Van Eck Worldwide Insurance Trust, et al.; Notice of Application, 27340-27344 [E7-9270]
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27340
Federal Register / Vol. 72, No. 93 / Tuesday, May 15, 2007 / Notices
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4281 apply to valuation dates occurring
in June 2007.
FOR FURTHER INFORMATION CONTACT:
Catherine B. Klion, Manager, Regulatory
and Policy Division, Legislative and
Regulatory Department, Pension Benefit
Guaranty Corporation, 1200 K Street,
NW., Washington, DC 20005, 202–326–
4024. (TTY/TDD users may call the
Federal relay service toll-free at 1–800–
877–8339 and ask to be connected to
202–326–4024.)
SUPPLEMENTARY INFORMATION:
Variable-Rate Premiums
Section 4006(a)(3)(E)(iii)(II) of the
Employee Retirement Income Security
Act of 1974 (ERISA) and § 4006.4(b)(1)
of the PBGC’s regulation on Premium
Rates (29 CFR part 4006) prescribe use
of an assumed interest rate (the
‘‘required interest rate’’) in determining
a single-employer plan’s variable-rate
premium. Pursuant to the Pension
Protection Act of 2006, for premium
payment years beginning in 2006 or
2007, the required interest rate is the
‘‘applicable percentage’’ of the annual
rate of interest determined by the
Secretary of the Treasury on amounts
invested conservatively in long-term
investment grade corporate bonds for
the month preceding the beginning of
the plan year for which premiums are
being paid (the ‘‘premium payment
year’’).
On February 2, 2007 (at 72 FR 4955),
the Internal Revenue Service (IRS)
published final regulations containing
updated mortality tables for determining
current liability under section 412(l)(7)
of the Code and section 302(d)(7) of
ERISA for plan years beginning on or
after January 1, 2007. As a result, in
accordance with section
4006(a)(3)(E)(iii)(II) of ERISA, the
‘‘applicable percentage’’ to be used in
determining the required interest rate
for plan years beginning in 2007 is 100
percent.
The required interest rate to be used
in determining variable-rate premiums
for premium payment years beginning
in May 2007 is 5.98 percent (i.e., 100
percent of the 5.98 percent composite
corporate bond rate for April 2007 as
determined by the Treasury).
The following table lists the required
interest rates to be used in determining
variable-rate premiums for premium
payment years beginning between June
2006 and May 2007.
For premium payment years
beginning in:
The required
interest rate is:
September 2006 ...................
October 2006 ........................
November 2006 ....................
December 2006 ....................
January 2007 ........................
February 2007 ......................
March 2007 ...........................
April 2007 .............................
May 2007 ..............................
5.19
5.06
5.05
4.90
5.75
5.89
5.85
5.84
5.98
Multiemployer Plan Valuations
Following Mass Withdrawal
The PBGC’s regulation on Duties of
Plan Sponsor Following Mass
Withdrawal (29 CFR part 4281)
prescribes the use of interest
assumptions under the PBGC’s
regulation on Allocation of Assets in
Single-Employer Plans (29 CFR part
4044). The interest assumptions
applicable to valuation dates in June
2007 under part 4044 are contained in
an amendment to part 4044 published
elsewhere in today’s Federal Register.
Tables showing the assumptions
applicable to prior periods are codified
in appendix B to 29 CFR part 4044.
Issued in Washington, DC, on this 10th day
of May 2007.
Vincent K. Snowbarger,
Interim Director, Pension Benefit Guaranty
Corporation.
[FR Doc. E7–9342 Filed 5–14–07; 8:45 am]
BILLING CODE 7709–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
27820; 812–13304]
Van Eck Worldwide Insurance Trust, et
al.; Notice of Application
May 9, 2007.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 6(c) and 17(b) of
the Act for an exemption from section
17(a) of the Investment Company Act of
1940 (‘‘Act’’) and under section
12(d)(1)(J) of the Act for an exemption
from sections 12(d)(1)(A) and (B).
AGENCY:
Summary of the Application: The
order would permit certain registered
open-end management investment
companies to acquire shares of other
registered open-end management
investment companies and unit
For premium payment years
The required
beginning in:
interest rate is: investment trusts (‘‘UITs’’) that are
within and outside the same group of
June 2006 .............................
5.35 investment companies.
Applicants: Van Eck Worldwide
July 2006 ..............................
5.36
August 2006 .........................
5.36 Insurance Trust (‘‘WWIT’’), Van Eck
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Funds (‘‘Van Eck Funds’’) and Van Eck
Funds, Inc. (‘‘Van Eck Funds II’’)
(together, the ‘‘Investment Companies’’)
and Van Eck Associates Corporation
(‘‘Adviser’’).1
DATES: Filing Dates: The application was
filed on June 16, 2006, and amended on
May 3, 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 May
31, 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, Commission, 100
F Street, NE., Washington, DC 20549–
9303. Applicants: Joseph McBrien, Esq.,
Van Eck Associates Corporation, 99 Park
Avenue, New York, New York 10016.
FOR FURTHER INFORMATION CONTACT:
Emerson S. Davis, Sr., Senior Counsel,
at (202) 551–6868, or Nadya B. Roytblat,
Assistant Director, 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 Desk,
100 F Street, NE., Washington, DC
20549–0102 (telephone (202) 551–5850).
SUPPLEMENTARY INFORMATION:
Applicants’ Representations
1. WWIT is a Massachusetts business
trust and is registered under the Act as
an open-end management investment
company. WWIT currently consists of
five Funds, each with its own
investment objective and policies.
Shares of each WWIT Fund are
currently offered and sold through
1 All entities that currently intend to rely on the
requested order are named as applicants and any
other entity that relies on the order in the future
will comply with the terms and conditions of the
application. Applicants request that the relief also
apply to any other existing or future registered
open-end management investment company that is
part of the same group of investment companies, as
defined in section 12(d)(1)(G) of the Act, as the
Investment Companies (included in the term
‘‘Investment Companies’’). Each series of an
Investment Company is referred to as ‘‘Fund’’ and
collectively as ‘‘Funds.’’
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registered separate accounts of
insurance companies that are not
affiliates of the Adviser (‘‘Registered
Separate Accounts’’) and unregistered
separate accounts that are not affiliates
of the Adviser (‘‘Unregistered Separate
Accounts,’’ and together with the
Registered Separate Accounts, the
‘‘Separate Accounts’’).
2. Van Eck Funds is a Massachusetts
business trust and is registered under
the Act as an open-end management
investment company. Van Eck Funds
currently consists of three Funds, each
with its own investment objective and
policies. The shares of these Funds are
offered and sold to retail and
institutional investors and are not
offered through Separate Accounts. Van
Eck Funds II is a Maryland corporation
and is registered under the Act as an
open-end management investment
company. It currently consists of one
Fund, the shares of which are offered
and sold to retail and institutional
investors and are not offered through
Separate Accounts. The Adviser is a
Delaware corporation and is registered
as an investment adviser under the
Investment Advisers Act of 1940. Each
investment adviser to a Fund of Funds
that meets the definition of section
2(a)(20)(A) of the Act is referred to as a
‘‘Fund of Funds Adviser.’’ Any
investment adviser to a Fund of Funds
that meets the definition of section
2(a)(20)(B) of the Act is referred to as a
‘‘Fund of Funds Sub-Adviser.’’
3. Applicants request relief to permit
certain Funds (each such Fund, a ‘‘Fund
of Funds’’) to invest in: (a) other Funds
(‘‘Affiliated Underlying Funds’’), and (b)
registered open-end management
investment companies and 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
Investment Companies (‘‘Unaffiliated
Underlying Funds,’’ and together with
the Affiliated Underlying Funds, the
‘‘Underlying Funds’’). The Unaffiliated
Underlying Funds may include UITs
(‘‘Unaffiliated Trusts’’) and open-end
management investment companies
registered under the Act (‘‘Unaffiliated
Funds’’). Certain of the Unaffiliated
Underlying Funds may have received
exemptive relief to sell their shares on
a national securities exchange at
negotiated prices (‘‘ETFs’’). Each Fund
of Funds may also make direct
investments in other securities.
Applicants state that each Fund of
Funds will enable investors to create a
comprehensive asset allocation program
with just one investment and provide a
simple, convenient and cost-efficient
program for investors who are able to
identify their investment goals and risk
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tolerances but may not be comfortable
deciding how to invest their assets to
achieve those goals.
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 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,
excessive layering of fees, and overly
complex fund structures. Accordingly,
applicants believe that the requested
exemption is consistent with the public
interest and the protection of investors.
4. Applicants state that the proposed
arrangement will not result in undue
influence by a Fund of Funds or its
affiliated persons over the Underlying
Funds. To limit the control that a Fund
of Funds, and its affiliates, may have
over an Unaffiliated Underlying Fund,
applicants submit that: (a)(i) Each Fund
of Funds Adviser, (ii) any person
controlling, controlled by or under
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27341
common control with the Fund of
Funds Adviser, (iii) any investment
company and any issuer that would be
an investment company but for section
3(c)(1) or section 3(c)(7) of the Act
advised or sponsored by the Fund of
Funds Adviser or any person
controlling, controlled by or under
common control with the Fund of
Funds Adviser (collectively, the
‘‘Group’’), and (b)(i) any Fund of Funds
Subadviser, (ii) any person controlling,
controlled by or under common control
with the Fund of Funds Sub-Adviser,
and (iii) 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 Fund of Funds SubAdviser or any person controlling,
controlled by or under common control
with the Fund of Funds Sub-Adviser
(collectively, the ‘‘Sub-Adviser Group’’)
will not control (individually or in the
aggregate) an Unaffiliated Underlying
Fund within the meaning of section
2(a)(9) of the Act.
5. Applicants also propose to prevent
a Fund of Funds and its affiliated
entities from taking advantage of an
Unaffiliated Underlying Fund with
respect to transactions between the
entities by precluding a Fund of Funds
and its Fund of Fund Adviser, Fund of
Funds Sub-Adviser, promoter, principal
underwriter and any person controlling,
controlled by or under common control
with any of these entities (each, a ‘‘Fund
of Funds Affiliate’’) from causing any
existing or potential investment by the
Fund of Funds in an Unaffiliated
Underlying Fund to influence the terms
of any services or transactions between
the Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated
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
‘‘Unaffiliated Fund Affiliate’’).
Condition 5 precludes a Fund of Funds
and Fund of Funds Affiliate (except to
the extent it is acting in its capacity as
an investment adviser to an Unaffiliated
Fund or sponsor to an Unaffiliated
Trust) from causing an Unaffiliated
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
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employee is an affiliated person (each,
an ‘‘Underwriting Affiliate,’’ except any
person whose relationship to the
Unaffiliated 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
Unaffiliated Fund understands the
implications of an investment by a Fund
of Funds under the requested order,
prior to a Fund of Funds’ investment in
an Unaffiliated Fund in excess of the
limit in section 12(d)(1)(A)(i), condition
8 requires that the Fund of Funds and
the Unaffiliated Fund 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 Unaffiliated 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.2
7. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. With respect
to investment advisory fees, applicants
state that, prior to approval of any
investment advisory contract under
section 15 of the Act, the board of
directors or trustees of each Fund of
Funds (‘‘Board’’), including a majority
of the directors or trustees who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act
(‘‘Disinterested Trustees’’), will find that
the investment advisory fees charged
under the contract are based on services
provided that are in addition to, rather
than duplicative of, services provided
pursuant to any Affiliated Underlying
Fund’s or
Unaffiliated Fund’s advisory
contract(s). Applicants further state that
each Fund of Funds Adviser will waive
fees otherwise payable to it by the Fund
of Funds in an amount at least equal to
any compensation (including fees
received pursuant to any plan adopted
by an Unaffiliated Fund under rule 12b–
1 under the Act) received by the Fund
of Funds Adviser or an affiliated person
of the Fund of Funds Adviser from an
Unaffiliated Underlying Fund, other
2 An Unaffiliated Fund, including an ETF, would
retain its right to reject any initial investment by a
Fund of Funds in excess of the limit in section
12(d)(1)(A)(i) of the Act by declining to execute the
Participation Agreement.
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than any advisory fees paid to the Fund
of Funds Adviser or its affiliated person
by an Unaffiliated Fund, in connection
with the investment by the Fund of
Funds in the Unaffiliated Underlying
Fund.
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 another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to: (i)
Acquire securities of one or more
affiliated investment companies for
short-term cash management purposes,
or (ii) engage in interfund borrowing
and lending transactions. Applicants
also represent that a Fund of Funds’
prospectus and sales literature will
contain concise, ‘‘plain English’’
disclosure designed to inform investors
of the unique characteristics of the
proposed Fund of Funds structure,
including, but not limited to, its
expense structure and the additional
expenses of investing in Underlying
Funds. Each Fund of Fund will comply
with the disclosure requirements
concerning the cost of investing in
Underlying Funds as set forth in
Investment Company Act Release No.
27399.
B. Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and any affiliated person of
the company. Section 2(a)(3) of the Act
defines an ‘‘affiliated person’’ of another
person to include (a) any person directly
or indirectly owning, controlling, or
holding with power to vote, 5% or more
of the outstanding voting securities of
the other person; (b) any person 5% or
more of whose outstanding voting
securities are directly or indirectly
owned, controlled, or held with power
to vote by the other person; and (c) any
person directly or indirectly controlling,
controlled by, or under common control
with the other person.
2. Applicants state that the Funds of
Funds and the Affiliated Underlying
Funds might be deemed to be under
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common control of the Adviser and
therefore affiliated persons of one
another. Applicants also state that the
Funds of Funds and the Underlying
Funds might be deemed to be affiliated
persons of one another if a Fund of
Funds acquires 5% or more of an
Underlying Fund’s outstanding voting
securities. In light of these possible
affiliations, section 17(a) could prevent
an Underlying Fund from selling shares
to and redeeming shares from a Fund of
Funds.
3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
Commission to exempt any person,
security or transactions or any class or
classes of persons, securities or
transactions, from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
4. Applicants submit that the
proposed structure satisfies the
standards for relief under sections 17(b)
and 6(c) of the Act.3 Applicants state
that the terms upon which an
Underlying Fund will sell its shares to
or purchase its shares from a Fund of
Funds will be based on the net asset
value of each Underlying Fund.4
Applicants state that the proposed
investment will be consistent with the
policies of each Fund of Funds and
3 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.
4 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Underlying
Fund that operates as an ETF through secondary
market transactions at market prices rather than
through principal transactions with the Underlying
Fund at net asset value. Applicants would not rely
on the requested relief from section 17(a) for such
secondary market transactions. A Fund of Funds
that owns more than 5% of the outstanding voting
securities of an ETF could seek to transact in
‘‘Creation Units’’ directly with the ETF pursuant to
the requested Section 17(a) relief.
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Underlying Fund, and with the general
purposes of the Act.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief shall be
subject to the following conditions:
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated 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 Unaffiliated 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 Unaffiliated 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
Unaffiliated Underlying Fund, then the
Group or the Sub-Advisor Group (except
for any member of the Group or the SubAdviser Group that is a Separate
Account) will vote its shares of the
Unaffiliated Underlying Fund in the
same proportion as the vote of all other
holders of the Unaffiliated Underlying
Fund’s shares. This condition will not
apply to the Sub-Adviser Group with
respect to an Unaffiliated Underlying
Fund for which the Sub-Adviser or a
person controlling, controlled by, or
under common control with the SubAdviser acts as the investment adviser
within the meaning section 2(a)(20)(A)
of the Act (in the case of an Unaffiliated
Fund) or as the sponsor (in the case of
an Unaffiliated Trust).
A Registered Separate Account will
seek voting instructions from its
contract holders and will vote its shares
of an Unaffiliated Underlying Fund in
accordance with the instructions
received and will vote those shares for
which no instructions were received in
the same proportion as the shares for
which instructions were received. An
Unregistered Separate Account will
either: (i) vote its shares of the
Unaffiliated Underlying Fund in the
same proportion as the vote of all other
holders of the Unaffiliated Underlying
Fund’s shares; or (ii) seek voting
instructions from its contract holders
and vote its shares in accordance with
the instructions received and vote those
shares for which no instructions were
received in the same proportion as the
shares for which instructions were
received.
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in shares of an Unaffiliated
Underlying Fund to influence the terms
of any services or transactions between
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the Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated
Underlying Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Disinterested
Trustees, will adopt procedures
reasonably designed to assure that the
Adviser and any Fund of Fund SubAdviser are conducting the investment
program of the Fund of Funds without
taking into account any consideration
received by the Fund of Funds or a
Fund of Funds Affiliate from an
Unaffiliated Underlying Fund or an
Unaffiliated Fund Affiliate in
connection with any services or
transactions.
4. Once an investment by a Fund of
Funds in the securities of an
Unaffiliated Fund exceeds the limit of
section 12(d)(1)(A)(i) of the Act, the
Board of the Unaffiliated Fund,
including a majority of the Disinterested
Trustees, will determine that any
consideration paid by the Unaffiliated
Fund to a Fund of Funds or a Fund of
Funds Affiliate in connection with any
services or transactions: (a) Is fair and
reasonable in relation to the nature and
quality of the services and benefits
received by the Unaffiliated Fund; (b) is
within the range of consideration that
the Unaffiliated Fund would be required
to pay to another unaffiliated entity in
connection with the same services or
transactions; and (c) does not involve
overreaching on the part of any person
concerned. This condition does not
apply with respect to any services or
transactions between an Unaffiliated
Fund and its investment adviser(s), or
any person controlling, controlled by, or
under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of
Funds Affiliate (except to the extent it
is acting in its capacity as an investment
adviser to an Unaffiliated Fund or
sponsor to an Unaffiliated Trust) will
cause an Unaffiliated Underlying Fund
to purchase a security in an Affiliated
Underwriting.
6. The Board of an Unaffiliated Fund,
including a majority of the Disinterested
Trustees, will adopt procedures
reasonably designed to monitor any
purchases of securities by the
Unaffiliated Fund in an Affiliated
Underwriting, once an investment by a
Fund of Funds in the securities of the
Unaffiliated Fund exceeds the limit of
section 12(d)(1)(A)(i) of the Act,
including any purchases made directly
from an Underwriting Affiliate. The
Board of the Unaffiliated Fund will
review these purchases periodically, but
no less frequently than annually, to
determine whether the purchases were
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27343
influenced by the investment by the
Fund of Funds in shares of the
Unaffiliated Fund. The Board of the
Unaffiliated Fund will consider, among
other things: (a) Whether the purchases
were consistent with the investment
objectives and policies of the
Unaffiliated Fund; (b) how the
performance of securities purchased in
an Affiliated Underwriting compares to
the performance of comparable
securities purchased during a
comparable period of time in
underwritings other than Affiliated
Underwritings or to a benchmark such
as a comparable market index; and (c)
whether the amount of securities
purchased by the Unaffiliated Fund in
Affiliated Underwritings and the
amount purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of the Unaffiliated Fund will take
any appropriate actions based on its
review, including, if appropriate, the
institution of procedures designed to
assure that purchases of securities in
Affiliated Underwritings are in the best
interests of shareholders.
7. Each Unaffiliated Fund will
maintain and preserve permanently in
an easily accessible place a written copy
of the procedures described in the
preceding condition, and any
modifications to such procedures, and
will maintain and preserve for a period
of not less than six years from the end
of the fiscal year in which any purchase
from an Affiliated Underwriting
occurred, the first two years in an easily
accessible place, a written record of
each purchase of securities in an
Affiliated Underwriting once an
investment by a Fund of Funds in the
securities of an Unaffiliated 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 determinations of the Board of the
Unaffiliated Fund were made.
8. Prior to its investment in shares of
an Unaffiliated Fund in excess of the
limit in section 12(d)(1)(A)(i) of the Act,
the Fund of Funds and the Unaffiliated
Fund will execute a Participation
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. At the
time of its investment in shares of an
Unaffiliated Fund in excess of the limit
in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Unaffiliated Fund
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cprice-sewell on PROD1PC62 with NOTICES
27344
Federal Register / Vol. 72, No. 93 / Tuesday, May 15, 2007 / Notices
of the investment. At such time, the
Fund of Funds will also transmit to the
Unaffiliated Fund a list of the names of
each Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated Fund
of any changes to the list as soon as
reasonably practicable after a change
occurs. The Unaffiliated Fund and the
Fund of Funds will maintain and
preserve a copy of the order, the
Participation Agreement, and the list
with any updated information for the
duration of the investment and for a
period of not less than six years
thereafter, the first two years in an
easily accessible place.
9. Prior to approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Disinterested Trustees,
will find that the advisory fees charged
under the advisory contract are based on
services provided that are in addition to,
rather than duplicative of, the services
provided under the advisory contract(s)
of any Affiliated Underlying Fund or
Unaffiliated Funds in which the Fund of
Funds may invest. This finding, and the
basis upon which the finding was made,
will be recorded fully in the minute
books of the appropriate Fund of Funds.
10. The Fund of Funds Advisers will
waive fees otherwise payable to it by a
Fund of Funds in an amount at least
equal to any compensation (including
fees received pursuant to any plan
adopted by an Unaffiliated Fund under
rule 12b–1 under the Act) received by
the Fund of Funds Adviser, or an
affiliated person of the Fund of Funds
Adviser, other than any advisory fees
paid to the Fund of Funds Adviser or its
affiliated person by the Unaffiliated
Fund, in connection with the
investment by the Fund of Funds in the
Unaffiliated Underlying Fund. Any
Fund of Funds Sub-Adviser will waive
fees otherwise payable to the Fund of
Funds Sub-Adviser, directly or
indirectly, by the Fund of Funds in an
amount at least equal to any
compensation received from an
Unaffiliated Underlying Fund by the
Fund of Funds Sub-Adviser, or an
affiliated person of the Fund of Funds
Sub-Adviser, other than any advisory
fees paid to the Fund of Funds SubAdviser or its affiliated person by an
Unaffiliated Fund, in connection with
the investment by the Fund of Funds in
the Unaffiliated Fund made at the
direction of the Fund of Funds SubAdviser. In the event that the Fund of
Funds Sub-Adviser waives fees, the
benefit of the waiver will be passed
through to the Fund of Funds.
11. With respect to Registered
Separate Accounts that invest in a Fund
VerDate Aug<31>2005
13:50 May 14, 2007
Jkt 211001
of Funds, no sales load will be charged
at the Fund of Funds level or at the
Underlying Fund level. Other sales
charges and service fees, as defined in
rule 2830 of the Conduct Rules of the
National Association of Securities
Dealers (‘‘NASD’’), if any, will only be
charged at the Fund of Funds level or
at the Underlying Fund level, not both.
With respect to other investments in a
Fund of Funds, any sales charges and/
or service fees charged with respect to
shares of a Fund of Funds will not
exceed the limits applicable to funds set
forth in rule 2830 of the NASD Conduct
Rules.
12. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A) of the Act, except to the
extent that such Underlying Fund: (a)
Receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(1)
of the Act); or (b) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to: (i)
Acquire securities of one or more
affiliated investment companies for
short-term cash management purposes,
or (ii) engage in interfund borrowing
and lending transactions.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–9270 Filed 5–14–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55721; File No. SR–
NASDAQ–2007–047]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Establish an
Opening and Closing Cross for
Securities Listed on the NYSE, Amex,
and Regional Exchanges
May 7, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 1,
2007, The NASDAQ Stock Market LLC
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00064
Fmt 4703
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II
and III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act3 and Rule 19b–4(f)(6) thereunder,
which renders it effective upon filing
with the Commission.4 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
Nasdaq proposes a rule change to
provide an open and close that matches
orders where possible and provides a
useful, tradable, robust opening and
closing price for all securities listed on
the New York Stock Exchange
(‘‘NYSE’’), the American Stock
Exchange (‘‘Amex’’), and regional
exchanges. The text of the proposed rule
change is available at the Exchange, the
Commission’s Public Reference Room,
and https://www.nasdaq.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq 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. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq’s Opening and Closing
Crosses are price discovery facilities
that cross orders at a single price.
Nasdaq proposes to extend the success
of Nasdaq’s Opening and Closing Cross
matching functionality, which has been
widely accepted in the industry, for all
of the securities listed on the NYSE,
Amex, and regional exchanges (the
‘‘non-Nasdaq securities’’) with
adjustments, as necessary, to comply
with National Market System Plans and
SEC rules specific to those securities,
3 15
4 17
Sfmt 4703
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
E:\FR\FM\15MYN1.SGM
15MYN1
]]>Agencies
[Federal Register Volume 72, Number 93 (Tuesday, May 15, 2007)]
[Notices]
[Pages 27340-27344]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-9270]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27820; 812-13304]
Van Eck Worldwide Insurance Trust, et al.; Notice of Application
May 9, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Investment
Company Act of 1940 (``Act'') and under section 12(d)(1)(J) of the Act
for an exemption from sections 12(d)(1)(A) and (B).
-----------------------------------------------------------------------
Summary of the Application: The order would permit certain
registered open-end management investment companies to acquire shares
of other registered open-end management investment companies and unit
investment trusts (``UITs'') that are within and outside the same group
of investment companies.
Applicants: Van Eck Worldwide Insurance Trust (``WWIT''), Van Eck
Funds (``Van Eck Funds'') and Van Eck Funds, Inc. (``Van Eck Funds
II'') (together, the ``Investment Companies'') and Van Eck Associates
Corporation (``Adviser'').\1\
---------------------------------------------------------------------------
\1\ All entities that currently intend to rely on the requested
order are named as applicants and any other entity that relies on
the order in the future will comply with the terms and conditions of
the application. Applicants request that the relief also apply to
any other existing or future registered open-end management
investment company that is part of the same group of investment
companies, as defined in section 12(d)(1)(G) of the Act, as the
Investment Companies (included in the term ``Investment
Companies''). Each series of an Investment Company is referred to as
``Fund'' and collectively as ``Funds.''
DATES: Filing Dates: The application was filed on June 16, 2006, and
amended on May 3, 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 May 31, 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, Commission, 100 F Street, NE., Washington, DC
20549-9303. Applicants: Joseph McBrien, Esq., Van Eck Associates
Corporation, 99 Park Avenue, New York, New York 10016.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel,
at (202) 551-6868, or Nadya B. Roytblat, Assistant Director, at (202)
551-6821 (Office of Investment Company Regulation, Division of
Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC
20549-0102 (telephone (202) 551-5850).
Applicants' Representations
1. WWIT is a Massachusetts business trust and is registered under
the Act as an open-end management investment company. WWIT currently
consists of five Funds, each with its own investment objective and
policies. Shares of each WWIT Fund are currently offered and sold
through
[[Page 27341]]
registered separate accounts of insurance companies that are not
affiliates of the Adviser (``Registered Separate Accounts'') and
unregistered separate accounts that are not affiliates of the Adviser
(``Unregistered Separate Accounts,'' and together with the Registered
Separate Accounts, the ``Separate Accounts'').
2. Van Eck Funds is a Massachusetts business trust and is
registered under the Act as an open-end management investment company.
Van Eck Funds currently consists of three Funds, each with its own
investment objective and policies. The shares of these Funds are
offered and sold to retail and institutional investors and are not
offered through Separate Accounts. Van Eck Funds II is a Maryland
corporation and is registered under the Act as an open-end management
investment company. It currently consists of one Fund, the shares of
which are offered and sold to retail and institutional investors and
are not offered through Separate Accounts. The Adviser is a Delaware
corporation and is registered as an investment adviser under the
Investment Advisers Act of 1940. Each investment adviser to a Fund of
Funds that meets the definition of section 2(a)(20)(A) of the Act is
referred to as a ``Fund of Funds Adviser.'' Any investment adviser to a
Fund of Funds that meets the definition of section 2(a)(20)(B) of the
Act is referred to as a ``Fund of Funds Sub-Adviser.''
3. Applicants request relief to permit certain Funds (each such
Fund, a ``Fund of Funds'') to invest in: (a) other Funds (``Affiliated
Underlying Funds''), and (b) registered open-end management investment
companies and 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
Investment Companies (``Unaffiliated Underlying Funds,'' and together
with the Affiliated Underlying Funds, the ``Underlying Funds''). The
Unaffiliated Underlying Funds may include UITs (``Unaffiliated
Trusts'') and open-end management investment companies registered under
the Act (``Unaffiliated Funds''). Certain of the Unaffiliated
Underlying Funds may have received exemptive relief to sell their
shares on a national securities exchange at negotiated prices
(``ETFs''). Each Fund of Funds may also make direct investments in
other securities. Applicants state that each Fund of Funds will enable
investors to create a comprehensive asset allocation program with just
one investment and provide a simple, convenient and cost-efficient
program for investors who are able to identify their investment goals
and risk tolerances but may not be comfortable deciding how to invest
their assets to achieve those goals.
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 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, excessive layering of fees, and overly complex fund
structures. Accordingly, applicants believe that the requested
exemption is consistent with the public interest and the protection of
investors.
4. Applicants state that the proposed arrangement will not result
in undue influence by a Fund of Funds or its affiliated persons over
the Underlying Funds. To limit the control that a Fund of Funds, and
its affiliates, may have over an Unaffiliated Underlying Fund,
applicants submit that: (a)(i) Each Fund of Funds Adviser, (ii) any
person controlling, controlled by or under common control with the Fund
of Funds Adviser, (iii) any investment company and any issuer that
would be an investment company but for section 3(c)(1) or section
3(c)(7) of the Act advised or sponsored by the Fund of Funds Adviser or
any person controlling, controlled by or under common control with the
Fund of Funds Adviser (collectively, the ``Group''), and (b)(i) any
Fund of Funds Subadviser, (ii) any person controlling, controlled by or
under common control with the Fund of Funds Sub-Adviser, and (iii) 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 Fund of Funds
Sub-Adviser or any person controlling, controlled by or under common
control with the Fund of Funds Sub-Adviser (collectively, the ``Sub-
Adviser Group'') will not control (individually or in the aggregate) an
Unaffiliated Underlying Fund within the meaning of section 2(a)(9) of
the Act.
5. Applicants also propose to prevent a Fund of Funds and its
affiliated entities from taking advantage of an Unaffiliated Underlying
Fund with respect to transactions between the entities by precluding a
Fund of Funds and its Fund of Fund Adviser, Fund of Funds Sub-Adviser,
promoter, principal underwriter and any person controlling, controlled
by or under common control with any of these entities (each, a ``Fund
of Funds Affiliate'') from causing any existing or potential investment
by the Fund of Funds in an Unaffiliated Underlying Fund to influence
the terms of any services or transactions between the Fund of Funds or
a Fund of Funds Affiliate and the Unaffiliated 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 ``Unaffiliated Fund Affiliate''). Condition 5
precludes a Fund of Funds and Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Fund or sponsor to an Unaffiliated Trust) from causing an
Unaffiliated 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
[[Page 27342]]
employee is an affiliated person (each, an ``Underwriting Affiliate,''
except any person whose relationship to the Unaffiliated 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 Unaffiliated Fund understands
the implications of an investment by a Fund of Funds under the
requested order, prior to a Fund of Funds' investment in an
Unaffiliated Fund in excess of the limit in section 12(d)(1)(A)(i),
condition 8 requires that the Fund of Funds and the Unaffiliated Fund
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 Unaffiliated 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.\2\
---------------------------------------------------------------------------
\2\ An Unaffiliated Fund, including an ETF, would retain its
right to reject any initial investment by a Fund of Funds in excess
of the limit in section 12(d)(1)(A)(i) of the Act by declining to
execute the Participation Agreement.
---------------------------------------------------------------------------
7. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. With respect to investment advisory
fees, applicants state that, prior to approval of any investment
advisory contract under section 15 of the Act, the board of directors
or trustees of each Fund of Funds (``Board''), including a majority of
the directors or trustees who are not ``interested persons,'' as
defined in section 2(a)(19) of the Act (``Disinterested Trustees''),
will find that the investment advisory fees charged under the contract
are based on services provided that are in addition to, rather than
duplicative of, services provided pursuant to any Affiliated Underlying
Fund's or
Unaffiliated Fund's advisory contract(s). Applicants further state
that each Fund of Funds Adviser will waive fees otherwise payable to it
by the Fund of Funds in an amount at least equal to any compensation
(including fees received pursuant to any plan adopted by an
Unaffiliated Fund under rule 12b-1 under the Act) received by the Fund
of Funds Adviser or an affiliated person of the Fund of Funds Adviser
from an Unaffiliated Underlying Fund, other than any advisory fees paid
to the Fund of Funds Adviser or its affiliated person by an
Unaffiliated Fund, in connection with the investment by the Fund of
Funds in the Unaffiliated Underlying Fund.
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 another investment company pursuant to
exemptive relief from the Commission permitting such Underlying Fund
to: (i) Acquire securities of one or more affiliated investment
companies for short-term cash management purposes, or (ii) engage in
interfund borrowing and lending transactions. Applicants also represent
that a Fund of Funds' prospectus and sales literature will contain
concise, ``plain English'' disclosure designed to inform investors of
the unique characteristics of the proposed Fund of Funds structure,
including, but not limited to, its expense structure and the additional
expenses of investing in Underlying Funds. Each Fund of Fund will
comply with the disclosure requirements concerning the cost of
investing in Underlying Funds as set forth in Investment Company Act
Release No. 27399.
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and any
affiliated person of the company. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include (a) any person
directly or indirectly owning, controlling, or holding with power to
vote, 5% or more of the outstanding voting securities of the other
person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote by the other person; and (c) any person directly or
indirectly controlling, controlled by, or under common control with the
other person.
2. Applicants state that the Funds of Funds and the Affiliated
Underlying Funds might be deemed to be under common control of the
Adviser and therefore affiliated persons of one another. Applicants
also state that the Funds of Funds and the Underlying Funds might be
deemed to be affiliated persons of one another if a Fund of Funds
acquires 5% or more of an Underlying Fund's outstanding voting
securities. In light of these possible affiliations, section 17(a)
could prevent an Underlying Fund from selling shares to and redeeming
shares from a Fund of Funds.
3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act. Section
6(c) of the Act permits the Commission to exempt any person, security
or transactions or any class or classes of persons, securities or
transactions, from any provision of the Act if such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
4. Applicants submit that the proposed structure satisfies the
standards for relief under sections 17(b) and 6(c) of the Act.\3\
Applicants state that the terms upon which an Underlying Fund will sell
its shares to or purchase its shares from a Fund of Funds will be based
on the net asset value of each Underlying Fund.\4\ Applicants state
that the proposed investment will be consistent with the policies of
each Fund of Funds and
[[Page 27343]]
Underlying Fund, and with the general purposes of the Act.
---------------------------------------------------------------------------
\3\ 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.
\4\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Underlying Fund that operates as an
ETF through secondary market transactions at market prices rather
than through principal transactions with the Underlying Fund at net
asset value. Applicants would not rely on the requested relief from
section 17(a) for such secondary market transactions. A Fund of
Funds that owns more than 5% of the outstanding voting securities of
an ETF could seek to transact in ``Creation Units'' directly with
the ETF pursuant to the requested Section 17(a) relief.
---------------------------------------------------------------------------
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated 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 Unaffiliated
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
Unaffiliated 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 Unaffiliated Underlying Fund, then the Group
or the Sub-Advisor Group (except for any member of the Group or the
Sub-Adviser Group that is a Separate Account) will vote its shares of
the Unaffiliated Underlying Fund in the same proportion as the vote of
all other holders of the Unaffiliated Underlying Fund's shares. This
condition will not apply to the Sub-Adviser Group with respect to an
Unaffiliated 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 section
2(a)(20)(A) of the Act (in the case of an Unaffiliated Fund) or as the
sponsor (in the case of an Unaffiliated Trust).
A Registered Separate Account will seek voting instructions from
its contract holders and will vote its shares of an Unaffiliated
Underlying Fund in accordance with the instructions received and will
vote those shares for which no instructions were received in the same
proportion as the shares for which instructions were received. An
Unregistered Separate Account will either: (i) vote its shares of the
Unaffiliated Underlying Fund in the same proportion as the vote of all
other holders of the Unaffiliated Underlying Fund's shares; or (ii)
seek voting instructions from its contract holders and vote its shares
in accordance with the instructions received and vote those shares for
which no instructions were received in the same proportion as the
shares for which instructions were received.
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in shares of an
Unaffiliated Underlying Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Underlying Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Disinterested Trustees, will adopt procedures reasonably designed to
assure that the Adviser and any Fund of Fund Sub-Adviser are conducting
the investment program of the Fund of Funds without taking into account
any consideration received by the Fund of Funds or a Fund of Funds
Affiliate from an Unaffiliated Underlying Fund or an Unaffiliated Fund
Affiliate in connection with any services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Fund exceeds the limit of section 12(d)(1)(A)(i) of the
Act, the Board of the Unaffiliated Fund, including a majority of the
Disinterested Trustees, will determine that any consideration paid by
the Unaffiliated Fund to a Fund of Funds or a Fund of Funds Affiliate
in connection with any services or transactions: (a) Is fair and
reasonable in relation to the nature and quality of the services and
benefits received by the Unaffiliated Fund; (b) is within the range of
consideration that the Unaffiliated Fund would be required to pay to
another unaffiliated entity in connection with the same services or
transactions; and (c) does not involve overreaching on the part of any
person concerned. This condition does not apply with respect to any
services or transactions between an Unaffiliated Fund and its
investment adviser(s), or any person controlling, controlled by, or
under common control with such investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Fund or sponsor to an Unaffiliated Trust) will cause an
Unaffiliated Underlying Fund to purchase a security in an Affiliated
Underwriting.
6. The Board of an Unaffiliated Fund, including a majority of the
Disinterested Trustees, will adopt procedures reasonably designed to
monitor any purchases of securities by the Unaffiliated Fund in an
Affiliated Underwriting, once an investment by a Fund of Funds in the
securities of the Unaffiliated Fund exceeds the limit of section
12(d)(1)(A)(i) of the Act, including any purchases made directly from
an Underwriting Affiliate. The Board of the Unaffiliated Fund will
review these purchases periodically, but no less frequently than
annually, to determine whether the purchases were influenced by the
investment by the Fund of Funds in shares of the Unaffiliated Fund. The
Board of the Unaffiliated Fund will consider, among other things: (a)
Whether the purchases were consistent with the investment objectives
and policies of the Unaffiliated Fund; (b) how the performance of
securities purchased in an Affiliated Underwriting compares to the
performance of comparable securities purchased during a comparable
period of time in underwritings other than Affiliated Underwritings or
to a benchmark such as a comparable market index; and (c) whether the
amount of securities purchased by the Unaffiliated Fund in Affiliated
Underwritings and the amount purchased directly from an Underwriting
Affiliate have changed significantly from prior years. The Board of the
Unaffiliated Fund will take any appropriate actions based on its
review, including, if appropriate, the institution of procedures
designed to assure that purchases of securities in Affiliated
Underwritings are in the best interests of shareholders.
7. Each Unaffiliated Fund will maintain and preserve permanently in
an easily accessible place a written copy of the procedures described
in the preceding condition, and any modifications to such procedures,
and will maintain and preserve for a period of not less than six years
from the end of the fiscal year in which any purchase from an
Affiliated Underwriting occurred, the first two years in an easily
accessible place, a written record of each purchase of securities in an
Affiliated Underwriting once an investment by a Fund of Funds in the
securities of an Unaffiliated 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
determinations of the Board of the Unaffiliated Fund were made.
8. Prior to its investment in shares of an Unaffiliated Fund in
excess of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Fund will execute a Participation 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.
At the time of its investment in shares of an Unaffiliated Fund in
excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will
notify the Unaffiliated Fund
[[Page 27344]]
of the investment. At such time, the Fund of Funds will also transmit
to the Unaffiliated Fund a list of the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The Fund of Funds will notify the
Unaffiliated Fund of any changes to the list as soon as reasonably
practicable after a change occurs. The Unaffiliated Fund and the Fund
of Funds will maintain and preserve a copy of the order, the
Participation Agreement, and the list with any updated information for
the duration of the investment and for a period of not less than six
years thereafter, the first two years in an easily accessible place.
9. Prior to approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Disinterested Trustees, will find that the advisory fees charged under
the advisory contract are based on services provided that are in
addition to, rather than duplicative of, the services provided under
the advisory contract(s) of any Affiliated Underlying Fund or
Unaffiliated Funds in which the Fund of Funds may invest. This finding,
and the basis upon which the finding was made, will be recorded fully
in the minute books of the appropriate Fund of Funds.
10. The Fund of Funds Advisers will waive fees otherwise payable to
it by a Fund of Funds in an amount at least equal to any compensation
(including fees received pursuant to any plan adopted by an
Unaffiliated Fund under rule 12b-1 under the Act) received by the Fund
of Funds Adviser, or an affiliated person of the Fund of Funds Adviser,
other than any advisory fees paid to the Fund of Funds Adviser or its
affiliated person by the Unaffiliated Fund, in connection with the
investment by the Fund of Funds in the Unaffiliated Underlying Fund.
Any Fund of Funds Sub-Adviser will waive fees otherwise payable to the
Fund of Funds Sub-Adviser, directly or indirectly, by the Fund of Funds
in an amount at least equal to any compensation received from an
Unaffiliated Underlying Fund by the Fund of Funds Sub-Adviser, or an
affiliated person of the Fund of Funds Sub-Adviser, other than any
advisory fees paid to the Fund of Funds Sub-Adviser or its affiliated
person by an Unaffiliated Fund, in connection with the investment by
the Fund of Funds in the Unaffiliated Fund made at the direction of the
Fund of Funds Sub-Adviser. In the event that the Fund of Funds Sub-
Adviser waives fees, the benefit of the waiver will be passed through
to the Fund of Funds.
11. With respect to Registered Separate Accounts that invest in a
Fund of Funds, no sales load will be charged at the Fund of Funds level
or at the Underlying Fund level. Other sales charges and service fees,
as defined in rule 2830 of the Conduct Rules of the National
Association of Securities Dealers (``NASD''), if any, will only be
charged at the Fund of Funds level or at the Underlying Fund level, not
both. With respect to other investments in a Fund of Funds, any sales
charges and/or service fees charged with respect to shares of a Fund of
Funds will not exceed the limits applicable to funds set forth in rule
2830 of the NASD Conduct Rules.
12. No Underlying Fund will acquire securities of any other
investment company or company relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained in section 12(d)(1)(A) of the
Act, except to the extent that such Underlying Fund: (a) Receives
securities of another investment company as a dividend or as a result
of a plan of reorganization of a company (other than a plan devised for
the purpose of evading section 12(d)(1) of the Act); or (b) acquires
(or is deemed to have acquired) securities of another investment
company pursuant to exemptive relief from the Commission permitting
such Underlying Fund to: (i) Acquire securities of one or more
affiliated investment companies for short-term cash management
purposes, or (ii) engage in interfund borrowing and lending
transactions.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-9270 Filed 5-14-07; 8:45 am]
BILLING CODE 8010-01-P
