing any security from the company. Section 2(a)(3) of the Act defines an ‘‘affiliated person’’ of another person to include 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 any person directly or indirectly controlling, controlled by, or under common control with, the other person. The Investee Funds may be deemed to be controlled by the Adviser or an entity controlling, controlled by, or under common control with the Adviser and hence affiliated persons of each other. In addition, the Investee Funds may be deemed to be under common control with any other registered investment company (or series thereof) advised by the Adviser or an entity controlling, controlled by or under common control with the Adviser (an ‘‘Affiliated Fund’’).3 2. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if evidence establishes that (a) the terms of the proposed transaction are reasonable and fair 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. 3. Applicants request an exemption under sections 6(c) and 17(b) of the Act from section 17(a) of the Act in order to permit each Investee Fund to sell Fund Shares to and redeem Fund Shares from, and engage in the in-kind transactions that would accompany such sales and redemptions with, any Purchasing Fund 3 Applicants acknowledge that the receipt of any compensation by (a) an affiliated person or second tier affiliate of a Purchasing Fund for the purchase by the Purchasing Fund of Fund Shares of an Investee Fund or (b) an affiliated person or second tier affiliate of an Investee Fund for the sale by the Investee Fund of Fund Shares to a Purchasing Fund, is subject to section 17(e) of the Act. The Purchasing Fund Agreement also will include this acknowledgment. E:\FR\FM\07FEN1.SGM 07FEN1 5762 Federal Register / Vol. 72, No. 25 / Wednesday, February 7, 2007 / Notices of which it is an affiliated person or second tier affiliate because of one or more of the following: (1) The Purchasing Fund holds 5% or more of the Fund Shares of the Trust or one or more Investee Funds; (2) a Purchasing Fund described in (1) is an affiliated person of the Purchasing Fund; or (3) the Purchasing Fund holds 5% or more of the shares of one or more Affiliated Funds.4 4. Applicants submit that the proposed arrangement satisfies the standards for relief under sections 17(b) and 6(c) of the Act. Applicants submit that the proposed transactions are appropriate in the public interest, consistent with the protection of investors, and do not involve overreaching. Applicants note that the consideration paid for the purchase or received for the redemption of Fund Shares directly from an Investee Fund by a Purchasing Fund (or any other investor) will be based on the net asset value of the Fund Shares. In addition, the securities received or transferred by the Investee Fund in connection with the purchase or redemption of Fund Shares will be valued in the same manner as the Investee Fund’s portfolio securities and thus the transactions will not be detrimental to the Purchasing Fund. Applicants also state that the proposed transactions will be consistent with the policies of each Purchasing Fund and Investee Fund and with the general purposes of the Act. Applicants state that the Purchasing Fund Agreement will require a Purchasing Fund to represent that its ownership of Fund Shares issued by an Investee Fund is consistent with the investment policies set forth in the Purchasing Fund’s registration statement. sroberts on PROD1PC70 with NOTICES C. Prior Order Applicants also seek to amend a condition to the Prior Order so that the condition is consistent with the relief requested from section 12(d)(1). Condition 2 to the Prior Order currently provides that each Investee Fund prospectus and ‘‘Product Description’’ 5 4 Although applicants believe that most Purchasing Funds will purchase and sell Fund Shares in the secondary market, a Purchasing Fund might seek to transact in Fund Shares directly with an Investee Fund. When transacting directly with an Investee Fund, a Purchasing Fund will generally be required to deposit securities into, or receive securities from, the Investee Fund in connection with the purchase and redemption of Fund Shares. With respect to these in-kind transactions, applicants are requesting relief for Investee Funds that are affiliated persons or second tier affiliates of a Purchasing Fund solely by virtue of one or more of the reasons described above. 5 A ‘‘Product Description’’ is a short document that describes, in plain English, the Fund Shares and the Investee Funds. The Product Description is VerDate Aug<31>2005 21:36 Feb 06, 2007 Jkt 211001 will clearly disclose that, for purposes of the Act, Fund Shares are issued by the Investee Fund and that the acquisition of Fund Shares by investment companies is subject to the restrictions of section 12(d)(1) of the Act. In light of the requested order to permit Purchasing Funds to invest in Investee Funds in excess of the limits of section 12(d)(1), applicants wish to replace this condition with condition 13, as stated below. Under the new condition, each Investee Fund prospectus and Product Description will disclose that Purchasing Funds may purchase shares of the Investee Funds in excess of the limits of section 12(d)(1) to the extent that they comply with the terms and conditions of the requested order granting relief from section 12(d)(1).6 Applicants’ Conditions Applicants agree that the order of the Commission granting the requested relief will be subject to the following conditions: 1. The members of a Purchasing Fund’s Advisory Group will not control (individually or in the aggregate) an Investee Fund within the meaning of section 2(a)(9) of the Act. The members of a Purchasing Fund’s Sub-Advisory Group will not control (individually or in the aggregate) an Investee Fund within the meaning of section 2(a)(9) of the Act. If, as a result of a decrease in the outstanding Fund Shares of an Investee Fund, the Purchasing Fund’s Advisory Group or the Purchasing Fund’s Sub-Advisory Group, each in the aggregate, becomes a holder of more than 25 percent of the outstanding Fund Shares of an Investee Fund, it will vote its Fund Shares in the same proportion as the vote of all other holders of the Investee Fund’s Fund Shares. This condition does not apply to the Purchasing Fund Sub-Advisory Group with respect to an Investee Fund for which the Purchasing Fund SubAdviser or a person controlling, controlled by, or under common control with the Purchasing Fund Sub-Adviser acts as the investment adviser within the meaning of section 2(a)(20)(A) of the Act (in the case of an Open-end Fund) or as the sponsor (in the case of a UIT Fund). delivered by broker-dealers to secondary market purchasers of Fund Shares. 6 The requested order would also amend the Prior Order to reflect that the Trust has replaced the prior distributor, ALPS Distributors, Inc. (‘‘ALPS’’), with the Distributor. The application for the Prior Order stated that ALPS was not an affiliated person of the Adviser. As described above, the Distributor is an affiliated person of the Adviser. The Distributor agrees to comply with all terms and conditions of the Prior Order, as amended. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 2. No Purchasing Fund or Purchasing Fund Affiliate will cause any existing or potential investment by the Purchasing Fund in an Investee Fund to influence the terms of any services or transactions between the Purchasing Fund or a Purchasing Fund Affiliate and the Investee Fund or a Fund Affiliate. A ‘‘Purchasing Fund Affiliate’’ means a Purchasing Fund Adviser, Purchasing Fund Sub-Adviser, Purchasing Trust Sponsor, a promoter, or a principal underwriter of a Purchasing Fund and any person controlling, controlled by, or under common control with any of those entities. A ‘‘Fund Affiliate’’ means an investment adviser(s), promoter, sponsor or principal underwriter of an Investee Fund and any person controlling, controlled by or under common control with any of these entities. 3. The board of directors or trustees of a Purchasing Management Company, including a majority of the disinterested directors or trustees, will adopt procedures reasonably designed to ensure that the Purchasing Fund Adviser and any Purchasing Fund SubAdviser are conducting the investment program of the Purchasing Management Company without taking into account any consideration received by the Purchasing Management Company or a Purchasing Fund Affiliate from an Investee Fund or Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Purchasing Fund in the securities of an Open-end Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, the board of directors or trustees of an Open-end Fund (‘‘Board’’), including a majority of the disinterested Board members, will determine that any consideration paid by the Open-end Fund to the Purchasing Fund or a Purchasing Fund Affiliate in connection with any services or transactions (i) is fair and reasonable in relation to the nature and quality of the services and benefits received by the Open-end Fund; (ii) is within the range of consideration that the Open-end Fund would be required to pay to another unaffiliated entity in connection with the same services or transactions; and (iii) 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 Open-end Fund and its investment adviser(s) or any person controlling, controlled by, or under common control with such investment adviser(s). 5. No Purchasing Fund or Purchasing Fund Affiliate (except to the extent it is acting in its capacity as an investment E:\FR\FM\07FEN1.SGM 07FEN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 72, No. 25 / Wednesday, February 7, 2007 / Notices adviser to an Open-end Fund or sponsor to a UIT Fund) will cause an Investee Fund to purchase a security in an offering of securities during the existence of an underwriting or selling syndicate of which a principal underwriter is an officer, director, member of an advisory board, Purchasing Fund Adviser, Purchasing Fund Sub-Adviser, employee, or Purchasing Trust Sponsor of the Purchasing Fund, or a person of which any such officer, director, member of an advisory board, Purchasing Fund Adviser, Purchasing Fund Sub-Adviser, employee, or Purchasing Trust Sponsor is an affiliated person (each, an ‘‘Underwriting Affiliate,’’ except any person whose relationship to the Investee Fund is covered by section 10(f) of the Act is not an Underwriting 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. The Board of an Open-end Fund, including a majority of the disinterested Board members, will adopt procedures reasonably designed to monitor any purchases of securities by the Open-end Fund in an Affiliated Underwriting, once an investment by a Purchasing Fund in the securities of the Open-end 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 will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Purchasing Fund in the Open-end Fund. The Board will consider, among other things: (i) whether the purchases were consistent with the investment objectives and policies of the Open-end Fund; (ii) 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 (iii) whether the amount of securities purchased by the Open-end Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board will take any appropriate actions based on its review, including the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interest of shareholders. VerDate Aug<31>2005 21:36 Feb 06, 2007 Jkt 211001 7. The Open-end 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 in an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in Affiliated Underwritings once an investment by a Purchasing Fund in the shares of the Open-end Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were acquired, the identity of the underwriting syndicate’s members, the terms of the purchase, and the information or materials upon which the Board’s determinations were made. 8. Before investing in an Investee Fund in excess of the limits of section 12(d)(1)(A), the Purchasing Fund and the Investee Fund will execute a Purchasing Fund Agreement stating, without limitation, that their boards of directors or trustees and their investment advisers or sponsors and trustees, as applicable, 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 Open-end Fund in excess of the limit of section 12(d)(1)(A)(i), a Purchasing Fund will notify the Open-end Fund of the investment. At such time, the Purchasing Fund will also transmit to the Open-end Fund a list of the names of each Purchasing Fund Affiliate and Underwriting Affiliate. The Purchasing Fund will notify the Open-end Fund of any changes to the list as soon as reasonably practicable after a change occurs. The Investee Fund and the Purchasing Fund will maintain and preserve a copy of the order, the Purchasing Fund Agreement and, in the case of an Open-end Fund, 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 directors or trustees of each Purchasing Management Company, including a majority of the disinterested directors or trustees, will find that the advisory fees charged under such advisory contract are based on services provided that will be in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Open-end Fund in which the PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 5763 Purchasing Management Company may invest. These findings and their basis will be recorded fully in the minute books of the appropriate Purchasing Management Company. 10. A Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor, as applicable, will waive fees otherwise payable to it by a Purchasing Fund, in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Open-end Fund under rule 12b-1 under the Act) received from an Investee Fund by the Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor, or an affiliated person of the Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor, other than any advisory fees paid to the Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor or its affiliated person by an Open-end Fund, in connection with the investment by the Purchasing Fund in an Investee Fund. Any Purchasing Fund Sub-Adviser will waive fees otherwise payable to the Purchasing Fund SubAdviser, directly or indirectly, by the Purchasing Management Company in an amount at least equal to any compensation received from an Investee Fund by the Purchasing Fund SubAdviser, or an affiliated person of the Purchasing Fund Sub-Adviser, other than any advisory fees paid to the Purchasing Fund Sub-Adviser or its affiliated person by the Open-end Fund, in connection with the investment by the Purchasing Management Company in an Investee Fund made at the direction of the Purchasing Fund SubAdviser. In the event that the Purchasing Fund Sub-Adviser waives fees, the benefit of the waiver will be passed through to the Purchasing Management Company. 11. Any sales charges and/or service fees charged with respect to shares of a Purchasing Fund will not exceed the limits applicable to a fund of funds as set forth in Rule 2830. 12. No Investee Fund will acquire 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) of the Act. Amendment to Prior Order Applicants agree to replace condition 2 of the Prior Order with the following condition: 13. Each Investee Fund’s prospectus and Product Description will clearly disclose that, for purposes of the Act, the Fund Shares are issued by a registered investment company, and the acquisition of Fund Shares by investment companies is subject to the E:\FR\FM\07FEN1.SGM 07FEN1 5764 Federal Register / Vol. 72, No. 25 / Wednesday, February 7, 2007 / Notices restrictions of section 12(d)(1) of the Act, except as permitted by an exemptive order that permits registered investment companies to invest in an Investee Fund beyond the limits in section 12(d)(1), subject to certain terms and conditions, including that the registered investment company enter into a Purchasing Fund Agreement with the Investee Fund regarding the terms of the investment. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. 07–529 Filed 2–6–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27694; 812–13339] Van Eck Associates Corporation, et al.; Notice of Application January 31, 2007. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application to amend a prior order under section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) to grant exemptions from sections 2(a)(32), 5(a)(1), 22(d), 22(e), and 24(d) of the Act and rule 22c–1 under the Act, under section 12(d)(1)(J) of the 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 granting an exemption from sections 17(a)(1) and (a)(2) of the Act. AGENCY: Applicants request an order to amend a prior order that permits: (a) Open-end management investment companies that include series based on certain domestic equity securities indices to issue shares (‘‘Shares’’) that can be redeemed only in large aggregations (‘‘Creation Units’’); (b) secondary market transactions in Shares to occur at negotiated prices; (c) dealers to sell Shares to purchasers in the secondary market unaccompanied by a prospectus when prospectus delivery is not required by the Securities Act of 1933 (‘‘Securities Act’’); (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Shares (‘‘Prior sroberts on PROD1PC70 with NOTICES SUMMARY OF APPLICATION: VerDate Aug<31>2005 21:36 Feb 06, 2007 Jkt 211001 Order’’).1 Applicants seek to amend the Prior Order in order to offer two new series (each series, an ‘‘Additional Fund,’’ and together, the ‘‘Additional Funds’’) and future series (‘‘Future Foreign Funds,’’ and together with the Additional Funds, the ‘‘Foreign Funds’’) based on foreign equity securities indices. In addition, the order would delete a condition related to future relief in the Prior Order. APPLICANTS: Van Eck Associates Corporation (‘‘Adviser’’), Market Vectors ETF Trust (‘‘Trust’’), and Van Eck Securities Corporation (‘‘Distributor’’). FILING DATES: The application was filed on November 1, 2006, and amended on January 25, 2007. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief 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 February 26, 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 may request notification of a hearing by writing to the Commission’s Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549– 1090. Applicants, 99 Park Avenue, 8th Floor, New York, NY 10016. FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior Counsel, at (202) 551–6879, or Mary Kay Frech, Branch Chief, at (202) 551–6821 (Division of Investment Management, Office of Investment Company Regulation). The following is a summary of the application. The complete application may be obtained for a fee at the Commission’s Public Reference Branch, 100 F Street NE., Washington DC 20549–0102 (tel. 202–551–5850). SUPPLEMENTARY INFORMATION: Applicants’ Representations 1. The Trust is an open-end management investment company registered under the Act and organized as a Delaware statutory trust. The Trust is organized as a series fund with multiple series. The Adviser, an 1 Van Eck Associates Corporation, et al., Investment Company Act Release Nos. 27283 (April 7, 2006) (notice) and 27311 (May 2, 2006) (order). PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 investment adviser registered under the Investment Advisers Act of 1940 (‘‘Advisers Act’’), will serve as investment adviser to each Foreign Fund. In the future, the Adviser may enter into sub-advisory agreements with other investment advisers to act as ‘‘subadvisers’’ with respect to particular Foreign Funds. Any sub-adviser will be registered under the Advisers Act. The Distributor, a broker-dealer registered under the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), is expected to serve as the principal underwriter and distributor of each Foreign Fund’s Creation Units. 2. The Trust is currently permitted to offer several series based on domestic equity securities indices in reliance on the Prior Order (‘‘Funds’’). Applicants seek to amend the Prior Order to permit the Trust to offer the two Additional Funds and Future Foreign Funds, each of which, except as described in the application, would operate in a manner identical to the Funds. 3. The Additional Funds will invest in portfolios of securities consisting predominantly of the component securities of the Ardour Global Alternative Energy Index (Extra Liquid) and the Ardour Global Alternative Energy Index (Composite) (each, an ‘‘Underlying Index’’ and together, the ‘‘Underlying Indexes’’). The Underlying Indexes are rules based, capitalization weighted, float adjusted indices that include companies principally engaged in at least one of the following five industry segments: Alternative energy resources, distributed generation, environmental technologies, energy efficiency and/or enabling technologies. Currently, the Ardour Global Alternative Energy Index (Composite) is comprised of over 200 individual stocks that are traded on a North American, European or Asian stock exchange. The Ardour Global Alternative Energy Index (Extra Liquid) is comprised of thirty stocks that are selected from the Ardour Global Alternative Energy Index (Composite) that have achieved the highest average daily trading volumes for the prior three months. No entity that creates, compiles, sponsors, or maintains an Underlying Index is or will be an affiliated person, as defined in section 2(a)(3) of the Act, or an affiliated person of an affiliated person, of the Trust, the Adviser, the Distributor, promoter, or any subadviser to a Foreign Fund. 4. Applicants state that all discussions contained in the application for the Prior Order are equally applicable to the Foreign Funds, except as specifically noted by applicants (as summarized in this notice). Applicants assert that the E:\FR\FM\07FEN1.SGM 07FEN1

Agencies

[Federal Register Volume 72, Number 25 (Wednesday, February 7, 2007)]
[Notices]
[Pages 5759-5764]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-529]


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

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27693; 812-13343]


PowerShares Exchange-Traded Fund Trust, et al.; Notice of 
Application January 31, 2007.

AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J) 
of the Investment Company Act of 1940 (the ``Act'') for 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 
management investment companies and unit investment trusts to acquire 
shares of other registered open-end

[[Page 5760]]

management investment companies and unit investment trusts that operate 
as exchange-traded funds and that are not part of the same group of 
investment companies. The order would also amend a condition in a prior 
order.

Applicants: PowerShares Exchange-Traded Fund Trust (the ``Trust''), 
PowerShares Capital Management LLC (the ``Adviser'') and AIM 
Distributors, Inc. (the ``Distributor'').

Filing Dates: The application was filed on November 15, 2006 and 
amended on January 30, 2007.

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 February 26, 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, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC, 20549-1090. Applicants: PowerShares 
Capital Management LLC and PowerShares Exchange-Traded Fund Trust, 301 
W. Roosevelt Rd., Wheaton, IL 60187; AIM Distributors, Inc., 11 
Greenway Plaza, Suite 100, Houston, TX 77046-1173.

For Further Information Contact: Marilyn Mann, Senior Counsel, at (202) 
551-6813, and Mary Kay Frech, Branch Chief, 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 Branch, 100 F Street, NE., Washington, DC 
20549-0102 (tel. (202) 551-5850).

Applicants' Representations

    1. The Trust is an open-end management investment company 
registered under the Act and organized as a Massachusetts business 
trust. The Trust currently offers 70 series (the ``Current Index 
Funds'') in reliance on a prior exemptive order (the ``Prior 
Order'').\1\ The Trust intends to establish additional series in the 
future in reliance on the Prior Order (``Future Index Funds''). The 
Current Index Funds and Future Index Funds are together referred to as 
the ``Index Funds.'' \2\ The Adviser is a Delaware limited liability 
company that is registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act'') and provides 
advisory services to each of the Index Funds. The Distributor is a 
Delaware corporation that is registered as a broker-dealer under the 
Securities Exchange Act of 1934. Each of the Adviser and the 
Distributor is an indirect wholly-owned subsidiary of AMVESCAP PLC, a 
public limited company organized in the United Kingdom.
---------------------------------------------------------------------------

    \1\ PowerShares Exchange-Traded Fund Trust, Investment Company 
Act Rel. Nos. 25961 (Mar. 4, 2003) (notice) and 25985 (Mar. 28, 
2003) (order).
    \2\ All entities that currently intend to rely on the requested 
order are named as applicants. Any other entity that relies on the 
order in the future will comply with the terms and conditions of the 
application. A Purchasing Fund, as defined below, may rely on the 
requested order only to invest in the Investee Funds, as defined 
below, and not in any other registered investment company.
---------------------------------------------------------------------------

    2. Applicants request an exemption to permit: (i) management 
investment companies or series thereof (``Purchasing Management 
Companies'') and unit investment trusts or series thereof (``Purchasing 
Trusts,'' and together with Purchasing Management Companies, 
``Purchasing Funds'') registered under the Act that are not sponsored 
or advised by the Adviser or an entity controlling, controlled by or 
under common control with the Adviser and not part of the same ``group 
of investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, as the Index Funds, to acquire shares (``Fund Shares'') of (a) an 
Index Fund and (b) each open-end management investment company or 
series thereof or unit investment trust or series thereof registered 
under the Act that operates as an exchange-traded fund (an ``ETF''), is 
currently or subsequently part of the same ``group of investment 
companies'' as each Index Fund and is advised or sponsored by the 
Adviser or an entity controlling, controlled by or under common control 
with the Adviser (such open-end ETFs, including the Index Funds, are 
referred to herein as ``Open-end Funds'' and such unit investment trust 
ETFs are referred to herein as ``UIT Funds'') (collectively, the 
``Investee Funds''), beyond the limitations in section 12(d)(1)(A); and 
(ii) Open-end Funds, the Distributor and any broker or dealer to sell 
shares to the Purchasing Funds beyond the limits of section 
12(d)(1)(B). Applicants also seek an exemption from section 17(a) of 
the Act to permit an Investee Fund to sell Fund Shares to, and redeem 
Fund Shares from, and engage in certain in-kind transactions with, a 
Purchasing Fund of which the Investee Fund is an affiliated person or 
an affiliated person of an affiliated person.
    3. Each Purchasing Management Company will be advised by an 
investment adviser within the meaning of section 2(a)(20)(A) of the Act 
(``Purchasing Fund Adviser'') and may be sub-advised by investment 
adviser(s) within the meaning of section 2(a)(20)(B) of the Act 
(``Purchasing Fund Sub-Adviser''). Any investment adviser to a 
Purchasing Management Company will be registered as an investment 
adviser under the Advisers Act. A sponsor to a Purchasing Trust is a 
``Purchasing Trust Sponsor.''
    4. Applicants state that the Investee Funds will offer the 
Purchasing Funds an easy way to gain instant exposure to a variety of 
markets, segments, sectors, geographic regions and groups of industries 
through a single, relatively low cost transaction.

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, or 
any other broker or dealer from selling its shares 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. 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.
    2. Applicants assert that the proposed transactions will not lead 
to any of the abuses that section 12(d)(1) was designed to prevent. 
Applicants submit

[[Page 5761]]

that the proposed conditions to the requested relief address the 
concerns underlying the limits in section 12(d)(1), which include 
concerns about undue influence, excessive layering of fees and overly 
complex structures.
    3. Applicants state that the proposed arrangement will not result 
in undue influence by a Purchasing Fund or its affiliates over an 
Investee Fund. To limit the control that a Purchasing Fund may have 
over an Investee Fund, applicants propose a condition prohibiting the 
Purchasing Fund Adviser or Purchasing Trust Sponsor; any person 
controlling, controlled by, or under common with the Purchasing Fund 
Adviser or Purchasing Trust Sponsor; and any investment company or 
issuer that would be an investment company but for sections 3(c)(1) or 
3(c)(7) of the Act that is advised or sponsored by the Purchasing Fund 
Adviser or advised or sponsored by the Purchasing Trust Sponsor, or any 
person controlling, controlled by, or under common control with the 
Purchasing Fund Adviser or Purchasing Trust Sponsor (``Purchasing 
Fund's Advisory Group'') from controlling (individually or in the 
aggregate) an Investee Fund within the meaning of section 2(a)(9) of 
the Act. The same prohibition would apply to any Purchasing Fund 
Subadviser; any person controlling, controlled by, or under common 
control with the Purchasing Fund 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 or sponsored by the Purchasing Fund Subadviser or any person 
controlling, controlled by, or under common control with the Purchasing 
Fund Subadviser (``Purchasing Fund's Sub-Advisory Group'').
    4. To limit further the potential for undue influence by a 
Purchasing Fund over an Investee Fund, applicants propose conditions 2 
through 7, stated below, to preclude a Purchasing Fund and certain of 
its affiliates from taking advantage of an Investee Fund and certain 
Investee Fund affiliates with respect to transactions between the 
entities and to ensure the transactions will be on an arm's length 
basis.
    5. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. The board of directors or trustees 
of each Purchasing Management Company, including a majority of the 
disinterested directors or trustees, before approving any advisory 
contract under section 15 of the Act, will be required to determine 
that the advisory fees charged to the Purchasing Management Company are 
based on services provided that will be in addition to, rather than 
duplicative of, the services provided under the advisory contract(s) of 
any Open-end Fund in which the Purchasing Management Company may 
invest. In addition, the Purchasing Fund Adviser, trustee or Purchasing 
Trust Sponsor of a Purchasing Fund, as applicable, will waive fees 
otherwise payable to it by the Purchasing Fund in an amount at least 
equal to any compensation received from an Investee Fund by the 
Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor, or an 
affiliated person of the Purchasing Fund Adviser, trustee or Purchasing 
Trust Sponsor (other than any advisory fees), in connection with the 
investment by the Purchasing Fund in the Investee Funds. Applicants 
also state that any sales charges and/or service fees charged with 
respect to shares of a Purchasing Fund will not exceed the limits 
applicable to a fund of funds set forth in Conduct Rule 2830 of the 
NASD (``Rule 2830'').
    6. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that an Investee Fund 
will be prohibited from acquiring securities of any investment company, 
or of any 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.
    7. To ensure that Purchasing Funds are aware of the terms and 
conditions of the requested order, the Purchasing Funds must enter into 
an agreement with the respective Investee Funds (``Purchasing Fund 
Agreement''). The Purchasing Fund Agreement will include an 
acknowledgement from the Purchasing Fund that it may rely on the order 
only to invest in the Investee Funds and not in any other investment 
company. The Purchasing Fund Agreement will further require any 
Purchasing Fund that exceeds the 5% or 10% limitations in section 
12(d)(1)(A)(ii) and (iii) to disclose in its prospectus that it may 
invest in ETFs and disclose, in ``plain English,'' in its prospectus 
the unique characteristics of the Purchasing Funds investing in 
investment companies, including but not limited to the expense 
structure and any additional expenses of investing in investment 
companies. Each Purchasing Fund will comply with the disclosure 
requirements concerning the aggregate costs of investing in the 
Investee Funds set forth in Investment Company Act Release No. 27399.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company or an affiliated person of 
such person (``second tier affiliate''), from selling any security to 
or purchasing any security from the company. Section 2(a)(3) of the Act 
defines an ``affiliated person'' of another person to include 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 any person directly or indirectly controlling, 
controlled by, or under common control with, the other person. The 
Investee Funds may be deemed to be controlled by the Adviser or an 
entity controlling, controlled by, or under common control with the 
Adviser and hence affiliated persons of each other. In addition, the 
Investee Funds may be deemed to be under common control with any other 
registered investment company (or series thereof) advised by the 
Adviser or an entity controlling, controlled by or under common control 
with the Adviser (an ``Affiliated Fund'').\3\
---------------------------------------------------------------------------

    \3\ Applicants acknowledge that the receipt of any compensation 
by (a) an affiliated person or second tier affiliate of a Purchasing 
Fund for the purchase by the Purchasing Fund of Fund Shares of an 
Investee Fund or (b) an affiliated person or second tier affiliate 
of an Investee Fund for the sale by the Investee Fund of Fund Shares 
to a Purchasing Fund, is subject to section 17(e) of the Act. The 
Purchasing Fund Agreement also will include this acknowledgment.
---------------------------------------------------------------------------

    2. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
evidence establishes that (a) the terms of the proposed transaction are 
reasonable and fair 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.
    3. Applicants request an exemption under sections 6(c) and 17(b) of 
the Act from section 17(a) of the Act in order to permit each Investee 
Fund to sell Fund Shares to and redeem Fund Shares from, and engage in 
the in-kind transactions that would accompany such sales and 
redemptions with, any Purchasing Fund

[[Page 5762]]

of which it is an affiliated person or second tier affiliate because of 
one or more of the following: (1) The Purchasing Fund holds 5% or more 
of the Fund Shares of the Trust or one or more Investee Funds; (2) a 
Purchasing Fund described in (1) is an affiliated person of the 
Purchasing Fund; or (3) the Purchasing Fund holds 5% or more of the 
shares of one or more Affiliated Funds.\4\
---------------------------------------------------------------------------

    \4\ Although applicants believe that most Purchasing Funds will 
purchase and sell Fund Shares in the secondary market, a Purchasing 
Fund might seek to transact in Fund Shares directly with an Investee 
Fund. When transacting directly with an Investee Fund, a Purchasing 
Fund will generally be required to deposit securities into, or 
receive securities from, the Investee Fund in connection with the 
purchase and redemption of Fund Shares. With respect to these in-
kind transactions, applicants are requesting relief for Investee 
Funds that are affiliated persons or second tier affiliates of a 
Purchasing Fund solely by virtue of one or more of the reasons 
described above.
---------------------------------------------------------------------------

    4. Applicants submit that the proposed arrangement satisfies the 
standards for relief under sections 17(b) and 6(c) of the Act. 
Applicants submit that the proposed transactions are appropriate in the 
public interest, consistent with the protection of investors, and do 
not involve overreaching. Applicants note that the consideration paid 
for the purchase or received for the redemption of Fund Shares directly 
from an Investee Fund by a Purchasing Fund (or any other investor) will 
be based on the net asset value of the Fund Shares. In addition, the 
securities received or transferred by the Investee Fund in connection 
with the purchase or redemption of Fund Shares will be valued in the 
same manner as the Investee Fund's portfolio securities and thus the 
transactions will not be detrimental to the Purchasing Fund. Applicants 
also state that the proposed transactions will be consistent with the 
policies of each Purchasing Fund and Investee Fund and with the general 
purposes of the Act. Applicants state that the Purchasing Fund 
Agreement will require a Purchasing Fund to represent that its 
ownership of Fund Shares issued by an Investee Fund is consistent with 
the investment policies set forth in the Purchasing Fund's registration 
statement.

C. Prior Order

    Applicants also seek to amend a condition to the Prior Order so 
that the condition is consistent with the relief requested from section 
12(d)(1). Condition 2 to the Prior Order currently provides that each 
Investee Fund prospectus and ``Product Description'' \5\ will clearly 
disclose that, for purposes of the Act, Fund Shares are issued by the 
Investee Fund and that the acquisition of Fund Shares by investment 
companies is subject to the restrictions of section 12(d)(1) of the 
Act. In light of the requested order to permit Purchasing Funds to 
invest in Investee Funds in excess of the limits of section 12(d)(1), 
applicants wish to replace this condition with condition 13, as stated 
below. Under the new condition, each Investee Fund prospectus and 
Product Description will disclose that Purchasing Funds may purchase 
shares of the Investee Funds in excess of the limits of section 
12(d)(1) to the extent that they comply with the terms and conditions 
of the requested order granting relief from section 12(d)(1).\6\
---------------------------------------------------------------------------

    \5\ A ``Product Description'' is a short document that 
describes, in plain English, the Fund Shares and the Investee Funds. 
The Product Description is delivered by broker-dealers to secondary 
market purchasers of Fund Shares.
    \6\ The requested order would also amend the Prior Order to 
reflect that the Trust has replaced the prior distributor, ALPS 
Distributors, Inc. (``ALPS''), with the Distributor. The application 
for the Prior Order stated that ALPS was not an affiliated person of 
the Adviser. As described above, the Distributor is an affiliated 
person of the Adviser. The Distributor agrees to comply with all 
terms and conditions of the Prior Order, as amended.
---------------------------------------------------------------------------

Applicants' Conditions

    Applicants agree that the order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. The members of a Purchasing Fund's Advisory Group will not 
control (individually or in the aggregate) an Investee Fund within the 
meaning of section 2(a)(9) of the Act. The members of a Purchasing 
Fund's Sub-Advisory Group will not control (individually or in the 
aggregate) an Investee Fund within the meaning of section 2(a)(9) of 
the Act. If, as a result of a decrease in the outstanding Fund Shares 
of an Investee Fund, the Purchasing Fund's Advisory Group or the 
Purchasing Fund's Sub-Advisory Group, each in the aggregate, becomes a 
holder of more than 25 percent of the outstanding Fund Shares of an 
Investee Fund, it will vote its Fund Shares in the same proportion as 
the vote of all other holders of the Investee Fund's Fund Shares. This 
condition does not apply to the Purchasing Fund Sub-Advisory Group with 
respect to an Investee Fund for which the Purchasing Fund Sub-Adviser 
or a person controlling, controlled by, or under common control with 
the Purchasing Fund Sub-Adviser acts as the investment adviser within 
the meaning of section 2(a)(20)(A) of the Act (in the case of an Open-
end Fund) or as the sponsor (in the case of a UIT Fund).
    2. No Purchasing Fund or Purchasing Fund Affiliate will cause any 
existing or potential investment by the Purchasing Fund in an Investee 
Fund to influence the terms of any services or transactions between the 
Purchasing Fund or a Purchasing Fund Affiliate and the Investee Fund or 
a Fund Affiliate. A ``Purchasing Fund Affiliate'' means a Purchasing 
Fund Adviser, Purchasing Fund Sub-Adviser, Purchasing Trust Sponsor, a 
promoter, or a principal underwriter of a Purchasing Fund and any 
person controlling, controlled by, or under common control with any of 
those entities. A ``Fund Affiliate'' means an investment adviser(s), 
promoter, sponsor or principal underwriter of an Investee Fund and any 
person controlling, controlled by or under common control with any of 
these entities.
    3. The board of directors or trustees of a Purchasing Management 
Company, including a majority of the disinterested directors or 
trustees, will adopt procedures reasonably designed to ensure that the 
Purchasing Fund Adviser and any Purchasing Fund Sub-Adviser are 
conducting the investment program of the Purchasing Management Company 
without taking into account any consideration received by the 
Purchasing Management Company or a Purchasing Fund Affiliate from an 
Investee Fund or Fund Affiliate in connection with any services or 
transactions.
    4. Once an investment by a Purchasing Fund in the securities of an 
Open-end Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
the board of directors or trustees of an Open-end Fund (``Board''), 
including a majority of the disinterested Board members, will determine 
that any consideration paid by the Open-end Fund to the Purchasing Fund 
or a Purchasing Fund Affiliate in connection with any services or 
transactions (i) is fair and reasonable in relation to the nature and 
quality of the services and benefits received by the Open-end Fund; 
(ii) is within the range of consideration that the Open-end Fund would 
be required to pay to another unaffiliated entity in connection with 
the same services or transactions; and (iii) 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 Open-
end Fund and its investment adviser(s) or any person controlling, 
controlled by, or under common control with such investment adviser(s).
    5. No Purchasing Fund or Purchasing Fund Affiliate (except to the 
extent it is acting in its capacity as an investment

[[Page 5763]]

adviser to an Open-end Fund or sponsor to a UIT Fund) will cause an 
Investee Fund to purchase a security in an offering of securities 
during the existence of an underwriting or selling syndicate of which a 
principal underwriter is an officer, director, member of an advisory 
board, Purchasing Fund Adviser, Purchasing Fund Sub-Adviser, employee, 
or Purchasing Trust Sponsor of the Purchasing Fund, or a person of 
which any such officer, director, member of an advisory board, 
Purchasing Fund Adviser, Purchasing Fund Sub-Adviser, employee, or 
Purchasing Trust Sponsor is an affiliated person (each, an 
``Underwriting Affiliate,'' except any person whose relationship to the 
Investee Fund is covered by section 10(f) of the Act is not an 
Underwriting 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. The Board of an Open-end Fund, including a majority of the 
disinterested Board members, will adopt procedures reasonably designed 
to monitor any purchases of securities by the Open-end Fund in an 
Affiliated Underwriting, once an investment by a Purchasing Fund in the 
securities of the Open-end 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 will review these purchases 
periodically, but no less frequently than annually, to determine 
whether the purchases were influenced by the investment by the 
Purchasing Fund in the Open-end Fund. The Board will consider, among 
other things: (i) whether the purchases were consistent with the 
investment objectives and policies of the Open-end Fund; (ii) 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 
(iii) whether the amount of securities purchased by the Open-end Fund 
in Affiliated Underwritings and the amount purchased directly from an 
Underwriting Affiliate have changed significantly from prior years. The 
Board will take any appropriate actions based on its review, including 
the institution of procedures designed to assure that purchases of 
securities in Affiliated Underwritings are in the best interest of 
shareholders.
    7. The Open-end 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 in an Affiliated 
Underwriting occurred, the first two years in an easily accessible 
place, a written record of each purchase of securities in Affiliated 
Underwritings once an investment by a Purchasing Fund in the shares of 
the Open-end Fund exceeds the limit of section 12(d)(1)(A)(i) of the 
Act, setting forth from whom the securities were acquired, the identity 
of the underwriting syndicate's members, the terms of the purchase, and 
the information or materials upon which the Board's determinations were 
made.
    8. Before investing in an Investee Fund in excess of the limits of 
section 12(d)(1)(A), the Purchasing Fund and the Investee Fund will 
execute a Purchasing Fund Agreement stating, without limitation, that 
their boards of directors or trustees and their investment advisers or 
sponsors and trustees, as applicable, 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 Open-end 
Fund in excess of the limit of section 12(d)(1)(A)(i), a Purchasing 
Fund will notify the Open-end Fund of the investment. At such time, the 
Purchasing Fund will also transmit to the Open-end Fund a list of the 
names of each Purchasing Fund Affiliate and Underwriting Affiliate. The 
Purchasing Fund will notify the Open-end Fund of any changes to the 
list as soon as reasonably practicable after a change occurs. The 
Investee Fund and the Purchasing Fund will maintain and preserve a copy 
of the order, the Purchasing Fund Agreement and, in the case of an 
Open-end Fund, 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 directors or trustees of each Purchasing Management 
Company, including a majority of the disinterested directors or 
trustees, will find that the advisory fees charged under such advisory 
contract are based on services provided that will be in addition to, 
rather than duplicative of, the services provided under the advisory 
contract(s) of any Open-end Fund in which the Purchasing Management 
Company may invest. These findings and their basis will be recorded 
fully in the minute books of the appropriate Purchasing Management 
Company.
    10. A Purchasing Fund Adviser, trustee or Purchasing Trust Sponsor, 
as applicable, will waive fees otherwise payable to it by a Purchasing 
Fund, in an amount at least equal to any compensation (including fees 
received pursuant to any plan adopted by an Open-end Fund under rule 
12b-1 under the Act) received from an Investee Fund by the Purchasing 
Fund Adviser, trustee or Purchasing Trust Sponsor, or an affiliated 
person of the Purchasing Fund Adviser, trustee or Purchasing Trust 
Sponsor, other than any advisory fees paid to the Purchasing Fund 
Adviser, trustee or Purchasing Trust Sponsor or its affiliated person 
by an Open-end Fund, in connection with the investment by the 
Purchasing Fund in an Investee Fund. Any Purchasing Fund Sub-Adviser 
will waive fees otherwise payable to the Purchasing Fund Sub-Adviser, 
directly or indirectly, by the Purchasing Management Company in an 
amount at least equal to any compensation received from an Investee 
Fund by the Purchasing Fund Sub-Adviser, or an affiliated person of the 
Purchasing Fund Sub-Adviser, other than any advisory fees paid to the 
Purchasing Fund Sub-Adviser or its affiliated person by the Open-end 
Fund, in connection with the investment by the Purchasing Management 
Company in an Investee Fund made at the direction of the Purchasing 
Fund Sub-Adviser. In the event that the Purchasing Fund Sub-Adviser 
waives fees, the benefit of the waiver will be passed through to the 
Purchasing Management Company.
    11. Any sales charges and/or service fees charged with respect to 
shares of a Purchasing Fund will not exceed the limits applicable to a 
fund of funds as set forth in Rule 2830.
    12. No Investee Fund will acquire 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) of the Act.

Amendment to Prior Order

    Applicants agree to replace condition 2 of the Prior Order with the 
following condition:
    13. Each Investee Fund's prospectus and Product Description will 
clearly disclose that, for purposes of the Act, the Fund Shares are 
issued by a registered investment company, and the acquisition of Fund 
Shares by investment companies is subject to the

[[Page 5764]]

restrictions of section 12(d)(1) of the Act, except as permitted by an 
exemptive order that permits registered investment companies to invest 
in an Investee Fund beyond the limits in section 12(d)(1), subject to 
certain terms and conditions, including that the registered investment 
company enter into a Purchasing Fund Agreement with the Investee Fund 
regarding the terms of the investment.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 07-529 Filed 2-6-07; 8:45 am]
BILLING CODE 8010-01-P