John Hancock Trust, et al.; Notice of Application, 31117-31121 [E7-10752]

Download as PDF 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. jlentini on PROD1PC65 with NOTICES 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 VerDate Aug<31>2005 17:28 Jun 04, 2007 Jkt 211001 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. PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 31117 (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 E:\FR\FM\05JNN1.SGM 05JNN1 31118 Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices 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. jlentini on PROD1PC65 with NOTICES 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 VerDate Aug<31>2005 17:28 Jun 04, 2007 Jkt 211001 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, PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 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. E:\FR\FM\05JNN1.SGM 05JNN1 jlentini on PROD1PC65 with NOTICES Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices 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 VerDate Aug<31>2005 17:28 Jun 04, 2007 Jkt 211001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 31119 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. E:\FR\FM\05JNN1.SGM 05JNN1 jlentini on PROD1PC65 with NOTICES 31120 Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices 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 VerDate Aug<31>2005 17:28 Jun 04, 2007 Jkt 211001 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 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 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 E:\FR\FM\05JNN1.SGM 05JNN1 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 http:// www.dtc.org/impNtc/mor/index.html#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. E:\FR\FM\05JNN1.SGM 05JNN1

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.

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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.
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    \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.
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    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.
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    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\
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    \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).
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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.
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    \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.
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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