John Hancock Trust, et al.; Notice of Application, 31117-31121 [E7-10752]
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Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices
one, five and ten year periods (or life of
the Index Fund), (i) the cumulative total
return and the average annual total
return based on NAV and Bid/Ask Price,
and (ii) the cumulative total return of
the relevant Underlying Index.
6. Before an Index Fund may rely on
the order, the Commission will have
approved, pursuant to rule 19b–4 under
the Exchange Act, an Exchange rule
requiring Exchange members and
member organizations effecting
transactions in Fund Shares to deliver a
Product Description to purchasers of
Fund Shares.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–10753 Filed 6–4–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
27848; 812–13341]
John Hancock Trust, et al.; Notice of
Application
May 30, 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.
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AGENCY:
SUMMARY OF THE APPLICATION:
Applicants request an order that would
permit certain registered open-end
management investment companies to
acquire shares of other registered openend management investment companies
and unit investment trusts that are
within and outside the same group of
investment companies.
APPLICANTS: John Hancock Trust
(‘‘JHT’’), John Hancock Funds II (‘‘JHF
II’’), John Hancock Funds III (‘‘JHF III’’),
John Hancock Capital Series (‘‘JHCS,’’
and collectively, ‘‘Trusts’’), and John
Hancock Advisers, LLC (‘‘JHA’’) and
John Hancock Investment Management
Services, LLC (‘‘JHIMS,’’ each an
‘‘Adviser,’’ together the ‘‘Advisers’’).
FILING DATES: The application was filed
on November 7, 2006 and amended on
May 23, 2007.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
issued unless the Commission orders a
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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 June 25, 2007, and
should be accompanied by proof of
service on applicants in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090;
Applicants: c/o Mark P. Goshko,
Kirkpatrick & Lockhart Preston Gates
Ellis LLP, State Street Financial Center,
One Lincoln Street, Boston,
Massachusetts 02111–2950.
FOR FURTHER INFORMATION CONTACT:
Barbara T. Heussler, Senior Counsel, at
(202) 551–6990, or Nadya Roytblat,
Assistant Director, at (202) 551–6821
(Office of Investment Company
Regulation, Division of Investment
Management).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Desk,
100 F Street, NE., Washington, DC
20549–0102 (telephone (202) 551–5850).
Applicants’ Representations
1. The Trusts, organized as
Massachusetts business trusts, are
registered under the Act as open-end
management investment companies and
offer multiple series advised by the
Adviser (‘‘Portfolios’’).1 JHT currently
offers 110 Portfolios, JHF II currently
offers 96 Portfolios, JHF III currently
offers 13 Portfolios and JHCS currently
offers 8 Portfolios. Shares of JHT are
offered only to registered separate
accounts (‘‘Registered Separate
Accounts’’) of the John Hancock Life
Insurance Company (U.S.A.) (‘‘JHLICO
1Applicants request that the order also extend to
any future Portfolios of the Trusts, and any other
existing or future registered open-end management
investment companies and any series thereof that
are part of the same group of investment companies,
as defined in section 12(d)(1)(G)(ii) of the Act, as
the Trusts and are, or may in the future be, advised
by the Advisers or any other investment adviser
controlling, controlled by, or under common
control with the Advisers (‘‘Fund(s)’’). The Trusts
are the only registered investment companies that
currently intend to rely on the requested order. Any
other investment company that relies on the order
in the future will comply with the terms and
conditions of the application.
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(USA)’’), the John Hancock Life
Insurance Company of New York
(‘‘JHLICO New York), the John Hancock
Life Insurance Company, and the John
Hancock Variable Life Insurance
Company (collectively, ‘‘Insurance
Companies’’), as the underlying
investment vehicles for the variable life
insurance and variable annuity
contracts (‘‘Variable Contracts’’) issued
by the Insurance Companies. Shares of
JHF II are offered directly to the public
as well as to certain separate accounts
of JHLICO (USA) and JHLICO New York
that are not registered as investment
companies under the Act in reliance on
section 3(c)(11) (‘‘Unregistered Separate
Accounts’’ and together with the
Registered Separate Accounts, the
‘‘Separate Accounts’’). Shares of JHF III
and JHCS are offered directly to the
public.
2. The Advisers are each a Delaware
limited liability company which is
registered as an investment adviser
under the Investment Advisers Act of
1940. JHA is a wholly-owned subsidiary
of John Hancock Financial Services,
Inc., a subsidiary of Manulife Financial
Corporation and serves as investment
adviser for each of the JHCS Funds.
JHIMS is an indirect, wholly-owned
subsidiary of JHLICO USA and serves as
the investment adviser for each of the
JHT, JHF II and JHF III Funds.
3. Applicants request relief to permit:
(a) A Fund (each a ‘‘Fund of Funds’’) to
acquire shares of registered open-end
management investment companies that
are not part of the same group of
investment companies as the Fund of
Funds (the ‘‘Unaffiliated Investment
Companies’’) and unit investment trusts
(‘‘UITs’’) that are not part of the same
group of investment companies as the
Fund of Funds (‘‘Unaffiliated Trusts,’’
and together with Unaffiliated
Investment Companies, ‘‘Unaffiliated
Funds’’); (b) the Unaffiliated Funds to
sell their shares to the Funds of Funds;
(c) the Fund of Funds to acquire shares
of certain other Funds in the same group
of investment companies as the Fund of
Funds (the ‘‘Affiliated Funds,’’ and
together with the Unaffiliated Funds,
the ‘‘Underlying Funds’’) and (d) the
Affiliated Funds to sell their shares to
the Fund of Funds. Certain of the
Unaffiliated Funds may be registered
under the Act as either UITs or openend management investment companies
and have received exemptive relief to
permit their shares be listed and traded
on a national securities exchange at
negotiated prices (‘‘ETFs’’). Each Fund
of Funds also may invest in government
securities, domestic and foreign
common and preferred stock, incomebearing securities, certain types of
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futures contracts and options thereon,
and in other securities and investments
that are not issued by registered
investment companies and that are
consistent with its investment objective,
including money market instruments.
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Applicants’ Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act
prohibits a registered investment
company from acquiring shares of an
investment company if the securities
represent more than 3% of the total
outstanding voting stock of the acquired
company, more than 5% of the total
assets of the acquiring company, or,
together with the securities of any other
investment companies, more than 10%
of the total assets of the acquiring
company. Section 12(d)(1)(B) of the Act
prohibits a registered open-end
investment company, its principal
underwriter and any broker or dealer
from selling the shares of the investment
company to another investment
company if the sale will cause the
acquiring company to own more than
3% of the acquired company’s voting
stock, or if the sale will cause more than
10% of the acquired company’s voting
stock to be owned by investment
companies generally.
2. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Applicants seek an exemption under
section 12(d)(1)(J) of the Act from the
limitations of sections 12(d)(1)(A) and
(B) to the extent necessary to permit the
Funds of Funds to acquire shares of the
Underlying Funds in excess of the limits
set forth in section 12(d)(1)(A) of the Act
and to permit the Underlying Funds,
their principal underwriters and any
broker or dealer to sell their shares to
the Funds of Funds in excess of the
limits set forth in section 12(d)(1)(B) of
the Act.
3. Applicants state that the proposed
arrangement will not give rise to the
policy concerns underlying sections
12(d)(1)(A) and (B) which include
concerns about undue influence by a
fund of funds or its affiliated persons
over underlying funds, excessive
layering of fees, and overly complex
fund structures. Accordingly, applicants
believe that the requested exemptions
are consistent with the public interest
and the protection of investors.
4. Applicants state that the proposed
arrangement will not result in undue
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influence by a Fund of Funds or its
affiliated persons over the Underlying
Funds. The concern about undue
influence does not arise in connection
with a Fund of Funds’ investment in the
Affiliated Funds, since they are part of
the same group of investment
companies. To limit the control that a
Fund of Funds or its affiliated persons
may have over an Unaffiliated Fund,
applicants submit that: (a) The Advisers
and any person controlling, controlled
by or under common control with the
Advisers, 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 Advisers or any
person controlling, controlled by or
under common control with the
Advisers (collectively, the ‘‘Group’’),
and (b) any investment adviser within
the meaning of section 2(a)(20)(B) of the
Act to a Fund of Funds (‘‘Sub-Adviser’’)
and 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 SubAdviser (collectively, the ‘‘Sub-Adviser
Group’’) will not control (individually
or in the aggregate) an Unaffiliated Fund
within the meaning of section 2(a)(9) of
the Act.
5. Applicants further state that
condition 2 precludes a Fund of Funds
or the Adviser, any Sub-Adviser,
promoter or principal underwriter of a
Fund of Funds, as well as any person
controlling, controlled by or under
common control with any of those
entities (each, a ‘‘Fund of Funds
Affiliate’’) from taking advantage of an
Unaffiliated Fund, with respect to
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or its investment
adviser(s), sponsor, promoter, and
principal underwriter and any person
controlling, controlled by or under
common control with any of those
entities (each, an ‘‘Unaffiliated Fund
Affiliate’’). 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
Investment Company or sponsor to an
Unaffiliated Trust) will cause an
Unaffiliated Fund to purchase a security
in an offering of securities during the
existence of any underwriting or selling
syndicate of which a principal
underwriter is an officer, director,
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trustee, advisory board member,
investment adviser, Sub-Adviser, or
employee of the Fund of Funds, or a
person of which any such officer,
director, trustee, investment adviser,
Sub-Adviser, member of an advisory
board, or employee is an affiliated
person (each, an ‘‘Underwriting
Affiliate,’’ except any person whose
relationship to the Unaffiliated Fund is
covered by section 10(f) of the Act is not
an Underwriting 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. To further assure that an
Unaffiliated Investment Company
understands the implications of an
investment by a Fund of Funds under
the requested order, prior to a Fund of
Funds’ investment in the shares of an
Unaffiliated Investment Company in
excess of the limit in section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment
Company will execute an agreement
stating, without limitation, that their
boards of directors or trustees
(‘‘Boards’’) and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order (‘‘Participation Agreement’’).
Applicants note that an Unaffiliated
Fund (other than an ETF whose shares
are purchased by a Fund of Funds in the
secondary market) will retain its right at
all times to reject any investment by a
Fund of Funds.2
7. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. To assure that
the investment advisory or management
fees are not duplicative, applicants state
that, in connection with the approval of
any investment advisory or management
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the trustees who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act
(‘‘Independent Trustees’’), will find that
the management or advisory fees
charged under the advisory contract are
based on services provided that are in
addition to, rather than duplicative of,
services provided pursuant to any
Underlying Fund’s advisory contract(s).
Applicants further state that the
Advisers will waive fees otherwise
payable to them by a Fund of Funds in
an amount at least equal to any
2An Unaffiliated Fund, including an ETF, would
retain its right to reject any initial investment by a
Fund of Funds in excess of the limit in section
12(d)(1)(A)(i) of the Act by declining to execute the
Participation Agreement with the Fund of Funds.
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compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated Fund by
the Adviser, or an affiliated person of
the Adviser, other than any advisory
fees paid to the Adviser or an affiliated
person of the Adviser by the
Unaffiliated Fund, in connection with
the investment by the Fund of Funds in
the Unaffiliated Fund.
8. Applicants state that with respect
to Registered Separate Accounts that
invest in a Fund of Funds, no sales load
will be charged at the Fund of Funds
level or at the Underlying Fund level.
Other sales charges and service fees, as
defined in Rule 2830 of the Conduct
Rules of the NASD (‘‘NASD Conduct
Rule 2830’’), 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 a fund of
funds set forth in NASD Conduct Rule
2830.
9. Applicants state that the proposed
arrangement will not create an overly
complex fund structure because 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. Applicants
also represent that a Fund of Funds’
prospectus and sales literature will
contain clear, concise, ‘‘plain English’’
disclosure designed to inform investors
about the unique characteristics of the
proposed arrangement, including, but
not limited to, the expense structure and
the additional expenses of investing in
Underlying Funds.3
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 persons 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 Affiliated Funds might
be deemed to be under common control
of the Advisers and therefore affiliated
persons of one another. Applicants also
state that the Fund 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.
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 fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
Commission to exempt any person or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
8. Applicants believe that the
proposed transactions satisfy the
requirements for relief under sections
17(b) and 6(c) of the Act as the terms are
fair and reasonable and do not involve
overreaching.4 Applicants state that the
3 Each Fund of Funds also will comply with the
disclosure requirements concerning the aggregate
expenses of investing in Underlying Funds set forth
in Investment Company Act Release No. 27399
(June 20, 2006).
4 Applicants acknowledge that receipt of any
compensation by (a) An affiliated person of a Funds
of Funds, or an affiliated person of such person, for
the purchase by the Fund of Funds of shares of an
Underlying Fund or (b) an affiliated person of an
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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.5 Applicants also state
that the proposed transactions will be
consistent with the policies of each
Fund of Funds and Underlying Fund,
and with the general purposes of the
Act.
Applicants’ Conditions
Applicants agree that the order
granting the requested relief shall be
subject to the following conditions:
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act.
The members of the Sub-Adviser Group
will not control (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
If, as a result of a decrease in the
outstanding voting securities of an
Unaffiliated Fund, the Group or a SubAdviser Group, each in the aggregate,
becomes a holder of more than 25% of
the outstanding voting securities of the
Unaffiliated Fund, then the Group or the
Sub-Adviser Group (except for any
member of the Group or the SubAdviser Group that is a Separate
Account) will vote its shares of the
Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares. This condition will not apply to
a Sub-Adviser Group with respect to an
Unaffiliated Fund for which the SubAdviser or a person controlling,
controlled by, or under common control
with the Sub-Adviser acts as the
investment adviser within the meaning
of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment
Company) or as the sponsor (in the case
of an Unaffiliated Trust).
A Registered Separate Account will
seek voting instructions from its
Variable Contract holders and will vote
its shares of an Unaffiliated Fund in
accordance with the instructions
received and will vote those shares for
which no instructions were received in
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.
5 Applicants note a Fund of Funds generally
would purchase and sell shares of an Underlying
Fund that operates as an ETF through secondary
market transactions at market prices rather than
through principal transactions with the Underlying
Fund at net asset value. Applicants would not rely
on the requested relief from section 17(a) for such
secondary market transactions. A Fund of Funds
could seek to transact in ‘‘Creation Units’’ directly
with an ETF pursuant to the requested section 17(a)
relief.
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the same proportion as the shares for
which instructions were received. An
Unregistered Separate Account will
either: (i) Vote its shares of the
Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares; or (ii) seek voting instructions
from its Variable Contract holders and
vote its shares in accordance with the
instructions received and vote those
shares for which no instructions were
received in the same proportion as the
shares for which instructions were
received.
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in an Unaffiliated Fund to
influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Independent
Trustees, will adopt procedures
reasonably designed to assure that its
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 Fund of Funds Affiliate from
an Unaffiliated Fund or an Unaffiliated
Fund Affiliate in connection with any
services or transactions.
4. Once an investment by a Fund of
Funds in the securities of an
Unaffiliated Investment Company
exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of
the Unaffiliated Investment Company,
including a majority of the Independent
Trustees, will determine that any
consideration paid by the Unaffiliated
Investment Company 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 Investment Company; (b) is
within the range of consideration that
the Unaffiliated Investment 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
Unaffiliated Investment 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
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is acting in its capacity as an investment
adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated
Underlying Trust) will cause an
Unaffiliated Fund to purchase a security
in any Affiliated Underwriting.
6. The Board of an Unaffiliated
Investment Company, including a
majority of the Independent Trustees,
will adopt procedures reasonably
designed to monitor any purchases of
securities by the Unaffiliated Investment
Company in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of the Unaffiliated
Investment 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 of the Unaffiliated Investment
Company will review these procedures
periodically, but no less frequently than
annually, to determine whether the
purchases were influenced by the
investment by the Fund of Funds in the
Unaffiliated Investment Company. The
Board of the Unaffiliated Investment
Company will consider, among other
things: (a) Whether the purchases were
consistent with the investment
objectives and policies of the
Unaffiliated Investment 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 Unaffiliated
Investment Company in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of an Unaffiliated Investment
Company 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 Investment
Company 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
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once an investment by a Fund of Funds
in the securities of an Unaffiliated
Investment Company exceeds the limit
of section 12(d)(1)(A)(i) of the Act,
setting forth the: (a) Party from whom
the securities were acquired, (b) identity
of the underwriting syndicate’s
members, (c) terms of the purchase, and
(d) information or materials upon which
the determinations of the Board of the
Unaffiliated Investment Company were
made.
8. Prior to its investment in shares of
an Unaffiliated Investment Company in
excess of the limit in section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment
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 Unaffiliated Investment
Company in excess of the limit in
section 12(d)(1)(A)(i), a Fund of Funds
will notify the Unaffiliated Investment
Company of the investment. At such
time, the Fund of Funds will also
transmit to the Unaffiliated Investment
Company a list of the names of each
Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated
Investment Company of any changes to
the list as soon as reasonably practicable
after a change occurs. The Unaffiliated
Investment 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. Before approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Independent Trustees,
shall find that the advisory fees charged
under the advisory contract are based on
services provided that are in addition to,
rather than duplicative of, services
provided under the advisory contract(s)
of any Underlying Fund in which the
Fund of Funds may invest. Such
finding, and the basis upon which the
finding was made, will be recorded fully
in the minute books of the appropriate
Fund of Funds.
10. The Advisers will waive fees
otherwise payable to them 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 Investment Company
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated Fund by
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Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices
jlentini on PROD1PC65 with NOTICES
the Adviser, or an affiliated person of
the Adviser, other than any advisory
fees paid to the Adviser or its affiliated
person by the Unaffiliated Fund, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
Any Sub-Adviser will waive fees
otherwise payable to the Sub-Adviser,
directly or indirectly, by the Fund of
Funds in an amount at least equal to any
compensation received by the SubAdviser, or an affiliated person of the
Sub-Adviser, from an Unaffiliated Fund,
other than any advisory fees paid to the
Sub-Adviser or its affiliated person by
the Unaffiliated Investment Company,
in connection with the investment by
the Fund of Funds in the Unaffiliated
Investment Company made at the
direction of the Sub-Adviser. In the
event that the Sub-Adviser waives fees,
the benefit of the waiver will be passed
through to the Fund of Funds.
11. With respect to Registered
Separate Accounts that invest in a Fund
of Funds, no sales load will be charged
at the Fund of Funds level or at the
Underlying Fund level. Other sales
charges and service fees, as defined in
NASD Conduct Rule 2830, if any, will
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 Funds of Funds will not
exceed the limits applicable to a 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: (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. E7–10752 Filed 6–4–07; 8:45 am]
BILLING CODE 8010–01–P
VerDate Aug<31>2005
17:28 Jun 04, 2007
Jkt 211001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55829; File No. SR–DTC–
2006–20]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change to Modify
DTC’s Fee Schedule
May 30, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
December 20, 2006, The Depository
Trust Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change described in Items I, II, and III
below, which items have been prepared
primarily by DTC. DTC filed the
proposed rule change pursuant to
Section 19(b)(3)(A)(ii) and Rule 19b–
4(f)(2) thereunder so that the proposed
rule change was effective upon filing
with the Commission.2 The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purpose of the proposed rule
change would revise fees for certain
services provided by DTC, including (1)
decreases to certain fees related to
settlement services as part of DTC’s
continuing efforts to more closely align
fees with costs, (2) increases to certain
fees related to securities processing,
custody and asset servicing, and
underwriting services to realign fees
with costs, (3) introduction of fees for to
discourage certain activities that
increase industry inefficiencies, and (4)
introduction of new fees related to cost
recovery for certain manually intensive
services, systems development, or use of
Investor’s Voluntary Redemptions and
Sales Service (‘‘IVORS’’).3
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
DTC 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
1 15
U.S.C. 78s(b)(1).
2 15 U.S.C. 78s(b)(3)(A)(ii) and 17 CFR 240.19b–
4(f)(2).
3 The text of the DTC’s specific fee changes is set
forth in its filing, which can be found at https://
www.dtc.org/impNtc/mor/#2006.
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
31121
may be examined at the places specified
in Item IV below. DTC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.4
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
DTC is revising its fees for certain
services provided by DTC. These
changes include (1) Decreases to certain
settlement services fees as part of DTC’s
continuing efforts to more closely align
fees with costs and (2) increases to
certain fees related to securities
processing, custody and asset servicing,
and underwriting services to realign fees
with costs.
In addition, DTC is implementing fees
to discourage activities which increase
industry inefficiencies. Changes in these
fees for 2007 include fee increases for
(1) Withdrawal by transfer (in
connection with DTC’s continuing
efforts to discourage use of physical
certificates), (2) deposit services (to
encourage the use of the paperless legal
deposit services), and (3) custody
services (to encourage the elimination of
positions in nontransferable securities).
DTC is introducing new fees for (1)
manually intensive photocopy and
research requests performed in the
reorganization service, (2) cost recovery
relating to the ongoing development of
the new issue information
dissemination service under DTC’s
underwriting services, and (3)
transactions processed using the
rollover feature of the IVORS.5
These proposed fee revisions are
consistent with DTC’s overall pricing
philosophy to align service fees with
underlying costs, to discourage manual
and exception processing, and to
encourage immobilization and
dematerialization of securities. The
effective date for these fee adjustments
was January 2, 2007.
DTC believes that the proposed rule
change is consistent with the
requirements of Section 17A of the Act 6
and the rules and regulations
thereunder that are applicable to DTC
because it clarifies and updates DTC’s
fee schedule. As such, the rule change
provides for the equitable allocation of
fees among its participants.
4 The Commission has modified the text of the
summaries prepared by the DTC.
5 For more information on the IVORS rollover
feature, see Exchange Act Release No. 34–50279
(August 27, 2004) 69 FR 50279 (September 7, 2004)
[File No. SR–DTC–2004–08].
6 15 U.S.C. 78q–1.
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]]>Agencies
[Federal Register Volume 72, Number 107 (Tuesday, June 5, 2007)]
[Notices]
[Pages 31117-31121]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-10752]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27848; 812-13341]
John Hancock Trust, et al.; Notice of Application
May 30, 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.
-----------------------------------------------------------------------
Summary of the Application: Applicants request an order that would
permit certain registered open-end management investment companies to
acquire shares of other registered open-end management investment
companies and unit investment trusts that are within and outside the
same group of investment companies.
Applicants: John Hancock Trust (``JHT''), John Hancock Funds II (``JHF
II''), John Hancock Funds III (``JHF III''), John Hancock Capital
Series (``JHCS,'' and collectively, ``Trusts''), and John Hancock
Advisers, LLC (``JHA'') and John Hancock Investment Management
Services, LLC (``JHIMS,'' each an ``Adviser,'' together the
``Advisers'').
Filing Dates: The application was filed on November 7, 2006 and amended
on May 23, 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 June 25, 2007, and should be accompanied by proof of service on
applicants in the form of an affidavit or, for lawyers, a certificate
of service. Hearing requests should state the nature of the writer's
interest, the reason for the request, and the issues contested. Persons
who wish to be notified of a hearing may request notification by
writing to the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicants: c/o Mark P. Goshko,
Kirkpatrick & Lockhart Preston Gates Ellis LLP, State Street Financial
Center, One Lincoln Street, Boston, Massachusetts 02111-2950.
FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel,
at (202) 551-6990, or Nadya Roytblat, Assistant Director, at (202) 551-
6821 (Office of Investment Company Regulation, Division of Investment
Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC
20549-0102 (telephone (202) 551-5850).
Applicants' Representations
1. The Trusts, organized as Massachusetts business trusts, are
registered under the Act as open-end management investment companies
and offer multiple series advised by the Adviser (``Portfolios'').\1\
JHT currently offers 110 Portfolios, JHF II currently offers 96
Portfolios, JHF III currently offers 13 Portfolios and JHCS currently
offers 8 Portfolios. Shares of JHT are offered only to registered
separate accounts (``Registered Separate Accounts'') of the John
Hancock Life Insurance Company (U.S.A.) (``JHLICO (USA)''), the John
Hancock Life Insurance Company of New York (``JHLICO New York), the
John Hancock Life Insurance Company, and the John Hancock Variable Life
Insurance Company (collectively, ``Insurance Companies''), as the
underlying investment vehicles for the variable life insurance and
variable annuity contracts (``Variable Contracts'') issued by the
Insurance Companies. Shares of JHF II are offered directly to the
public as well as to certain separate accounts of JHLICO (USA) and
JHLICO New York that are not registered as investment companies under
the Act in reliance on section 3(c)(11) (``Unregistered Separate
Accounts'' and together with the Registered Separate Accounts, the
``Separate Accounts''). Shares of JHF III and JHCS are offered directly
to the public.
---------------------------------------------------------------------------
\1\Applicants request that the order also extend to any future
Portfolios of the Trusts, and any other existing or future
registered open-end management investment companies and any series
thereof that are part of the same group of investment companies, as
defined in section 12(d)(1)(G)(ii) of the Act, as the Trusts and
are, or may in the future be, advised by the Advisers or any other
investment adviser controlling, controlled by, or under common
control with the Advisers (``Fund(s)''). The Trusts are the only
registered investment companies that currently intend to rely on the
requested order. Any other investment company that relies on the
order in the future will comply with the terms and conditions of the
application.
---------------------------------------------------------------------------
2. The Advisers are each a Delaware limited liability company which
is registered as an investment adviser under the Investment Advisers
Act of 1940. JHA is a wholly-owned subsidiary of John Hancock Financial
Services, Inc., a subsidiary of Manulife Financial Corporation and
serves as investment adviser for each of the JHCS Funds. JHIMS is an
indirect, wholly-owned subsidiary of JHLICO USA and serves as the
investment adviser for each of the JHT, JHF II and JHF III Funds.
3. Applicants request relief to permit: (a) A Fund (each a ``Fund
of Funds'') to acquire shares of registered open-end management
investment companies that are not part of the same group of investment
companies as the Fund of Funds (the ``Unaffiliated Investment
Companies'') and unit investment trusts (``UITs'') that are not part of
the same group of investment companies as the Fund of Funds
(``Unaffiliated Trusts,'' and together with Unaffiliated Investment
Companies, ``Unaffiliated Funds''); (b) the Unaffiliated Funds to sell
their shares to the Funds of Funds; (c) the Fund of Funds to acquire
shares of certain other Funds in the same group of investment companies
as the Fund of Funds (the ``Affiliated Funds,'' and together with the
Unaffiliated Funds, the ``Underlying Funds'') and (d) the Affiliated
Funds to sell their shares to the Fund of Funds. Certain of the
Unaffiliated Funds may be registered under the Act as either UITs or
open-end management investment companies and have received exemptive
relief to permit their shares be listed and traded on a national
securities exchange at negotiated prices (``ETFs''). Each Fund of Funds
also may invest in government securities, domestic and foreign common
and preferred stock, income-bearing securities, certain types of
[[Page 31118]]
futures contracts and options thereon, and in other securities and
investments that are not issued by registered investment companies and
that are consistent with its investment objective, including money
market instruments.
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) of the Act from the limitations of sections 12(d)(1)(A) and
(B) to the extent necessary to permit the Funds of Funds to acquire
shares of the Underlying Funds in excess of the limits set forth in
section 12(d)(1)(A) of the Act and to permit the Underlying Funds,
their principal underwriters and any broker or dealer to sell their
shares to the Funds of Funds in excess of the limits set forth in
section 12(d)(1)(B) of the Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections 12(d)(1)(A) and (B)
which include concerns about undue influence by a fund of funds or its
affiliated persons over underlying funds, excessive layering of fees,
and overly complex fund structures. Accordingly, applicants believe
that the requested exemptions are consistent with the public interest
and the protection of investors.
4. Applicants state that the proposed arrangement will not result
in undue influence by a Fund of Funds or its affiliated persons over
the Underlying Funds. The concern about undue influence does not arise
in connection with a Fund of Funds' investment in the Affiliated Funds,
since they are part of the same group of investment companies. To limit
the control that a Fund of Funds or its affiliated persons may have
over an Unaffiliated Fund, applicants submit that: (a) The Advisers and
any person controlling, controlled by or under common control with the
Advisers, 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 Advisers or any person controlling,
controlled by or under common control with the Advisers (collectively,
the ``Group''), and (b) any investment adviser within the meaning of
section 2(a)(20)(B) of the Act to a Fund of Funds (``Sub-Adviser'') and
any person controlling, controlled by or under common control with the
Sub-Adviser, and any investment company or issuer that would be an
investment company but for section 3(c)(1) or 3(c)(7) of the Act (or
portion of such investment company or issuer) advised by the Sub-
Adviser or any person controlling, controlled by or under common
control with the Sub-Adviser (collectively, the ``Sub-Adviser Group'')
will not control (individually or in the aggregate) an Unaffiliated
Fund within the meaning of section 2(a)(9) of the Act.
5. Applicants further state that condition 2 precludes a Fund of
Funds or the Adviser, any Sub-Adviser, promoter or principal
underwriter of a Fund of Funds, as well as any person controlling,
controlled by or under common control with any of those entities (each,
a ``Fund of Funds Affiliate'') from taking advantage of an Unaffiliated
Fund, with respect to transactions between the Fund of Funds or a Fund
of Funds Affiliate and the Unaffiliated Fund or its investment
adviser(s), sponsor, promoter, and principal underwriter and any person
controlling, controlled by or under common control with any of those
entities (each, an ``Unaffiliated Fund Affiliate''). 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 Investment Company
or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to
purchase a security in an offering of securities during the existence
of any underwriting or selling syndicate of which a principal
underwriter is an officer, director, trustee, advisory board member,
investment adviser, Sub-Adviser, or employee of the Fund of Funds, or a
person of which any such officer, director, trustee, investment
adviser, Sub-Adviser, member of an advisory board, or employee is an
affiliated person (each, an ``Underwriting Affiliate,'' except any
person whose relationship to the Unaffiliated Fund is covered by
section 10(f) of the Act is not an Underwriting 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. To further assure that an Unaffiliated Investment Company
understands the implications of an investment by a Fund of Funds under
the requested order, prior to a Fund of Funds' investment in the shares
of an Unaffiliated Investment Company in excess of the limit in section
12(d)(1)(A)(i) of the Act, the Fund of Funds and the Unaffiliated
Investment Company will execute an agreement stating, without
limitation, that their boards of directors or trustees (``Boards'') and
their investment advisers understand the terms and conditions of the
order and agree to fulfill their responsibilities under the order
(``Participation Agreement''). Applicants note that an Unaffiliated
Fund (other than an ETF whose shares are purchased by a Fund of Funds
in the secondary market) will retain its right at all times to reject
any investment by a Fund of Funds.\2\
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\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 with the Fund of Funds.
---------------------------------------------------------------------------
7. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. To assure that the investment
advisory or management fees are not duplicative, applicants state that,
in connection with the approval of any investment advisory or
management contract under section 15 of the Act, the Board of each Fund
of Funds, including a majority of the trustees who are not ``interested
persons,'' as defined in section 2(a)(19) of the Act (``Independent
Trustees''), will find that the management or advisory fees charged
under the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided pursuant to
any Underlying Fund's advisory contract(s). Applicants further state
that the Advisers will waive fees otherwise payable to them by a Fund
of Funds in an amount at least equal to any
[[Page 31119]]
compensation (including fees received pursuant to any plan adopted by
an Unaffiliated Investment Company pursuant to rule 12b-1 under the
Act) received from an Unaffiliated Fund by the Adviser, or an
affiliated person of the Adviser, other than any advisory fees paid to
the Adviser or an affiliated person of the Adviser by the Unaffiliated
Fund, in connection with the investment by the Fund of Funds in the
Unaffiliated Fund.
8. Applicants state that with respect to Registered Separate
Accounts that invest in a Fund of Funds, no sales load will be charged
at the Fund of Funds level or at the Underlying Fund level. Other sales
charges and service fees, as defined in Rule 2830 of the Conduct Rules
of the NASD (``NASD Conduct Rule 2830''), 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 a fund of funds set forth in NASD
Conduct Rule 2830.
9. Applicants state that the proposed arrangement will not create
an overly complex fund structure because 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. Applicants also represent that a Fund of
Funds' prospectus and sales literature will contain clear, concise,
``plain English'' disclosure designed to inform investors about the
unique characteristics of the proposed arrangement, including, but not
limited to, the expense structure and the additional expenses of
investing in Underlying Funds.\3\
---------------------------------------------------------------------------
\3\ Each Fund of Funds also will comply with the disclosure
requirements concerning the aggregate expenses of investing in
Underlying Funds set forth in Investment Company Act Release No.
27399 (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 persons 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 Affiliated
Funds might be deemed to be under common control of the Advisers and
therefore affiliated persons of one another. Applicants also state that
the Fund 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.
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 fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act. Section
6(c) of the Act permits the Commission to exempt any person or
transactions from any provision of the Act if such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
8. Applicants believe that the proposed transactions satisfy the
requirements for relief under sections 17(b) and 6(c) of the Act as the
terms are fair and reasonable and do not involve overreaching.\4\
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.\5\ Applicants also
state that the proposed transactions will be consistent with the
policies of each Fund of Funds and Underlying Fund, and with the
general purposes of the Act.
---------------------------------------------------------------------------
\4\ Applicants acknowledge that receipt of any compensation by
(a) An affiliated person of a Funds of Funds, or an affiliated
person of such person, for the purchase by the Fund of Funds of
shares of an Underlying Fund or (b) an affiliated person of 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.
\5\ Applicants note a Fund of Funds generally would purchase and
sell shares of an Underlying Fund that operates as an ETF through
secondary market transactions at market prices rather than through
principal transactions with the Underlying Fund at net asset value.
Applicants would not rely on the requested relief from section 17(a)
for such secondary market transactions. A Fund of Funds could seek
to transact in ``Creation Units'' directly with an ETF pursuant to
the requested section 17(a) relief.
---------------------------------------------------------------------------
Applicants' Conditions
Applicants agree that the order granting the requested relief shall
be subject to the following conditions:
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The members of the Sub-Adviser Group will not
control (individually or in the aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act. If, as a result of a
decrease in the outstanding voting securities of an Unaffiliated Fund,
the Group or a Sub-Adviser Group, each in the aggregate, becomes a
holder of more than 25% of the outstanding voting securities of the
Unaffiliated Fund, then the Group or the Sub-Adviser Group (except for
any member of the Group or the Sub-Adviser Group that is a Separate
Account) will vote its shares of the Unaffiliated Fund in the same
proportion as the vote of all other holders of the Unaffiliated Fund's
shares. This condition will not apply to a Sub-Adviser Group with
respect to an Unaffiliated Fund for which the Sub-Adviser or a person
controlling, controlled by, or under common control with the Sub-
Adviser acts as the investment adviser within the meaning of section
2(a)(20)(A) of the Act (in the case of an Unaffiliated Investment
Company) or as the sponsor (in the case of an Unaffiliated Trust).
A Registered Separate Account will seek voting instructions from
its Variable Contract holders and will vote its shares of an
Unaffiliated Fund in accordance with the instructions received and will
vote those shares for which no instructions were received in
[[Page 31120]]
the same proportion as the shares for which instructions were received.
An Unregistered Separate Account will either: (i) Vote its shares of
the Unaffiliated Fund in the same proportion as the vote of all other
holders of the Unaffiliated Fund's shares; or (ii) seek voting
instructions from its Variable Contract holders and vote its shares in
accordance with the instructions received and vote those shares for
which no instructions were received in the same proportion as the
shares for which instructions were received.
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in an
Unaffiliated Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Trustees, will adopt procedures reasonably designed to
assure that its 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 Fund of
Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund
Affiliate in connection with any services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Investment Company exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment
Company, including a majority of the Independent Trustees, will
determine that any consideration paid by the Unaffiliated Investment
Company 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 Investment Company; (b) is within the
range of consideration that the Unaffiliated Investment 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
Unaffiliated Investment 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
Unaffiliated Investment Company or sponsor to an Unaffiliated
Underlying Trust) will cause an Unaffiliated Fund to purchase a
security in any Affiliated Underwriting.
6. The Board of an Unaffiliated Investment Company, including a
majority of the Independent Trustees, will adopt procedures reasonably
designed to monitor any purchases of securities by the Unaffiliated
Investment Company in an Affiliated Underwriting once an investment by
a Fund of Funds in the securities of the Unaffiliated Investment
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 of the Unaffiliated Investment Company will review these
procedures periodically, but no less frequently than annually, to
determine whether the purchases were influenced by the investment by
the Fund of Funds in the Unaffiliated Investment Company. The Board of
the Unaffiliated Investment Company will consider, among other things:
(a) Whether the purchases were consistent with the investment
objectives and policies of the Unaffiliated Investment 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 Unaffiliated
Investment Company in Affiliated Underwritings and the amount purchased
directly from an Underwriting Affiliate have changed significantly from
prior years. The Board of an Unaffiliated Investment Company 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 Investment Company 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 Investment Company
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth
the: (a) Party from whom the securities were acquired, (b) identity of
the underwriting syndicate's members, (c) terms of the purchase, and
(d) information or materials upon which the determinations of the Board
of the Unaffiliated Investment Company were made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit in section 12(d)(1)(A)(i) of the Act,
the Fund of Funds and the Unaffiliated Investment 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
Unaffiliated Investment Company in excess of the limit in section
12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Investment
Company of the investment. At such time, the Fund of Funds will also
transmit to the Unaffiliated Investment Company a list of the names of
each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated Investment Company of any changes to
the list as soon as reasonably practicable after a change occurs. The
Unaffiliated Investment 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. Before approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Independent Trustees, shall find that the advisory fees charged under
the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Fund of Funds
may invest. Such finding, and the basis upon which the finding was
made, will be recorded fully in the minute books of the appropriate
Fund of Funds.
10. The Advisers will waive fees otherwise payable to them 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 Investment Company pursuant to rule 12b-1 under the Act)
received from an Unaffiliated Fund by
[[Page 31121]]
the Adviser, or an affiliated person of the Adviser, other than any
advisory fees paid to the Adviser or its affiliated person by the
Unaffiliated Fund, in connection with the investment by the Fund of
Funds in the Unaffiliated Fund. Any Sub-Adviser will waive fees
otherwise payable to the Sub-Adviser, directly or indirectly, by the
Fund of Funds in an amount at least equal to any compensation received
by the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an
Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser
or its affiliated person by the Unaffiliated Investment Company, in
connection with the investment by the Fund of Funds in the Unaffiliated
Investment Company made at the direction of the Sub-Adviser. In the
event that the Sub-Adviser waives fees, the benefit of the waiver will
be passed through to the Fund of Funds.
11. With respect to Registered Separate Accounts that invest in a
Fund of Funds, no sales load will be charged at the Fund of Funds level
or at the Underlying Fund level. Other sales charges and service fees,
as defined in NASD Conduct Rule 2830, if any, will 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 Funds of Funds will
not exceed the limits applicable to a 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: (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. E7-10752 Filed 6-4-07; 8:45 am]
BILLING CODE 8010-01-P
