The RBB Fund, Inc. and Abundance Technologies, Inc.; Notice of Application, 11919-11922 [E7-4633]

Download as PDF Federal Register / Vol. 72, No. 49 / Wednesday, March 14, 2007 / Notices Secretary of the Board, Wendy A. Hocking, at (202) 268–4800. Wendy A. Hocking, Secretary. [FR Doc. 07–1234 Filed 3–12–07; 3:49 pm] BILLING CODE 7710–12–M SECURITIES AND EXCHANGE COMMISSION [Release No. IC–27749; 812–13295] The RBB Fund, Inc. and Abundance Technologies, Inc.; Notice of Application March 8, 2007. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 12(d)(1)(A) and (B) of the Act and under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act. AGENCY: The order would permit certain series of a registered open-end management investment company to acquire shares of registered open-end management investment companies and unit investment trusts (‘‘UITs’’) that are outside the same group of investment companies. APPLICANTS: The RBB Fund, Inc. (the ‘‘Company’’) and Abundance Technologies, Inc. (the ‘‘Adviser’’). FILING DATES: The application was filed on May 23, 2006 and amended on March 6, 2007. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. 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. April 2, 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– cprice-sewell on PROD1PC66 with NOTICES SUMMARY OF APPLICATION: VerDate Aug<31>2005 15:03 Mar 13, 2007 Jkt 211001 1090; Applicants, The RBB Fund, Inc., 400 Bellevue Parkway, Wilmington, DE 19809 and Abundance Technologies, Inc., 3700 Park 42 Drive, Suite 105A, Cincinnati, OH 42141. FOR FURTHER INFORMATION, CONTACT: Jean E. Minarick, Senior Counsel, at (202) 551–6811, or Janet M. Grossnickle, Branch Chief, at (202) 551–6821 (Division of Investment Management, Office of Investment Company Regulation). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Public Reference Desk, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington DC 20549–0102 (telephone (202) 551–5850). Applicants’ Representations 1. The Company is a Maryland corporation and an open-end management investment company registered under the Act that is comprised of eighteen separate series advised by various investment advisers, including the Adviser. The Company intends to establish three new series: Free Market U.S. Equity Fund, Free Market International Equity Fund and Free Market Fixed-Income Fund, each of which will be advised by the Adviser (each such series, a ‘‘Fund of Funds’’).1 2. Applicants request relief to permit a Fund of Funds to acquire shares of registered open-end management investment companies or UITs that are not part of the same group of investment companies as defined in Section 12(d)(1)(G)(ii) of the Act as the Fund of Funds (‘‘Underlying Funds’’) 2 and the Underlying Funds to sell such shares to the Fund of Funds. Applicants also apply for an order pursuant to section 6(c) and section 17(b) of the Act exempting Applicants from section 17(a) of the Act to the extent necessary to permit purchases and redemptions by a Fund of Funds of shares of the Underlying Funds and to permit the Underlying Funds to sell or redeem their shares in transactions with the 1 Applicants also request relief with respect to any future series of the Company for which the Adviser serves as investment adviser (included in the term ‘‘Fund of Funds.’’). 2 The Underlying Funds may include UITs (‘‘Underlying Trusts’’) and open-end management investment companies (‘‘Underlying Management Companies’’) that have received exemptive relief to sell their shares on a national securities exchange at negotiated prices (‘‘ETFs’’). Shares of an ETF also may be purchased from the ETF in large aggregations by delivering a basket of specified securities to the ETF, and large aggregations of shares may be redeemed from an ETF in exchange for a basket of specified securities (‘‘In-kind ETF Purchases and Redemptions’’). PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 11919 Funds of Funds.3 Applicants state that each Fund of Funds will provide an efficient and simple method of allowing investors, with minimal investments, to create a comprehensive asset allocation program. 3. The Adviser, a privately-held Ohio corporation, is registered under the Investment Advisers Act of 1940. The Adviser serves, and will serve, as investment adviser to the Funds of Funds. Applicants’ Legal Analysis A. Section 12(d)(1) 1. Section 12(d)(1)(A) of the Act prohibits a registered investment company from acquiring shares of an investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company. Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter and any broker or dealer from selling the shares of the investment company to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company’s voting stock, or if the sale will cause more than 10% of the acquired company’s voting stock to be owned by investment companies generally. 2. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Applicants seek an exemption under section 12(d)(1)(J) to permit the Funds of Funds to acquire shares of Underlying Funds and to permit the Underlying Funds, their principal underwriters and any broker or dealer to sell shares of the Underlying Funds to the Funds of Funds beyond the limits set forth in sections 12(d)(1)(A) and (B) of the Act. 3. Applicants state that the proposed arrangement will not give rise to the policy concerns underlying sections 12(d)(1)(A) and (B), which include concerns about undue influence by a fund of funds over underlying funds, 3 All Funds of Funds that currently intend to rely on the requested order are named as applicants. Any other investment company that relies on the order in the future will comply with the terms and conditions of the order. E:\FR\FM\14MRN1.SGM 14MRN1 cprice-sewell on PROD1PC66 with NOTICES 11920 Federal Register / Vol. 72, No. 49 / Wednesday, March 14, 2007 / Notices excessive layering of fees, and overly complex fund structures. Accordingly, applicants believe that the requested exemption is consistent with the public interest and the protection of investors. 4. Applicants state that the proposed arrangement will not result in undue influence by a Fund of Funds or its affiliated persons over an Underlying Fund. To limit the control that a Fund of Funds may have over an Underlying Fund, applicants propose a condition prohibiting: (a) The Adviser and any person controlling, controlled by or under common control with the Adviser, and any investment company and any issuer that would be an investment company but for section 3(c)(1) or section 3(c)(7) of the Act that is advised by the Adviser or any person controlling, controlled by or under common control with the Adviser (collectively, the ‘‘Group’’), and (b) any investment adviser to a Fund of Funds that meets the definition of section 2(a)(20)(B) of the Act (‘‘Sub-Adviser’’), any person controlling, controlled by or under common control with the SubAdviser, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised by the Sub-Adviser or any person controlling, controlled by or under common control with the Sub-Adviser (collectively, the ‘‘Sub-Adviser Group’’) from controlling an Underlying Fund within the meaning of section 2(a)(9) of the Act. 5. Applicants also propose conditions to preclude a Fund of Funds and its affiliated entities from taking advantage of an Underlying Fund. Under condition 2 no Fund of Funds or its Adviser, SubAdviser, promoter, principal underwriter or any person controlling, controlled by or under common control with any of these entities (each, a ‘‘Fund of Funds Affiliate’’) will cause any existing or potential investment by the Fund of Funds in shares of an Underlying Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Underlying Fund or its investment adviser(s), sponsor, promoter, principal underwriter and any person controlling, controlled by or under common control with any of these entities (each, an ‘‘Underlying Fund Affiliate’’). Condition 5 precludes a Fund of Funds and any Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Underlying Management Company or sponsor to an Underlying Trust) from causing an Underlying Fund to purchase a security in an offering of VerDate Aug<31>2005 15:03 Mar 13, 2007 Jkt 211001 securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an officer, director, member of an advisory board, Adviser, Sub-Adviser, or employee of the Fund of Funds, or a person of which any such officer, director, member of an advisory board, Adviser, Sub-Adviser, or employee is an affiliated person (each, an ‘‘Underwriting Affiliate,’’ except any person whose relationship to the Underlying 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. As an additional assurance that an Underlying Management Company understands the implications of an investment by a Fund of Funds under the requested order, prior to a Fund of Funds’ investment in an Underlying Management Company in excess of the limit in section 12(d)(1)(A)(i), condition 8 requires that the Fund of Funds and the Underlying Management Company execute an agreement stating, without limitation, that their boards of directors or trustees and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order (‘‘Participation Agreement’’). Applicants note that an Underlying Fund (other than an ETF whose shares are purchased by a Fund of Funds in the secondary market) will retain the right to reject an investment by a Fund of Funds.4 7. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. With respect to investment advisory fees, applicants state that, before approving any investment advisory contract under section 15 of the Act, the board of directors or trustees (‘‘Board’’) of the Company, including a majority of the directors or trustees who are not ‘‘interested persons,’’ as defined in section 2(a)(19) of the Act (‘‘Disinterested Directors’’), will find that the investment advisory fees charged under such contract are based on services provided that are in addition to, rather than duplicative of, services provided under the advisory contract(s) of any Underlying Fund in which the Fund of Funds may invest. 4 An Underlying Fund, including an ETF, would retain its right to reject any initial investment by a Fund of Funds in excess of the limit in section 12(d)(1)(A)(i) of the Act by declining to execute the Participation Agreement with the Fund of Funds. PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 8. Applicants state that the proposed arrangement will not create an overly complex fund structure. Applicants note that an Underlying Fund will be prohibited from acquiring securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A), except to the extent that such Underlying Fund (a) receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) securities of one or more affiliated investment companies for short-term cash management purposes; or (ii) engage in interfund borrowing or lending transactions. Applicants also represent that a Fund of Funds’ prospectus and sales literature will contain concise, ‘‘plain English’’ disclosure designed to inform investors of the unique characteristics of the proposed Fund of Funds structure, including, but not limited to, its expense structure and the additional expenses of investing in Underlying Funds. Each Fund of Funds also will comply with the disclosure requirements adopted in Investment Company Act Release No. 27399 (June 20, 2006). B. Section 17(a) 5. Section 17(a) of the Act generally prohibits sales or purchases of securities between a registered investment company and any affiliated person of the company. Section 2(a)(3) of the Act defines an ‘‘affiliated person’’ of another person to include (a) Any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the other person; and (c) any person directly or indirectly controlling, controlled by, or under common control with the other person. 6. Applicants state that the Funds of Funds and the Underlying Funds might be deemed to be affiliated persons of one another if a Fund of Funds acquires 5% or more of an Underlying Fund’s outstanding voting securities. In light of these possible affiliations, section 17(a) could prevent an Underlying Fund from selling shares to and redeeming shares from a Fund of Funds.5 5 Applicants note that a Fund of Funds generally would purchase and sell shares of an Underlying E:\FR\FM\14MRN1.SGM 14MRN1 Federal Register / Vol. 72, No. 49 / Wednesday, March 14, 2007 / Notices 7. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are 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. 8. Applicants submit that the proposed transactions satisfy the standards for relief under sections 17(b) and 6(c) of the Act.6 Applicants state that the terms of the transactions are fair and reasonable and do not involve overreaching. Applicants note that the terms upon which an Underlying Fund will sell its shares to or purchase its shares from a Fund of Funds will be based on the net asset value of the Underlying Fund. Applicants state that the proposed arrangement will be consistent with the policies of each Fund of Funds and Underlying Fund, and with the general purposes of the Act. cprice-sewell on PROD1PC66 with NOTICES Applicants’ Conditions Applicants agree that any order granting the requested relief will be subject to the following conditions: 1. The members of the Group will not control (individually or in the aggregate) an Underlying Fund within the meaning of section 2(a)(9) of the Act. The members of the Sub-Adviser Group will not control (individually or in the aggregate) an Underlying Fund within the meaning of section 2(a)(9) of the Act. Fund that operates as an ETF through secondary market transactions at market prices rather than through principal transactions with the Underlying Fund at net asset value. Applicants would not rely on the requested relief from section 17(a) for such secondary market transactions. To the extent a Fund of Funds engages in In-Kind ETF Purchases and Redemptions, Applicants request relief from Section 17(a) for these transactions. 6 Applicants acknowledge that receipt of any compensation by (a) an affiliated person of a Fund of Funds, or an affiliated person of such person, for the purchase by the Fund of Funds of shares of an Underlying Fund or (b) an affiliated person of an Underlying Fund, or an affiliated person of such person, for the sale by the Underlying Fund of its shares to a Fund of Funds is subject to section 17(e) of the Act. The Participation Agreement also will include this acknowledgement. VerDate Aug<31>2005 15:03 Mar 13, 2007 Jkt 211001 If, as a result of a decrease in the outstanding voting securities of an Underlying Fund, the Group or the SubAdviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Underlying Fund, it will vote its shares of the Underlying Fund in the same proportion as the vote of all other holders of the Underlying Fund’s shares. This condition shall not apply to the Sub-Adviser Group with respect to an Underlying Fund for which the SubAdviser or a person controlling, controlled by, or under common control with the Sub-Adviser acts as the investment adviser within the meaning of section 2(a)(20)(A) of the Act (in the case of an Underlying Management Company) or as the sponsor (in the case of an Underlying Trust). 2. No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in shares of an Underlying Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Underlying Fund or an Underlying Fund Affiliate. 3. The Board of the Company, including a majority of the Disinterested Directors, will adopt procedures reasonably designed to assure that the Adviser and any Sub-Adviser to the Fund of Funds are conducting the investment program of the Fund of Funds without taking into account any consideration received by the Fund of Funds or a Fund of Funds Affiliate from an Underlying Fund or an Underlying Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Fund of Funds in the securities of an Underlying Management Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, the Board of the Underlying Management Company, including a majority of the Disinterested Directors, will determine that any consideration paid by the Underlying Management Company to the Fund of Funds or a Fund of Funds Affiliate in connection with any services or transactions: (a) Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Underlying Management Company; (b) is within the range of consideration that the Underlying Management Company would be required to pay to another unaffiliated entity in connection with the same services or transactions; and (c) does not involve overreaching on the part of any person concerned. This condition does not apply with respect to any services or transactions between an Underlying Management Company and its investment adviser(s), or any person PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 11921 controlling, controlled by, or under common control with such investment adviser(s). 5. No Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Underlying Management Company or sponsor to an Underlying Trust) will cause an Underlying Fund to purchase a security in any Affiliated Underwriting. 6. The Board of an Underlying Management Company, including a majority of the Disinterested Directors, will adopt procedures reasonably designed to monitor any purchases of securities by the Underlying Management Company in Affiliated Underwritings, once an investment by a Fund of Funds in the securities of the Underlying Management Company 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 Fund of Funds in shares of the Underlying Management Company. The Board will consider, among other things: (a) Whether the purchases were consistent with the investment objectives and policies of the Underlying Management Company; (b) how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and (c) whether the amount of securities purchased by the Underlying Management Company 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, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interests of shareholders. 7. Each Underlying Management Company shall 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 shall maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase from an Affiliated Underwriting occurred, the first two E:\FR\FM\14MRN1.SGM 14MRN1 cprice-sewell on PROD1PC66 with NOTICES 11922 Federal Register / Vol. 72, No. 49 / Wednesday, March 14, 2007 / Notices years in an easily accessible place, a written record of each purchase of securities in Affiliated Underwritings once an investment by a Fund of Funds in the securities of an Underlying Management Company 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 determinations of the Board of the Underlying Management Company were made. 8. Prior to an investment in shares of an Underlying Management Company in excess of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the Underlying Management Company will execute a Participation Agreement stating, without limitation, that their Boards and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. At the time of its investment in shares of an Underlying Management Company in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the Underlying Management Company of the investment. At such time, the Fund of Funds also will transmit to the Underlying Management Company a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Underlying Management Company of any changes to the list as soon as reasonably practicable after a change occurs. The Underlying Management Company and the Fund of Funds will maintain and preserve a copy of the order, the Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 9. Prior to approving any investment advisory agreement under section 15 of the Act with respect to a Fund of Funds, the Board of the Company, including a majority of the Disinterested Directors, will find that the advisory fees charged under such agreement are based on services provided that are in addition to, rather than duplicative of, the services provided under the investment advisory agreement(s) of any Underlying Fund in which the Fund of Funds may invest. The finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the Company. 10. The Adviser will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any VerDate Aug<31>2005 15:03 Mar 13, 2007 Jkt 211001 compensation (including fees received pursuant to a plan adopted by an Underlying Management Company under rule 12b–1 under the Act) received from an Underlying Fund by the Adviser or an affiliated person of the Adviser, other than any advisory fees paid to the Adviser or its affiliated person by an Underlying Management Company, in connection with the investment by the Fund of Funds in the Underlying Fund. Any Sub-Adviser will waive fees otherwise payable to the SubAdviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received from an Underlying Fund by the SubAdviser, or an affiliated person of the Sub-Adviser, other than any advisory fees paid to the Sub-Adviser or its affiliated person by an Underlying Management Company, in connection with the investment by the Fund of Funds in the Underlying Fund made at the direction of the Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit of the waiver will be passed through to the Fund of Funds. 11. Any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in NASD Conduct Rule 2830. 12. No Underlying Fund will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent that such Underlying Fund (i) receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading Section 12(d)(1) of the 1940 Act); or (ii) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to (a) acquire securities of one or more affiliated investment companies for short-term cash management purposes, or (b) engage in interfund borrowing and lending transactions. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E7–4633 Filed 3–13–07; 8:45 am] Frm 00100 Fmt 4703 [Release No. 34–55419; File No. SR–BSE– 2007–10] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Fees and Charges March 7, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 1, 2007, the Boston Stock Exchange, Inc. (‘‘BSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the BSE. The BSE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the BSE under Section 19(b)(3)(A)(ii) of the Act,3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The BSE proposes to amend the Minimum Activity Charge (‘‘MAC’’) contained in the Fee Schedule for the Boston Options Exchange (‘‘BOX’’). The Exchange proposes to add an alternative calculation of the minimum activity charge called ‘‘MiniMAC.’’ The text of the proposed rule change is available at the BSE, the Commission’s Public Reference Room, and http:// www.bostonstock.com/legal/filings/ 2007-10.pdf. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the BSE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The BSE has prepared summaries, set forth in Sections A, B, 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 2 17 BILLING CODE 8010–01–P PO 00000 SECURITIES AND EXCHANGE COMMISSION Sfmt 4703 E:\FR\FM\14MRN1.SGM 14MRN1

Agencies

[Federal Register Volume 72, Number 49 (Wednesday, March 14, 2007)]
[Notices]
[Pages 11919-11922]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-4633]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27749; 812-13295]


The RBB Fund, Inc. and Abundance Technologies, Inc.; Notice of 
Application

March 8, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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

Applicants: The RBB Fund, Inc. (the ``Company'') and Abundance 
Technologies, Inc. (the ``Adviser'').

Filing Dates: The application was filed on May 23, 2006 and amended on 
March 6, 2007. Applicants have agreed to file an amendment during the 
notice period, the substance of which is reflected in this notice.

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. April 2, 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, The RBB Fund, Inc., 
400 Bellevue Parkway, Wilmington, DE 19809 and Abundance Technologies, 
Inc., 3700 Park 42 Drive, Suite 105A, Cincinnati, OH 42141.

FOR FURTHER INFORMATION, CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811, or Janet M. Grossnickle, Branch Chief, at (202) 551-
6821 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington DC 20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. The Company is a Maryland corporation and an open-end management 
investment company registered under the Act that is comprised of 
eighteen separate series advised by various investment advisers, 
including the Adviser. The Company intends to establish three new 
series: Free Market U.S. Equity Fund, Free Market International Equity 
Fund and Free Market Fixed-Income Fund, each of which will be advised 
by the Adviser (each such series, a ``Fund of Funds'').\1\
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    \1\ Applicants also request relief with respect to any future 
series of the Company for which the Adviser serves as investment 
adviser (included in the term ``Fund of Funds.'').
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    2. Applicants request relief to permit a Fund of Funds to acquire 
shares of registered open-end management investment companies or UITs 
that are not part of the same group of investment companies as defined 
in Section 12(d)(1)(G)(ii) of the Act as the Fund of Funds 
(``Underlying Funds'') \2\ and the Underlying Funds to sell such shares 
to the Fund of Funds. Applicants also apply for an order pursuant to 
section 6(c) and section 17(b) of the Act exempting Applicants from 
section 17(a) of the Act to the extent necessary to permit purchases 
and redemptions by a Fund of Funds of shares of the Underlying Funds 
and to permit the Underlying Funds to sell or redeem their shares in 
transactions with the Funds of Funds.\3\ Applicants state that each 
Fund of Funds will provide an efficient and simple method of allowing 
investors, with minimal investments, to create a comprehensive asset 
allocation program.
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    \2\ The Underlying Funds may include UITs (``Underlying 
Trusts'') and open-end management investment companies (``Underlying 
Management Companies'') that have received exemptive relief to sell 
their shares on a national securities exchange at negotiated prices 
(``ETFs''). Shares of an ETF also may be purchased from the ETF in 
large aggregations by delivering a basket of specified securities to 
the ETF, and large aggregations of shares may be redeemed from an 
ETF in exchange for a basket of specified securities (``In-kind ETF 
Purchases and Redemptions'').
    \3\ All Funds of Funds that currently intend to rely on the 
requested order are named as applicants. Any other investment 
company that relies on the order in the future will comply with the 
terms and conditions of the order.
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    3. The Adviser, a privately-held Ohio corporation, is registered 
under the Investment Advisers Act of 1940. The Adviser serves, and will 
serve, as investment adviser to the Funds of Funds.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of an investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter and 
any broker or dealer from selling the shares of the investment company 
to another investment company if the sale will cause the acquiring 
company to own more than 3% of the acquired company's voting stock, or 
if the sale will cause more than 10% of the acquired company's voting 
stock to be owned by investment companies generally.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction, or any class or classes of 
persons, securities or transactions, from any provision of section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants seek an exemption under section 
12(d)(1)(J) to permit the Funds of Funds to acquire shares of 
Underlying Funds and to permit the Underlying Funds, their principal 
underwriters and any broker or dealer to sell shares of the Underlying 
Funds to the Funds of Funds beyond the limits set forth in sections 
12(d)(1)(A) and (B) of the Act.
    3. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A) and (B), 
which include concerns about undue influence by a fund of funds over 
underlying funds,

[[Page 11920]]

excessive layering of fees, and overly complex fund structures. 
Accordingly, applicants believe that the requested exemption is 
consistent with the public interest and the protection of investors.
    4. Applicants state that the proposed arrangement will not result 
in undue influence by a Fund of Funds or its affiliated persons over an 
Underlying Fund. To limit the control that a Fund of Funds may have 
over an Underlying Fund, applicants propose a condition prohibiting: 
(a) The Adviser and any person controlling, controlled by or under 
common control with the Adviser, and any investment company and any 
issuer that would be an investment company but for section 3(c)(1) or 
section 3(c)(7) of the Act that is advised by the Adviser or any person 
controlling, controlled by or under common control with the Adviser 
(collectively, the ``Group''), and (b) any investment adviser to a Fund 
of Funds that meets the definition of section 2(a)(20)(B) of the Act 
(``Sub-Adviser''), any person controlling, controlled by or under 
common control with the Sub-Adviser, and any investment company or 
issuer that would be an investment company but for section 3(c)(1) or 
3(c)(7) of the Act (or portion of such investment company or issuer) 
advised by the Sub-Adviser or any person controlling, controlled by or 
under common control with the Sub-Adviser (collectively, the ``Sub-
Adviser Group'') from controlling an Underlying Fund within the meaning 
of section 2(a)(9) of the Act.
    5. Applicants also propose conditions to preclude a Fund of Funds 
and its affiliated entities from taking advantage of an Underlying 
Fund. Under condition 2 no Fund of Funds or its Adviser, Sub-Adviser, 
promoter, principal underwriter or any person controlling, controlled 
by or under common control with any of these entities (each, a ``Fund 
of Funds Affiliate'') will cause any existing or potential investment 
by the Fund of Funds in shares of an Underlying Fund to influence the 
terms of any services or transactions between the Fund of Funds or a 
Fund of Funds Affiliate and the Underlying Fund or its investment 
adviser(s), sponsor, promoter, principal underwriter and any person 
controlling, controlled by or under common control with any of these 
entities (each, an ``Underlying Fund Affiliate''). Condition 5 
precludes a Fund of Funds and any Fund of Funds Affiliate (except to 
the extent it is acting in its capacity as an investment adviser to an 
Underlying Management Company or sponsor to an Underlying Trust) from 
causing an Underlying Fund to purchase a security in an offering of 
securities during the existence of any underwriting or selling 
syndicate of which a principal underwriter is an officer, director, 
member of an advisory board, Adviser, Sub-Adviser, or employee of the 
Fund of Funds, or a person of which any such officer, director, member 
of an advisory board, Adviser, Sub-Adviser, or employee is an 
affiliated person (each, an ``Underwriting Affiliate,'' except any 
person whose relationship to the Underlying 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. As an additional assurance that an Underlying Management Company 
understands the implications of an investment by a Fund of Funds under 
the requested order, prior to a Fund of Funds' investment in an 
Underlying Management Company in excess of the limit in section 
12(d)(1)(A)(i), condition 8 requires that the Fund of Funds and the 
Underlying Management Company execute an agreement stating, without 
limitation, that their boards of directors or trustees and their 
investment advisers understand the terms and conditions of the order 
and agree to fulfill their responsibilities under the order 
(``Participation Agreement''). Applicants note that an Underlying Fund 
(other than an ETF whose shares are purchased by a Fund of Funds in the 
secondary market) will retain the right to reject an investment by a 
Fund of Funds.\4\
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    \4\ An Underlying Fund, including an ETF, would retain its right 
to reject any initial investment by a Fund of Funds in excess of the 
limit in section 12(d)(1)(A)(i) of the Act by declining to execute 
the Participation Agreement with the Fund of Funds.
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    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. With respect to investment advisory 
fees, applicants state that, before approving any investment advisory 
contract under section 15 of the Act, the board of directors or 
trustees (``Board'') of the Company, including a majority of the 
directors or trustees who are not ``interested persons,'' as defined in 
section 2(a)(19) of the Act (``Disinterested Directors''), will find 
that the investment advisory fees charged under such contract are based 
on services provided that are in addition to, rather than duplicative 
of, services provided under the advisory contract(s) of any Underlying 
Fund in which the Fund of Funds may invest.
    8. Applicants state that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that an Underlying 
Fund will be prohibited from acquiring securities of any investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in 
excess of the limits contained in section 12(d)(1)(A), except to the 
extent that such Underlying Fund (a) receives securities of another 
investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed 
to have acquired) securities of one or more affiliated investment 
companies for short-term cash management purposes; or (ii) engage in 
interfund borrowing or lending transactions. Applicants also represent 
that a Fund of Funds' prospectus and sales literature will contain 
concise, ``plain English'' disclosure designed to inform investors of 
the unique characteristics of the proposed Fund of Funds structure, 
including, but not limited to, its expense structure and the additional 
expenses of investing in Underlying Funds. Each Fund of Funds also will 
comply with the disclosure requirements adopted in Investment Company 
Act Release No. 27399 (June 20, 2006).

B. Section 17(a)

    5. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include (a) Any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5% or more of the outstanding voting securities of the other 
person; (b) any person 5% or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling, controlled by, or under common control with the 
other person.
    6. Applicants state that the Funds of Funds and the Underlying 
Funds might be deemed to be affiliated persons of one another if a Fund 
of Funds acquires 5% or more of an Underlying Fund's outstanding voting 
securities. In light of these possible affiliations, section 17(a) 
could prevent an Underlying Fund from selling shares to and redeeming 
shares from a Fund of Funds.\5\
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    \5\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Underlying Fund that operates as an 
ETF through secondary market transactions at market prices rather 
than through principal transactions with the Underlying Fund at net 
asset value. Applicants would not rely on the requested relief from 
section 17(a) for such secondary market transactions. To the extent 
a Fund of Funds engages in In-Kind ETF Purchases and Redemptions, 
Applicants request relief from Section 17(a) for these transactions.

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[[Page 11921]]

    7. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (a) the terms of the proposed transaction are 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.
    8. Applicants submit that the proposed transactions satisfy the 
standards for relief under sections 17(b) and 6(c) of the Act.\6\ 
Applicants state that the terms of the transactions are fair and 
reasonable and do not involve overreaching. Applicants note that the 
terms upon which an Underlying Fund will sell its shares to or purchase 
its shares from a Fund of Funds will be based on the net asset value of 
the Underlying Fund. Applicants state that the proposed arrangement 
will be consistent with the policies of each Fund of Funds and 
Underlying Fund, and with the general purposes of the Act.
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    \6\ Applicants acknowledge that receipt of any compensation by 
(a) an affiliated person of a Fund of Funds, or an affiliated person 
of such person, for the purchase by the Fund of Funds of shares of 
an Underlying Fund or (b) an affiliated person of an Underlying 
Fund, or an affiliated person of such person, for the sale by the 
Underlying Fund of its shares to a Fund of Funds is subject to 
section 17(e) of the Act. The Participation Agreement also will 
include this acknowledgement.
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Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The members of the Group will not control (individually or in 
the aggregate) an Underlying Fund within the meaning of section 2(a)(9) 
of the Act. The members of the Sub-Adviser Group will not control 
(individually or in the aggregate) an Underlying Fund within the 
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in 
the outstanding voting securities of an Underlying Fund, the Group or 
the Sub-Adviser Group, each in the aggregate, becomes a holder of more 
than 25% of the outstanding voting securities of the Underlying Fund, 
it will vote its shares of the Underlying Fund in the same proportion 
as the vote of all other holders of the Underlying Fund's shares. This 
condition shall not apply to the Sub-Adviser Group with respect to an 
Underlying Fund for which the Sub-Adviser or a person controlling, 
controlled by, or under common control with the Sub-Adviser acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the Act 
(in the case of an Underlying Management Company) or as the sponsor (in 
the case of an Underlying Trust).
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in shares of an 
Underlying Fund to influence the terms of any services or transactions 
between the Fund of Funds or a Fund of Funds Affiliate and the 
Underlying Fund or an Underlying Fund Affiliate.
    3. The Board of the Company, including a majority of the 
Disinterested Directors, will adopt procedures reasonably designed to 
assure that the Adviser and any Sub-Adviser to the Fund of Funds are 
conducting the investment program of the Fund of Funds without taking 
into account any consideration received by the Fund of Funds or a Fund 
of Funds Affiliate from an Underlying Fund or an Underlying Fund 
Affiliate in connection with any services or transactions.
    4. Once an investment by a Fund of Funds in the securities of an 
Underlying Management Company exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Underlying Management 
Company, including a majority of the Disinterested Directors, will 
determine that any consideration paid by the Underlying Management 
Company to the Fund of Funds or a Fund of Funds Affiliate in connection 
with any services or transactions: (a) Is fair and reasonable in 
relation to the nature and quality of the services and benefits 
received by the Underlying Management Company; (b) is within the range 
of consideration that the Underlying Management Company would be 
required to pay to another unaffiliated entity in connection with the 
same services or transactions; and (c) does not involve overreaching on 
the part of any person concerned. This condition does not apply with 
respect to any services or transactions between an Underlying 
Management Company and its investment adviser(s), or any person 
controlling, controlled by, or under common control with such 
investment adviser(s).
    5. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Underlying Management Company or sponsor to an Underlying Trust) will 
cause an Underlying Fund to purchase a security in any Affiliated 
Underwriting.
    6. The Board of an Underlying Management Company, including a 
majority of the Disinterested Directors, will adopt procedures 
reasonably designed to monitor any purchases of securities by the 
Underlying Management Company in Affiliated Underwritings, once an 
investment by a Fund of Funds in the securities of the Underlying 
Management Company 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 Fund of Funds in shares of the 
Underlying Management Company. The Board will consider, among other 
things: (a) Whether the purchases were consistent with the investment 
objectives and policies of the Underlying Management Company; (b) how 
the performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(c) whether the amount of securities purchased by the Underlying 
Management Company 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, if appropriate, the institution of procedures 
designed to assure that purchases of securities in Affiliated 
Underwritings are in the best interests of shareholders.
    7. Each Underlying Management Company shall 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 shall maintain and preserve for a period of not 
less than six years from the end of the fiscal year in which any 
purchase from an Affiliated Underwriting occurred, the first two

[[Page 11922]]

years in an easily accessible place, a written record of each purchase 
of securities in Affiliated Underwritings once an investment by a Fund 
of Funds in the securities of an Underlying Management Company 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 determinations of the Board of the Underlying 
Management Company were made.
    8. Prior to an investment in shares of an Underlying Management 
Company in excess of the limit in section 12(d)(1)(A)(i) of the Act, 
the Fund of Funds and the Underlying Management Company will execute a 
Participation Agreement stating, without limitation, that their Boards 
and their investment advisers understand the terms and conditions of 
the order and agree to fulfill their responsibilities under the order. 
At the time of its investment in shares of an Underlying Management 
Company in excess of the limit in section 12(d)(1)(A)(i), a Fund of 
Funds will notify the Underlying Management Company of the investment. 
At such time, the Fund of Funds also will transmit to the Underlying 
Management Company a list of the names of each Fund of Funds Affiliate 
and Underwriting Affiliate. The Fund of Funds will notify the 
Underlying Management Company of any changes to the list as soon as 
reasonably practicable after a change occurs. The Underlying Management 
Company and the Fund of Funds will maintain and preserve a copy of the 
order, the Participation Agreement, and the list with any updated 
information for the duration of the investment and for a period of not 
less than six years thereafter, the first two years in an easily 
accessible place.
    9. Prior to approving any investment advisory agreement under 
section 15 of the Act with respect to a Fund of Funds, the Board of the 
Company, including a majority of the Disinterested Directors, will find 
that the advisory fees charged under such agreement are based on 
services provided that are in addition to, rather than duplicative of, 
the services provided under the investment advisory agreement(s) of any 
Underlying Fund in which the Fund of Funds may invest. The finding, and 
the basis upon which the finding was made, will be recorded fully in 
the minute books of the Company.
    10. The Adviser will waive fees otherwise payable to it by a Fund 
of Funds in an amount at least equal to any compensation (including 
fees received pursuant to a plan adopted by an Underlying Management 
Company under rule 12b-1 under the Act) received from an Underlying 
Fund by the Adviser or an affiliated person of the Adviser, other than 
any advisory fees paid to the Adviser or its affiliated person by an 
Underlying Management Company, in connection with the investment by the 
Fund of Funds in the Underlying Fund. Any Sub-Adviser will waive fees 
otherwise payable to the Sub-Adviser, directly or indirectly, by the 
Fund of Funds in an amount at least equal to any compensation received 
from an Underlying Fund by the Sub-Adviser, or an affiliated person of 
the Sub-Adviser, other than any advisory fees paid to the Sub-Adviser 
or its affiliated person by an Underlying Management Company, in 
connection with the investment by the Fund of Funds in the Underlying 
Fund made at the direction of the Sub-Adviser. In the event that the 
Sub-Adviser waives fees, the benefit of the waiver will be passed 
through to the Fund of Funds.
    11. Any sales charges and/or service fees charged with respect to 
shares of a Fund of Funds will not exceed the limits applicable to 
funds of funds set forth in NASD Conduct Rule 2830.
    12. No Underlying Fund will acquire securities of any other 
investment company or company relying on section 3(c)(1) or 3(c)(7) of 
the Act in excess of the limits contained in section 12(d)(1)(A) of the 
Act, except to the extent that such Underlying Fund (i) receives 
securities of another investment company as a dividend or as a result 
of a plan of reorganization of a company (other than a plan devised for 
the purpose of evading Section 12(d)(1) of the 1940 Act); or (ii) 
acquires (or is deemed to have acquired) securities of another 
investment company pursuant to exemptive relief from the Commission 
permitting such Underlying Fund to (a) acquire securities of one or 
more affiliated investment companies for short-term cash management 
purposes, or (b) engage in interfund borrowing and lending 
transactions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-4633 Filed 3-13-07; 8:45 am]
BILLING CODE 8010-01-P