Rafferty Asset Management, et al.; Notice of Application, 62705-62709 [E7-21694]
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Federal Register / Vol. 72, No. 214 / Tuesday, November 6, 2007 / Notices
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these types of affiliated persons from
purchasing or redeeming Creation Units
through ‘‘in-kind’’ transactions. The
deposit procedures for both in-kind
purchases and in-kind redemptions of
Creation Units will be the same for all
purchases and redemptions. Deposit
Securities and Fund Securities will be
valued in the same manner as Portfolio
Securities. Therefore, applicants state
that in-kind purchases and redemptions
will afford no opportunity for the
affiliated persons of a Fund, or the
affiliated persons of such affiliated
persons, to effect a transaction
detrimental to other holders of Shares.
Applicants also believe that in-kind
purchases and redemptions will not
result in self-dealing or overreaching of
the Fund.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Each Fund’s Prospectus and
Product Description will clearly
disclose that, for purposes of the Act,
Shares are issued by the Fund, which is
a registered investment company, and
that the acquisition of Shares by
investment companies is subject to the
restrictions of section 12(d)(1) of the
Act.
2. As long as the Funds operate in
reliance on the requested order, the
Shares will be listed on an Exchange.
3. Neither the Trust nor any Fund will
be advertised or marketed as an openend investment company or a mutual
fund. Each Fund’s Prospectus will
prominently disclose that Shares are not
individually redeemable shares and will
disclose that the owners of Shares may
acquire those Shares from the Fund and
tender those Shares for redemption to
the Fund in Creation Units only. Any
advertising material that describes the
purchase or sale of Creation Units or
refers to redeemability will prominently
disclose that Shares are not individually
redeemable, and that owners of Shares
may acquire those Shares from the Fund
and tender those Shares for redemption
to the Fund in Creation Units only.
4. The website maintained for each
Fund, which will be publicly accessible
at no charge, will contain the following
information, on a per Share basis, for
each Fund: (a) the prior Business Day’s
NAV and the Bid/Ask Price, and a
calculation of the premium or discount
of the Bid/Ask Price at the time of
calculation of the NAV against such
NAV; and (b) data in chart format
displaying the frequency distribution of
discounts and premiums of the daily
Bid/Ask Price against the NAV, within
appropriate ranges, for each of the four
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previous calendar quarters. In addition,
the Product Description for each Fund
will state that the website for the Fund
has information about the premiums
and discounts at which Shares have
traded.
5. The Prospectus and annual report
for each Fund also will include: (a) The
information listed in condition 4(b), (i)
in the case of the Fund’s Prospectus, for
the most recently completed year (and
the most recently completed quarter or
quarters, as applicable) and (ii) in the
case of the annual report, for the
immediately preceding five years, as
applicable; and (b) the following data,
calculated on a per Share basis for one,
five and ten year periods (or life of the
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 a 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 Shares to deliver a
Product Description to purchasers of
Shares.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–21739 Filed 11–5–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28039; 812–13416]
Rafferty Asset Management, et al.;
Notice of Application
October 30, 2007.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940 (the
‘‘Act’’) for exemption from sections
12(d)(1)(A) and (B) of the Act and under
sections 6(c) and 17(b) of the Act for an
exemption from section 17(a) of the Act.
AGENCY:
The order
would permit certain management
investment companies and unit
investment trusts registered under the
Act to acquire shares of certain openend management investment companies
registered under the Act, that are
outside of the same group of investment
SUMMARY OF THE APPLICATION:
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62705
companies as the acquiring investment
companies.
APPLICANTS: Rafferty Asset Management,
LLC (‘‘Rafferty’’ or ‘‘Adviser’’), Direxion
Funds (‘‘DF’’) and Direxion Insurance
Trust LLC (‘‘DIT,’’ together with DF, the
‘‘Trusts’’).
FILING DATES: The application was filed
on August 10, 2007, and amended on
October 26, 2007. Applicants have
agreed to file an amendment during the
notice period, the substance of which is
reflected in this notice.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on November 26, 2007, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE,. Washington, DC 20549–
1090; Applicants, 33 Whitehall Street,
10th Floor, New York, NY 10004.
FOR FURTHER INFORMATION CONTACT:
Bruce R. MacNeil, Senior Counsel, at
(202) 551–6817, or Janet M. Grossnickle,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
The
following is a summary of the
application. The complete application
may be obtained for a fee at the Public
Reference Desk, U.S. Securities and
Exchange Commission, 100 F Street,
NE., Washington DC 20549–0102
(telephone (202) 551–5850).
SUPPLEMENTARY INFORMATION:
Applicants’ Representations
1. The Trusts are open-end
management investment companies
registered under the Act and are each
comprised of separate series (‘‘Funds’’)
that pursue distinct investment
objectives and strategies. Shares of
Funds of DF are sold publicly to retail
investors, and shares of Funds of DIT
are sold to insurance company separate
accounts funding variable life and
variable annuity contracts. The Adviser
is registered as an investment adviser
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under the Investment Advisers Act of
1940 (‘‘Advisers Act’’) and serves as
investment adviser to each Fund.1
2. Applicants request relief to permit
registered management investment
companies and their series (‘‘Investing
Companies’’) and registered unit
investment trusts and their series
(‘‘Investing Trusts,’’ and together with
the Investing Companies, ‘‘Investing
Funds’’) that are outside of the same
‘‘group of investment companies,’’
within the meaning of section
12(d)(1)(G)(ii) of the Act, as the Trusts,
to acquire shares of the Funds in excess
of the limits in section 12(d)(1)(A) of the
Act, and to permit a Fund, any principal
underwriter for a Fund, and any broker
or dealer registered under the Securities
Exchange Act of 1934 (‘‘Broker’’) to sell
shares of each Fund to an Investing
Fund in excess of the limits of section
12(d)(1)(B) of the Act. Applicants
request that the relief apply to: (a) Other
existing and future registered open-end
management investment companies and
series thereof (included in the term
‘‘Funds’’) advised by the Adviser and in
the same group of investment
companies, within the meaning of
section 12(d)(1)(G)(ii) of the Act, as the
Trusts; (b) each Investing Fund that
enters into a Participation Agreement
(as defined below) with a Fund to
purchase shares of the Fund; and (c) any
principal underwriter to a Fund or
Broker selling shares of a Fund.2
3. Each Investing Company will be
advised by an investment adviser within
the meaning of section 2(a)(20)(A) of the
Act and registered as an investment
adviser under the Advisers Act
(‘‘Investing Fund Adviser’’). An
Investing Fund Adviser may contract
with an investment adviser which meets
the definition of section 2(a)(20)(B) of
the Act (a ‘‘Subadviser’’). Each Investing
Trust will have a sponsor (‘‘Sponsor’’)
and a trustee (‘‘Trustee’’). Applicants
represent that to ensure that the
Investing Funds comply with the terms
and conditions of the requested relief
from section 12(d)(1) of the Act, an
Investing Fund must enter into a
participation agreement between a
Trust, on behalf of the relevant Funds,
and the Investing Fund (‘‘Participation
1 The term ‘‘Adviser’’ includes all entities
controlling, controlled by or under common control
with Rafferty and its successors in interest. A
successor in interest is an entity resulting from a
reorganization of Rafferty into another jurisdiction
or a change in the type of business organization.
2 All entities that currently intend to rely on the
requested order are named as applicants. Any other
entity that relies on the order in the future will
comply with the terms and conditions of the
application. An Investing Fund may rely on the
requested order only to invest in the Funds and not
in any other registered investment company.
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Agreement’’) before investing in a Fund
beyond the limits imposed by section
12(d)(1)(A). The Participation
Agreement will require the Investing
Funds to adhere to the terms and
conditions of the requested order. The
Participation Agreement will include an
acknowledgment from an Investing
Fund that it may rely on the requested
order only to invest in the Funds and
not in any other registered investment
company.
4. Applicants state that the Funds will
offer the Investing Funds simple and
efficient investment vehicles to achieve
their asset allocation or diversification
objectives. Applicants state that the
Funds also provide high quality,
professional investment program
alternatives to Investing Funds that do
not have sufficient assets to make
comparable investments.
Applicants’ Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in
relevant part, 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 from
selling its shares to another investment
company if the sale will cause the
acquiring company to own more than
3% of the acquired company’s voting
stock, or if the sale will cause more than
10% of the acquired company’s voting
stock to be owned by investment
companies generally.
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 to permit
Investing Funds to acquire shares of the
Funds in excess of the limits in section
12(d)(1)(A) of the Act, and a Fund, any
principal underwriter for a Fund and
any Broker to sell shares of a Fund to
an Investing Fund in excess of the limits
of section 12(d)(1)(B) of the Act.
3. Applicants state that the proposed
arrangement and conditions will
adequately address the policy concerns
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underlying sections 12(d)(1)(A) and (B)
of the Act, which include concerns
about undue influence by a fund of
funds over underlying funds, excessive
layering of fees, and overly complex
fund structures. Accordingly, applicants
believe that the requested exemption is
consistent with the public interest and
the protection of investors.
4. Applicants believe that neither the
Investing Fund nor an Investing Fund
Affiliate would be able to exert undue
influence over the Funds.3 To limit the
control that an Investing Fund may have
over a Fund, applicants propose a
condition prohibiting the Investing
Fund Adviser, Sponsor, and any person
controlling, controlled by, or under
common control with the Investing
Fund Adviser or Sponsor, 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
that is advised or sponsored by the
Investing Fund Adviser or Sponsor, or
any person controlling, controlled by, or
under common control with the
Investing Fund Adviser or Sponsor
(‘‘Investing Fund Advisory Group’’)
from controlling (individually or in the
aggregate) a Fund within the meaning of
section 2(a)(9) of the Act. The same
prohibition would apply to each
Subadviser, any person controlling,
controlled by or under common control
with the Subadviser, and any
investment company or issuer that
would be an investment company but
for section 3(c)(1) or 3(c)(7) of the Act
(or portion of such investment company
or issuer) advised or sponsored by the
Subadviser or any person controlling,
controlled by or under common control
with the Subadviser (‘‘Subadviser
Group’’). Applicants propose other
conditions to limit the potential for
undue influence over the Funds,
including that no Investing Fund or
Investing Fund Affiliate (except to the
extent it is acting in its capacity as an
investment adviser to a Fund) will cause
a 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 Underwriting Affiliate
(‘‘Affiliated Underwriting’’). An
‘‘Underwriting Affiliate’’ is a principal
underwriter in any underwriting or
selling syndicate that is an officer,
3 ‘‘Investing Fund Affiliates’’ are the Investing
Fund Adviser, Subadviser, Sponsor, promoter, and
principal underwriter of the Investing Fund, and
any person controlling, controlled by, or under
common control with any of these entities. ‘‘Fund
Affiliates’’ are the investment adviser(s), promoter,
and principal underwriter of the Fund, and any
person controlling, controlled by, or under common
control with any of these entities.
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director, member of an advisory board,
Investing Fund Adviser, Subadviser,
Sponsor, or employee of the Investing
Fund, or a person of which any such
officer, director, member of an advisory
board, Investing Fund Adviser,
Subadviser, Sponsor or employee is an
affiliated person; however any person
whose relationship to a Fund is covered
by section 10(f) of the Act is not an
Underwriting Affiliate.
5. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. The board of
directors or trustees of each Investing
Company, including a majority of the
directors or trustees who are not
‘‘interested persons’’ (within the
meaning of section 2(a)(19) of the Act)
(‘‘Disinterested Trustees’’), will find that
the advisory fees charged under the
advisory contract are based on services
provided that will be in addition to,
rather than duplicative of, the services
provided under the advisory contract(s)
of any Fund in which the Investing
Company may invest. In addition, an
Investing Fund Adviser, Sponsor, or
Trustee, as applicable, will waive fees
otherwise payable to it by the Investing
Fund in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by a Fund
under rule 12b–1 under the Act)
received from a Fund by the Investing
Fund Adviser, Sponsor or Trustee or an
affiliated person thereof, other than any
advisory fees paid to the Investing Fund
Adviser, Sponsor or Trustee, or an
affiliated person thereof by a Fund in
connection with the investment by the
Investing Fund in the Fund. Applicants
also state that with respect to registered
separate accounts that invest in any
Investing Fund, no sales load will be
charged at the Investing Fund level or
at the Fund level. Other sales charges
and service fees, as defined in Rule 2830
of the Conduct Rules of the National
Association of Securities Dealers, Inc.,
(‘‘Rule 2830’’), if any, will only be
charged at the Investing Fund level or
at the Fund level, not both.4 With
respect to other investments in any
Investing Fund, any sales charges and/
or service fees charged with respect to
4 Applicants represent that each Investing Fund
will represent in the Participation Agreement that
no insurance company sponsoring a registered
separate account funding variable insurance
contracts will be permitted to invest in the
Investing Fund unless the insurance company has
certified to the Investing Fund that the aggregate of
all fees and charges associated with each contract
that invests in the Investing Fund, including fees
and charges at the separate account, Investing Fund,
and Fund levels, will be reasonable in relation to
the services rendered, the expenses expected to be
incurred, and the risks assumed by the insurance
company.
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shares of the Investing Fund will not
exceed the limits applicable to a fund of
funds as set forth in Rule 2830.
6. Applicants submit that the
proposed arrangement will not create an
overly complex fund structure.
Applicants propose condition 12 to
ensure that the proposed structure will
not result in unnecessary complexity.
Further, the Participation Agreement
will require each Investing Fund that
exceeds the 5% or 10% limitation in
section 12(d)(1)(A)(ii) and (iii) of the Act
to disclose in its prospectus that it may
invest in registered investment
companies, and to disclose, in ‘‘plain
English,’’ in its prospectus the unique
characteristics of the Investing Fund
investing in registered investment
companies, including but not limited to
the expense structure and any
additional expenses of investing in
registered investment companies. Each
Investing Fund also will comply with
the disclosure requirements set forth in
Investment Company Act Release No.
27399 (June 20, 2006).
7. Applicants also note that a Fund
may choose to reject any investment by
an Investing Fund. The prospectus of
each Fund discloses that the Fund may
choose to reject a purchase order at the
discretion of the Fund.
B. Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and any affiliated person of
the company. Section 2(a)(3) of the Act
defines an ‘‘affiliated person’’ of another
person to include 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. Applicants
seek relief from section 17(a) to permit
a Fund that is an affiliated person of an
Investing Fund because the Investing
Fund holds 5% or more of the Fund’s
shares to sell its shares to and redeem
its shares from an Investing Fund.5
2. 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
5 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of an
Investing Fund, or an affiliated person of such
person, for the purchase by the Investing Fund of
shares of a Fund or (b) an affiliated person of a
Fund, or an affiliated person of such person, for the
sale by the Fund of its shares to an Investing Fund
is subject to section 17(e) of the Act. The
Participation Agreement also will include this
acknowledgment.
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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. Applicants submit that the
proposed arrangement satisfies the
standards for relief under sections 17(b)
and 6(c) of the Act.
3. Applicants believe that any
proposed transactions directly between
Funds and the Investing Funds will be
consistent with the policies of each
Fund and Investing Fund. The
Participation Agreement will require
any Investing Fund that purchases
shares from a Fund to represent that the
purchase of shares from the Fund by an
Investing Fund will be accomplished in
compliance with the investment
restrictions of the Investing Fund and
will be consistent with the investment
policies set forth in the Investing Fund’s
registration statement.
4. Applicants also state that the terms
of the arrangement are fair and
reasonable and do not involve
overreaching. Applicants note that all
shares of the Funds sold and redeemed
by the Funds will be sold and redeemed
at net asset value as required by rule
22c–1 under the Act, without regard to
the identity of the purchasing or
redeeming investor. Applicants state
that the proposed arrangement will be
consistent with the policies of each
Investing Fund and Fund and with the
general purposes of the Act.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The members of the Investing Fund
Advisory Group will not control
(individually or in the aggregate) a Fund
within the meaning of section 2(a)(9) of
the Act. The members of the Subadviser
Group will not control (individually or
in the aggregate) a 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 a Fund,
the Investing Fund Advisory Group or
the Subadviser Group, each in the
aggregate, becomes a holder of more
than 25% of the outstanding voting
securities of a Fund, it (except for any
member of the Investing Fund Advisory
Group or Subadviser Group that is a
separate account) will vote its shares of
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the Fund in the same proportion as the
vote of all other holders of the Fund’s
shares. This condition does not apply to
the Subadviser Group with respect to a
Fund for which the Subadviser or a
person controlling, controlled by, or
under common control with the
Subadviser acts as the investment
adviser within the meaning of section
2(a)(20)(A) of the Act. A registered
separate account will seek voting
instructions from its contract holders
and will vote its shares in accordance
with the instructions received and will
vote those shares for which no
instructions were received in the same
proportion as the shares for which
instructions were received. An
unregistered separate account will
either (a) vote its shares of the Fund in
the same proportion as the vote of all
other holders of the Fund’s shares, or (b)
seek voting instructions from its
contract holders and vote its shares in
accordance with the instructions
received and vote those shares for
which no instructions were received in
the same proportion as the shares for
which instructions were received.
2. No Investing Fund or Investing
Fund Affiliate will cause any existing or
potential investment by the Investing
Fund in shares of a Fund to influence
the terms of any services or transactions
between the Investing Fund or an
Investing Fund Affiliate and the Fund or
a Fund Affiliate.
3. The board of directors or trustees of
an Investing Company, including a
majority of the Disinterested Trustees,
will adopt procedures reasonably
designed to assure that the Investing
Fund Adviser and any Subadviser are
conducting the investment program of
the Investing Company without taking
into account any consideration received
by the Investing Company or an
Investing Fund Affiliate from a Fund or
a Fund Affiliate in connection with any
services or transactions.
4. Once an investment by an Investing
Fund in the securities of a Fund exceeds
the limit in section 12(d)(1)(A)(i) of the
Act, the board of trustees of the Fund
(‘‘Board’’), including a majority of the
Disinterested Trustees, will determine
that any consideration paid by the Fund
to an Investing Fund or an Investing
Fund 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 Fund, (b) is within the
range of consideration that the Fund
would be required to pay to another
unaffiliated entity in connection with
the same services or transactions, and
(c) does not involve overreaching on the
part of any person concerned. This
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condition does not apply with respect to
any services or transactions between a
Fund and its investment adviser(s), or
any person controlling, controlled by, or
under common control with such
investment adviser(s).
5. No Investing Fund or Investing
Fund Affiliate (except to the extent it is
acting in its capacity as an investment
adviser to a Fund) will cause a Fund to
purchase a security in any Affiliated
Underwriting.
6. The Board of a Fund, including a
majority of the Disinterested Trustees,
will adopt procedures reasonably
designed to monitor any purchases of
securities by the Fund in an Affiliated
Underwriting once an investment by an
Investing Fund in the securities of the
Fund exceeds the limit in section
12(d)(1)(A)(i) of the Act, including any
purchases made directly from an
Underwriting Affiliate. The Board of the
Fund will review these purchases
periodically, but no less frequently than
annually, to determine whether the
purchases were influenced by the
investment by the Investing Fund in the
Fund. The Board of the Fund will
consider, among other things, (a)
whether the purchases were consistent
with the investment objectives and
policies of the Fund, (b) how the
performance of securities purchased in
an Affiliated Underwriting compares to
the performance of comparable
securities purchased during a
comparable period of time in
underwritings other than Affiliated
Underwritings or to a benchmark such
as a comparable market index, and (c)
whether the amount of securities
purchased by the Fund in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of the Fund will take any
appropriate actions based on its review,
including, if appropriate, the institution
of procedures designed to assure that
purchases of securities in Affiliated
Underwritings are in the best interests
of shareholders.
7. The Fund will maintain and
preserve permanently in an easily
accessible place a written copy of the
procedures described in the preceding
condition, and any modifications to
such procedures, and will maintain and
preserve for a period of not less than six
years from the end of the fiscal year in
which any purchase in an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in Affiliated Underwritings
once an investment by an Investing
Fund in the securities of the Fund
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exceeds the limit in section
12(d)(1)(A)(i) of the Act, setting forth
from whom the securities were
acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the determinations of the Board of the
Fund were made.
8. Before investing in a Fund in
excess of the limits in section
12(d)(1)(A) of the Act, the Investing
Fund and the Fund will execute a
Participation Agreement stating without
limitation that their boards of directors
or trustees and their investment
advisers, or the Sponsor and Trustee, as
applicable, understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order. At the time of its investment in
shares of a Fund in excess of the limit
in section 12(d)(1)(A)(i), an Investing
Fund will notify the Fund of the
investment. At such time, the Investing
Fund will also transmit to the Fund a
list of the names of each Investing Fund
Affiliate and Underwriting Affiliate. The
Investing Fund will notify the Fund of
any changes to the list of the names as
soon as reasonably practicable after a
change occurs. The Fund and the
Investing Fund 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 directors or trustees of each
Investing Company, including a
majority of the Disinterested Trustees,
will find that the advisory fees charged
under such advisory contract are based
on services provided that will be in
addition to, rather than duplicative of,
the services provided under the
advisory contract(s) of any Fund in
which the Investing Company may
invest. These findings and their basis
will be recorded fully in the minute
books of the appropriate Investing
Company.
10. An Investing Fund Adviser,
Sponsor or Trustee, as applicable, will
waive fees otherwise payable to it by the
Investing Fund in an amount at least
equal to any compensation (including
fees from any plan adopted by a Fund
under rule 12b–1 under the Act)
received from a Fund by the Investing
Fund Adviser, Sponsor or Trustee, or an
affiliated person thereof, other than any
advisory fees paid to the Investing Fund
Adviser, Sponsor or Trustee, or an
affiliated person thereof, by a Fund in
E:\FR\FM\06NON1.SGM
06NON1
Federal Register / Vol. 72, No. 214 / Tuesday, November 6, 2007 / Notices
connection with the investment by the
Investing Fund in the Fund. Any
Subadviser will waive fees otherwise
payable to the Subadviser, directly or
indirectly, by the Investing Company in
an amount at least equal to any
compensation received from a Fund by
the Subadviser, or an affiliated person
thereof, other than any advisory fees
paid to the Subadviser or its affiliated
person by a Fund, in connection with
the investment by the Investing
Company in the Fund made at the
direction of the Subadviser. In the event
that the Subadviser waives fees, the
benefit of the waiver will be passed
through to the Investing Company.
11. With respect to registered separate
accounts that invest in any Investing
Fund, no sales load will be charged at
the Investing Fund level or at the Fund
level. Other sales charges and service
fees, as defined in Rule 2830, if any,
will only be charged at the Investing
Fund level or at the Fund level, not
both. With respect to other investments
in an Investing Fund, any sales charges
and/or service fees charged with respect
to shares of the Investing Fund will not
exceed the limits applicable to a fund of
funds as set forth in Rule 2830.
12. No Fund will acquire securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
to the extent permitted by section
12(d)(1)(E) of the Act or exemptive relief
from the Commission permitting the
Fund to purchase shares of an affiliated
money market fund for short-term cash
management purposes.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–21694 Filed 11–5–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
mstockstill on PROD1PC66 with NOTICES
Sunshine Act Meeting Federal Register
Citation of Previous Announcement:
November 5, 2007
Status: Closed meeting.
Place: 100 F Street, NE., Washington,
DC.
Date and Time of previously
Announced meeting: November 8, 2007
at 2 p.m.
Change in the Meetings: Date and
Time Change.
The Closed Meeting scheduled for
Thursday, November 8, 2007 at 2 p.m.,
VerDate Aug<31>2005
16:55 Nov 05, 2007
Jkt 214001
has been changed to Wednesday,
November 7, 2007 at 2:30 p.m.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items. For further
information and to ascertain what, if
any, matters have been added, deleted
or postponed, please contact:
The Office of the Secretary at (202)
551–5400.
November 1, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–21772 Filed 11–5–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56722; File No. SR–
NASDAQ–2007–085]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change
Amending Nasdaq’s Membership
Application Rules
October 31, 2007.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
30, 2007, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
substantially prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change modifies
Nasdaq’s membership application
procedures. Below is the text of the
proposed rule change. Proposed new
language is in italics; proposed
deletions are in [brackets].
*
*
*
*
*
1010. Membership Proceedings
1011. Definitions
Unless otherwise provided, terms
used in the Rule 1000 Series shall have
the meaning as defined in Rule 0120.
(a)–(f) No change.
(g) ‘‘material change in business
operations’’.
1 15
2 17
PO 00000
U.S.C 78s(b)(1).
CFR 240.19b–4.
Frm 00087
Fmt 4703
Sfmt 4703
62709
The term ‘‘material change in
business operations’’ includes, but is
not limited to:
(1) removing or modifying a
membership agreement restriction;
(2) market making, underwriting, or
acting as a dealer for the first time; [and]
(3) adding business activities that
require a higher minimum net capital
under SEC Rule 15c3–1; and
(4) adding business activities that
would cause a proprietary trading firm
no longer to meet the definition of that
term contained in this rule.
(h)–(n) No change.
(o) ‘‘Proprietary Trading Firm’’
The term ‘‘proprietary trading firm’’
means an Applicant with the following
characteristics:
(1) the Applicant is not required by
Section 15(b)(8) of the Act to become a
FINRA member but is a member of
another registered securities exchange
not registered solely under Section 6(g)
of the Act;
(2) all funds used or proposed to be
used by the Applicant for trading are
the Applicant’s own capital, traded
through the Applicant’s own accounts;
(3) the Applicant does not, and will
not have ‘‘customers,’’ as that term is
defined in Nasdaq Rule 0120(g); and
(4) all Principals and Representatives
of the Applicant acting or to be acting
in the capacity of a trader must be
owners of, employees of, or contractors
to the Applicant.
1012. General Provisions
(a) No change.
(b) Lapse of Application
(1) Absent a showing of good cause,
an application filed under Rule 1013 or
1017 shall lapse if an Applicant fails to:
(A) respond fully within [60] 15
business days after service of an initial
written request for information or
documents under Rule 1013, [within 30
days after service of] an initial written
request for information or documents
under Rule 1017, [within 30 days after
service of] or a subsequent written
request for information or documents
under Rule 1013 or 1017, or within such
other time period agreed to by the
Department and the Applicant;
(B) appear at or otherwise participate
in a scheduled membership interview
pursuant to Rule 1013(b) or 1017(f), if
required; or
[(C)] file an executed membership
agreement under Rule 1014(d) or [Rule]
1017(g)(4) within 25 days after service
of the agreement, or within such other
period agreed to by the Department and
the Applicant.
(2) If an Applicant wishes to continue
to seek membership or approval of a
E:\FR\FM\06NON1.SGM
06NON1
]]>Agencies
[Federal Register Volume 72, Number 214 (Tuesday, November 6, 2007)]
[Notices]
[Pages 62705-62709]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21694]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28039; 812-13416]
Rafferty Asset Management, et al.; Notice of Application
October 30, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 12(d)(1)(J)
of the Investment Company Act of 1940 (the ``Act'') for exemption from
sections 12(d)(1)(A) and (B) of the Act and under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act.
-----------------------------------------------------------------------
Summary of the Application: The order would permit certain management
investment companies and unit investment trusts registered under the
Act to acquire shares of certain open-end management investment
companies registered under the Act, that are outside of the same group
of investment companies as the acquiring investment companies.
Applicants: Rafferty Asset Management, LLC (``Rafferty'' or
``Adviser''), Direxion Funds (``DF'') and Direxion Insurance Trust LLC
(``DIT,'' together with DF, the ``Trusts'').
Filing Dates: The application was filed on August 10, 2007, and amended
on October 26, 2007. Applicants have agreed to file an amendment during
the notice period, the substance of which is reflected in this notice.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on November 26, 2007, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE,. Washington, DC 20549-1090; Applicants, 33 Whitehall
Street, 10th Floor, New York, NY 10004.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
(202) 551-6817, or Janet M. Grossnickle, Branch Chief, at (202) 551-
6821 (Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington DC 20549-0102 (telephone (202) 551-5850).
Applicants' Representations
1. The Trusts are open-end management investment companies
registered under the Act and are each comprised of separate series
(``Funds'') that pursue distinct investment objectives and strategies.
Shares of Funds of DF are sold publicly to retail investors, and shares
of Funds of DIT are sold to insurance company separate accounts funding
variable life and variable annuity contracts. The Adviser is registered
as an investment adviser
[[Page 62706]]
under the Investment Advisers Act of 1940 (``Advisers Act'') and serves
as investment adviser to each Fund.\1\
---------------------------------------------------------------------------
\1\ The term ``Adviser'' includes all entities controlling,
controlled by or under common control with Rafferty and its
successors in interest. A successor in interest is an entity
resulting from a reorganization of Rafferty into another
jurisdiction or a change in the type of business organization.
---------------------------------------------------------------------------
2. Applicants request relief to permit registered management
investment companies and their series (``Investing Companies'') and
registered unit investment trusts and their series (``Investing
Trusts,'' and together with the Investing Companies, ``Investing
Funds'') that are outside of the same ``group of investment
companies,'' within the meaning of section 12(d)(1)(G)(ii) of the Act,
as the Trusts, to acquire shares of the Funds in excess of the limits
in section 12(d)(1)(A) of the Act, and to permit a Fund, any principal
underwriter for a Fund, and any broker or dealer registered under the
Securities Exchange Act of 1934 (``Broker'') to sell shares of each
Fund to an Investing Fund in excess of the limits of section
12(d)(1)(B) of the Act. Applicants request that the relief apply to:
(a) Other existing and future registered open-end management investment
companies and series thereof (included in the term ``Funds'') advised
by the Adviser and in the same group of investment companies, within
the meaning of section 12(d)(1)(G)(ii) of the Act, as the Trusts; (b)
each Investing Fund that enters into a Participation Agreement (as
defined below) with a Fund to purchase shares of the Fund; and (c) any
principal underwriter to a Fund or Broker selling shares of a Fund.\2\
---------------------------------------------------------------------------
\2\ All entities that currently intend to rely on the requested
order are named as applicants. Any other entity that relies on the
order in the future will comply with the terms and conditions of the
application. An Investing Fund may rely on the requested order only
to invest in the Funds and not in any other registered investment
company.
---------------------------------------------------------------------------
3. Each Investing Company will be advised by an investment adviser
within the meaning of section 2(a)(20)(A) of the Act and registered as
an investment adviser under the Advisers Act (``Investing Fund
Adviser''). An Investing Fund Adviser may contract with an investment
adviser which meets the definition of section 2(a)(20)(B) of the Act (a
``Subadviser''). Each Investing Trust will have a sponsor (``Sponsor'')
and a trustee (``Trustee''). Applicants represent that to ensure that
the Investing Funds comply with the terms and conditions of the
requested relief from section 12(d)(1) of the Act, an Investing Fund
must enter into a participation agreement between a Trust, on behalf of
the relevant Funds, and the Investing Fund (``Participation
Agreement'') before investing in a Fund beyond the limits imposed by
section 12(d)(1)(A). The Participation Agreement will require the
Investing Funds to adhere to the terms and conditions of the requested
order. The Participation Agreement will include an acknowledgment from
an Investing Fund that it may rely on the requested order only to
invest in the Funds and not in any other registered investment company.
4. Applicants state that the Funds will offer the Investing Funds
simple and efficient investment vehicles to achieve their asset
allocation or diversification objectives. Applicants state that the
Funds also provide high quality, professional investment program
alternatives to Investing Funds that do not have sufficient assets to
make comparable investments.
Applicants' Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in relevant part, 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 from selling its shares to another investment company if the
sale will cause the acquiring company to own more than 3% of the
acquired company's voting stock, or if the sale will cause more than
10% of the acquired company's voting stock to be owned by investment
companies generally.
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 to permit Investing Funds to acquire shares of
the Funds in excess of the limits in section 12(d)(1)(A) of the Act,
and a Fund, any principal underwriter for a Fund and any Broker to sell
shares of a Fund to an Investing Fund in excess of the limits of
section 12(d)(1)(B) of the Act.
3. Applicants state that the proposed arrangement and conditions
will adequately address the policy concerns underlying sections
12(d)(1)(A) and (B) of the Act, which include concerns about undue
influence by a fund of funds over underlying funds, excessive layering
of fees, and overly complex fund structures. Accordingly, applicants
believe that the requested exemption is consistent with the public
interest and the protection of investors.
4. Applicants believe that neither the Investing Fund nor an
Investing Fund Affiliate would be able to exert undue influence over
the Funds.\3\ To limit the control that an Investing Fund may have over
a Fund, applicants propose a condition prohibiting the Investing Fund
Adviser, Sponsor, and any person controlling, controlled by, or under
common control with the Investing Fund Adviser or Sponsor, 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 that is advised or sponsored
by the Investing Fund Adviser or Sponsor, or any person controlling,
controlled by, or under common control with the Investing Fund Adviser
or Sponsor (``Investing Fund Advisory Group'') from controlling
(individually or in the aggregate) a Fund within the meaning of section
2(a)(9) of the Act. The same prohibition would apply to each
Subadviser, any person controlling, controlled by or under common
control with the Subadviser, and any investment company or issuer that
would be an investment company but for section 3(c)(1) or 3(c)(7) of
the Act (or portion of such investment company or issuer) advised or
sponsored by the Subadviser or any person controlling, controlled by or
under common control with the Subadviser (``Subadviser Group'').
Applicants propose other conditions to limit the potential for undue
influence over the Funds, including that no Investing Fund or Investing
Fund Affiliate (except to the extent it is acting in its capacity as an
investment adviser to a Fund) will cause a 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
Underwriting Affiliate (``Affiliated Underwriting''). An ``Underwriting
Affiliate'' is a principal underwriter in any underwriting or selling
syndicate that is an officer,
[[Page 62707]]
director, member of an advisory board, Investing Fund Adviser,
Subadviser, Sponsor, or employee of the Investing Fund, or a person of
which any such officer, director, member of an advisory board,
Investing Fund Adviser, Subadviser, Sponsor or employee is an
affiliated person; however any person whose relationship to a Fund is
covered by section 10(f) of the Act is not an Underwriting Affiliate.
---------------------------------------------------------------------------
\3\ ``Investing Fund Affiliates'' are the Investing Fund
Adviser, Subadviser, Sponsor, promoter, and principal underwriter of
the Investing Fund, and any person controlling, controlled by, or
under common control with any of these entities. ``Fund Affiliates''
are the investment adviser(s), promoter, and principal underwriter
of the Fund, and any person controlling, controlled by, or under
common control with any of these entities.
---------------------------------------------------------------------------
5. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. The board of directors or trustees
of each Investing Company, including a majority of the directors or
trustees who are not ``interested persons'' (within the meaning of
section 2(a)(19) of the Act) (``Disinterested Trustees''), will find
that the advisory fees charged under the advisory contract are based on
services provided that will be in addition to, rather than duplicative
of, the services provided under the advisory contract(s) of any Fund in
which the Investing Company may invest. In addition, an Investing Fund
Adviser, Sponsor, or Trustee, as applicable, will waive fees otherwise
payable to it by the Investing Fund in an amount at least equal to any
compensation (including fees received pursuant to any plan adopted by a
Fund under rule 12b-1 under the Act) received from a Fund by the
Investing Fund Adviser, Sponsor or Trustee or an affiliated person
thereof, other than any advisory fees paid to the Investing Fund
Adviser, Sponsor or Trustee, or an affiliated person thereof by a Fund
in connection with the investment by the Investing Fund in the Fund.
Applicants also state that with respect to registered separate accounts
that invest in any Investing Fund, no sales load will be charged at the
Investing Fund level or at the Fund level. Other sales charges and
service fees, as defined in Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., (``Rule 2830''), if
any, will only be charged at the Investing Fund level or at the Fund
level, not both.\4\ With respect to other investments in any Investing
Fund, any sales charges and/or service fees charged with respect to
shares of the Investing Fund will not exceed the limits applicable to a
fund of funds as set forth in Rule 2830.
---------------------------------------------------------------------------
\4\ Applicants represent that each Investing Fund will represent
in the Participation Agreement that no insurance company sponsoring
a registered separate account funding variable insurance contracts
will be permitted to invest in the Investing Fund unless the
insurance company has certified to the Investing Fund that the
aggregate of all fees and charges associated with each contract that
invests in the Investing Fund, including fees and charges at the
separate account, Investing Fund, and Fund levels, will be
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the insurance
company.
---------------------------------------------------------------------------
6. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants propose condition 12 to
ensure that the proposed structure will not result in unnecessary
complexity. Further, the Participation Agreement will require each
Investing Fund that exceeds the 5% or 10% limitation in section
12(d)(1)(A)(ii) and (iii) of the Act to disclose in its prospectus that
it may invest in registered investment companies, and to disclose, in
``plain English,'' in its prospectus the unique characteristics of the
Investing Fund investing in registered investment companies, including
but not limited to the expense structure and any additional expenses of
investing in registered investment companies. Each Investing Fund also
will comply with the disclosure requirements set forth in Investment
Company Act Release No. 27399 (June 20, 2006).
7. Applicants also note that a Fund may choose to reject any
investment by an Investing Fund. The prospectus of each Fund discloses
that the Fund may choose to reject a purchase order at the discretion
of the Fund.
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and any
affiliated person of the company. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include 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.
Applicants seek relief from section 17(a) to permit a Fund that is an
affiliated person of an Investing Fund because the Investing Fund holds
5% or more of the Fund's shares to sell its shares to and redeem its
shares from an Investing Fund.\5\
---------------------------------------------------------------------------
\5\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of an Investing Fund, or an affiliated
person of such person, for the purchase by the Investing Fund of
shares of a Fund or (b) an affiliated person of a Fund, or an
affiliated person of such person, for the sale by the Fund of its
shares to an Investing Fund is subject to section 17(e) of the Act.
The Participation Agreement also will include this acknowledgment.
---------------------------------------------------------------------------
2. 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. Applicants submit that the proposed
arrangement satisfies the standards for relief under sections 17(b) and
6(c) of the Act.
3. Applicants believe that any proposed transactions directly
between Funds and the Investing Funds will be consistent with the
policies of each Fund and Investing Fund. The Participation Agreement
will require any Investing Fund that purchases shares from a Fund to
represent that the purchase of shares from the Fund by an Investing
Fund will be accomplished in compliance with the investment
restrictions of the Investing Fund and will be consistent with the
investment policies set forth in the Investing Fund's registration
statement.
4. Applicants also state that the terms of the arrangement are fair
and reasonable and do not involve overreaching. Applicants note that
all shares of the Funds sold and redeemed by the Funds will be sold and
redeemed at net asset value as required by rule 22c-1 under the Act,
without regard to the identity of the purchasing or redeeming investor.
Applicants state that the proposed arrangement will be consistent with
the policies of each Investing Fund and Fund and with the general
purposes of the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The members of the Investing Fund Advisory Group will not
control (individually or in the aggregate) a Fund within the meaning of
section 2(a)(9) of the Act. The members of the Subadviser Group will
not control (individually or in the aggregate) a 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 a Fund, the Investing Fund
Advisory Group or the Subadviser Group, each in the aggregate, becomes
a holder of more than 25% of the outstanding voting securities of a
Fund, it (except for any member of the Investing Fund Advisory Group or
Subadviser Group that is a separate account) will vote its shares of
[[Page 62708]]
the Fund in the same proportion as the vote of all other holders of the
Fund's shares. This condition does not apply to the Subadviser Group
with respect to a Fund for which the Subadviser or a person
controlling, controlled by, or under common control with the Subadviser
acts as the investment adviser within the meaning of section
2(a)(20)(A) of the Act. A registered separate account will seek voting
instructions from its contract holders and will vote its shares in
accordance with the instructions received and will vote those shares
for which no instructions were received in the same proportion as the
shares for which instructions were received. An unregistered separate
account will either (a) vote its shares of the Fund in the same
proportion as the vote of all other holders of the Fund's shares, or
(b) seek voting instructions from its contract holders and vote its
shares in accordance with the instructions received and vote those
shares for which no instructions were received in the same proportion
as the shares for which instructions were received.
2. No Investing Fund or Investing Fund Affiliate will cause any
existing or potential investment by the Investing Fund in shares of a
Fund to influence the terms of any services or transactions between the
Investing Fund or an Investing Fund Affiliate and the Fund or a Fund
Affiliate.
3. The board of directors or trustees of an Investing Company,
including a majority of the Disinterested Trustees, will adopt
procedures reasonably designed to assure that the Investing Fund
Adviser and any Subadviser are conducting the investment program of the
Investing Company without taking into account any consideration
received by the Investing Company or an Investing Fund Affiliate from a
Fund or a Fund Affiliate in connection with any services or
transactions.
4. Once an investment by an Investing Fund in the securities of a
Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, the board
of trustees of the Fund (``Board''), including a majority of the
Disinterested Trustees, will determine that any consideration paid by
the Fund to an Investing Fund or an Investing Fund 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 Fund, (b) is within the range of consideration that the
Fund would be required to pay to another unaffiliated entity in
connection with the same services or transactions, and (c) does not
involve overreaching on the part of any person concerned. This
condition does not apply with respect to any services or transactions
between a Fund and its investment adviser(s), or any person
controlling, controlled by, or under common control with such
investment adviser(s).
5. No Investing Fund or Investing Fund Affiliate (except to the
extent it is acting in its capacity as an investment adviser to a Fund)
will cause a Fund to purchase a security in any Affiliated
Underwriting.
6. The Board of a Fund, including a majority of the Disinterested
Trustees, will adopt procedures reasonably designed to monitor any
purchases of securities by the Fund in an Affiliated Underwriting once
an investment by an Investing Fund in the securities of the Fund
exceeds the limit in section 12(d)(1)(A)(i) of the Act, including any
purchases made directly from an Underwriting Affiliate. The Board of
the Fund will review these purchases periodically, but no less
frequently than annually, to determine whether the purchases were
influenced by the investment by the Investing Fund in the Fund. The
Board of the Fund will consider, among other things, (a) whether the
purchases were consistent with the investment objectives and policies
of the Fund, (b) how the performance of securities purchased in an
Affiliated Underwriting compares to the performance of comparable
securities purchased during a comparable period of time in
underwritings other than Affiliated Underwritings or to a benchmark
such as a comparable market index, and (c) whether the amount of
securities purchased by the Fund in Affiliated Underwritings and the
amount purchased directly from an Underwriting Affiliate have changed
significantly from prior years. The Board of the Fund will take any
appropriate actions based on its review, including, if appropriate, the
institution of procedures designed to assure that purchases of
securities in Affiliated Underwritings are in the best interests of
shareholders.
7. The Fund will maintain and preserve permanently in an easily
accessible place a written copy of the procedures described in the
preceding condition, and any modifications to such procedures, and will
maintain and preserve for a period of not less than six years from the
end of the fiscal year in which any purchase in an Affiliated
Underwriting occurred, the first two years in an easily accessible
place, a written record of each purchase of securities in Affiliated
Underwritings once an investment by an Investing Fund in the securities
of the Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act,
setting forth from whom the securities were acquired, the identity of
the underwriting syndicate's members, the terms of the purchase, and
the information or materials upon which the determinations of the Board
of the Fund were made.
8. Before investing in a Fund in excess of the limits in section
12(d)(1)(A) of the Act, the Investing Fund and the Fund will execute a
Participation Agreement stating without limitation that their boards of
directors or trustees and their investment advisers, or the Sponsor and
Trustee, as applicable, understand the terms and conditions of the
order and agree to fulfill their responsibilities under the order. At
the time of its investment in shares of a Fund in excess of the limit
in section 12(d)(1)(A)(i), an Investing Fund will notify the Fund of
the investment. At such time, the Investing Fund will also transmit to
the Fund a list of the names of each Investing Fund Affiliate and
Underwriting Affiliate. The Investing Fund will notify the Fund of any
changes to the list of the names as soon as reasonably practicable
after a change occurs. The Fund and the Investing Fund 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 directors or trustees of each Investing Company,
including a majority of the Disinterested Trustees, will find that the
advisory fees charged under such advisory contract are based on
services provided that will be in addition to, rather than duplicative
of, the services provided under the advisory contract(s) of any Fund in
which the Investing Company may invest. These findings and their basis
will be recorded fully in the minute books of the appropriate Investing
Company.
10. An Investing Fund Adviser, Sponsor or Trustee, as applicable,
will waive fees otherwise payable to it by the Investing Fund in an
amount at least equal to any compensation (including fees from any plan
adopted by a Fund under rule 12b-1 under the Act) received from a Fund
by the Investing Fund Adviser, Sponsor or Trustee, or an affiliated
person thereof, other than any advisory fees paid to the Investing Fund
Adviser, Sponsor or Trustee, or an affiliated person thereof, by a Fund
in
[[Page 62709]]
connection with the investment by the Investing Fund in the Fund. Any
Subadviser will waive fees otherwise payable to the Subadviser,
directly or indirectly, by the Investing Company in an amount at least
equal to any compensation received from a Fund by the Subadviser, or an
affiliated person thereof, other than any advisory fees paid to the
Subadviser or its affiliated person by a Fund, in connection with the
investment by the Investing Company in the Fund made at the direction
of the Subadviser. In the event that the Subadviser waives fees, the
benefit of the waiver will be passed through to the Investing Company.
11. With respect to registered separate accounts that invest in any
Investing Fund, no sales load will be charged at the Investing Fund
level or at the Fund level. Other sales charges and service fees, as
defined in Rule 2830, if any, will only be charged at the Investing
Fund level or at the Fund level, not both. With respect to other
investments in an Investing Fund, any sales charges and/or service fees
charged with respect to shares of the Investing Fund will not exceed
the limits applicable to a fund of funds as set forth in Rule 2830.
12. No Fund will acquire securities of any investment company or
company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section 12(d)(1)(A) of the Act, except to the
extent permitted by section 12(d)(1)(E) of the Act or exemptive relief
from the Commission permitting the Fund to purchase shares of an
affiliated money market fund for short-term cash management purposes.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-21694 Filed 11-5-07; 8:45 am]
BILLING CODE 8011-01-P
