PowerShares Exchange-Traded Fund Trust, et al.; Notice of Application January 31, 2007., 5759-5764 [07-529]
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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—https://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—https://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—https://www.nrc.gov.
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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—https://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—https://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—https://www.nrc.gov.
Week of March 12, 2007—Tentative
There are no meetings scheduled for
the Week of March 12, 2007.
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* 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.
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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
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February 1, 2007, and on less than one
week’s notice to the public.
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The NRC Commission Meeting
Schedule can be found on the Internet
at: https://www.nrc.gov/what-we-do/
policy-making/schedule.html.
*
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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.
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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:
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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:
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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
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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.
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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
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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
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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.
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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.
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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
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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.
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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
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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.
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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
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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
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]]>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]
=======================================================================
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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\
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\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.
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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\
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\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.
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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\
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\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.
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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
