Northern Institutional Funds, et al.; Notice of Application, 4023-4027 [E8-1057]
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Federal Register / Vol. 73, No. 15 / Wednesday, January 23, 2008 / Notices
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File No.
265–24. This file number should be
included on the subject line if e-mail is
used. To help us process and review
your statements more efficiently, please
use only one method. The Commission
staff will post all statements on the
Advisory Committee’s Web site (https://
www.sec.gov/about/offices/oca/
acifr.shtml). Statements also will be
available for public inspection and
copying in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. All statements received
will be posted without change; we do
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT:
James L. Kroeker, Deputy Chief
Accountant, or Shelly C. Luisi, Senior
Associate Chief Accountant, at (202)
551–5300, Office of the Chief
Accountant, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–6561.
SUPPLEMENTARY INFORMATION: In
accordance with Section 10(a) of the
Federal Advisory Committee Act, 5
U.S.C. App. 1, section 10(a), James L.
Kroeker, Designated Federal Officer of
the Committee, has approved
publication of this notice.
Dated: January 16, 2008.
Nancy M. Morris,
Committee Management Officer.
[FR Doc. E8–1053 Filed 1–22–08; 8:45 am]
Northern Institutional Funds, et al.;
Notice of Application
January 16, 2008.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
12(d)(1)(A) and (B) of the Act, and
under sections 6(c) and 17(b) of the Act
for an exemption from section 17(a) of
the Act.
AGENCY:
Sunshine Act Meeting
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BILLING CODE 8011–01–P
[Investment Company Act Release No.
28119; 812–13424]
SECURITIES AND EXCHANGE
COMMISSION
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold the following
meeting during the week of January 21,
2008:
A Closed Meeting will be held on
Thursday, January 24, 2008 at 2 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters may also be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
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Dated: January 17, 2008.
Nancy M. Morris,
Secretary
[FR Doc. E8–1072 Filed 1–22–08; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 8011–01–P
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more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), (8), (9)(B), and
(10) and 17 CFR 200.402(a)(3), (5), (7),
(8), 9(ii) and (10), permit consideration
of the scheduled matters at the Closed
Meeting.
Commissioner Atkins, as duty officer,
voted to consider the items listed for the
closed meeting in closed session.
The subject matter of the Closed
Meeting scheduled for Thursday,
January 24, 2008 will be:
Formal orders of investigations;
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings of an
enforcement nature;
A regulatory matter regarding a financial
institution; and
Other matters related to enforcement
proceedings.
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.
Jkt 214001
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.
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Northern Institutional
Funds (‘‘NIF’’), Northern Funds (‘‘NF,’’
and together with NIF, the ‘‘Trusts’’),
and Northern Trust Investments, N.A.
(‘‘Adviser’’).
FILING DATES: The application was filed
on September 12, 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 February 11, 2008, 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, c/o Diana E.
McCarthy, Drinker Biddle & Reath LLP,
One Logan Square, 18th and Cherry
Streets, Philadelphia, PA 19103–6996.
FOR FURTHER INFORMATION CONTACT:
Emerson S. Davis, Sr., Senior Counsel,
at (202) 551–6868, or Mary Kay Frech,
Branch Chief, 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:
Applicants’ Representations
1. The Trusts, organized as Delaware
statutory trusts, are registered under the
Act as open-end management
investment companies and offer
multiple series, each of which has its
own distinct investment objectives and
policies (‘‘Funds’’). The Balanced
Portfolio, a series of NIF, is currently the
only Fund that intends to rely on the
requested relief. The Adviser, a whollyowned subsidiary of The Northern Trust
Company, is registered as an investment
adviser under the Investment Advisers
Act of 1940 and serves as investment
adviser to the Funds.
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2. Applicants request relief to permit:
(a) A Fund (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 defined in
section 12(d)(1)(G)(ii) of the Act) 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, the ‘‘Unaffiliated Funds’’);
(b) the Unaffiliated Funds, their
principal underwriter and any broker or
dealer registered under the Securities
Exchange Act of 1934 (‘‘Broker’’) to sell
their shares to the Fund 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, their principal
underwriter and Brokers to sell their
shares to the Fund of Funds.1 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’’).2 Each
Fund of Funds also may invest in
government securities, domestic and
foreign common and preferred stock,
income-bearing securities, certain types
of 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
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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
1 Applicants request that the order extend to any
future Funds, and any other existing or future
registered open-end management investment
companies and their series 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 Adviser
or any other investment adviser controlling,
controlled by, or under common control with the
Adviser (included in the term, ‘‘Funds’’). The
Trusts are the only registered investment companies
that currently intend to rely on the requested order.
Any other entity that relies on the order in the
future will comply with the terms and conditions
of the application.
2 Certain of the Affiliated Funds also may operate
as ETFs; however, no Fund of Funds will be an
ETF. See also infra note 5.
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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 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 to sell 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 exemption is
consistent with the public interest and
the protection of investors.
4. Applicants state that the proposed
arrangement will not result in undue
influence by a Fund of Funds or its
affiliated persons over the Underlying
Funds. 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 propose condition 1 below,
which prohibits: (a) The Adviser and
any person controlling, controlled by or
under common control with the
Adviser, any investment company and
any issuer that would be an investment
company but for section 3(c)(1) or
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section 3(c)(7) of the Act advised or
sponsored by the Adviser or any person
controlling, controlled by or under
common control with the Adviser
(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 SubAdviser, and any investment company
or issuer that would be an investment
company but for section 3(c)(1) or
3(c)(7) of the Act (or portion of such
investment company or issuer) advised
by the Sub-Adviser or any person
controlling, controlled by or under
common control with the Sub-Adviser
(collectively, the ‘‘Sub-Adviser Group’’)
from controlling (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 below precludes a Fund of
Funds or the Adviser, any Sub-Adviser,
promoter or principal underwriter of a
Fund of Funds, and any person
controlling, controlled by, or under
common control with any of those
entities (each, a ‘‘Fund Affiliate’’) from
taking advantage of an Unaffiliated
Fund with respect to transactions
between a Fund of Funds or a Fund
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 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, SubAdviser, 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
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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, a 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’’).
7. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. 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 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 Adviser will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to 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 any sales
charges and/or service fees charged with
respect to shares of a Fund of Funds
will not exceed the limits applicable to
funds of funds set forth in Rule 2830 of
the Conduct Rules of the NASD.
9. Applicants state that the proposed
arrangement will not create an overly
complex fund structure. Applicants note
that an Underlying Fund will be
prohibited from acquiring securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
in certain circumstances identified in
condition 12 below. Applicants also
represent that a Fund of Funds’
prospectus and sales literature will
contain 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
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Jkt 214001
the additional expenses of investing in
Underlying Funds.
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 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.
2. Applicants state that the Funds of
Funds and the Affiliated Funds may be
deemed to be under common control of
the Adviser and therefore affiliated
persons of one another. Applicants also
state that a Fund of Funds and the
Underlying Funds may be deemed to be
affiliated persons of each other if a Fund
of Funds acquires 5% or more of an
Underlying Fund’s outstanding voting
securities. In light of these possible
affiliations, section 17(a) could prevent
an Underlying Fund from selling shares
to and redeeming shares from a Fund of
Funds.3
3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
Commission to exempt any person 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.
3 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of a Fund
of Funds, or an affiliated person of such person, for
the purchase by the Fund of Funds of shares of an
Underlying Fund or (b) an affiliated person of an
Underlying Fund, or an affiliated person of such
person, for the sale by the Underlying Fund of its
shares to a Fund of Funds may be prohibited by
section 17(e)(1) of the Act. The Participation
Agreement also will include this acknowledgement.
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4. Applicants submit 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. Applicants state that the
terms upon which an Underlying Fund
will sell its shares to or purchase its
shares from a Fund of Funds will be
based on the net asset value of each
Underlying Fund.4 Applicants 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 any order
granting the requested relief shall be
subject to the following conditions:
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act.
The members of a 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 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).
2. No Fund of Funds or Fund 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
4 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Unaffiliated
Fund that operates as an ETF through secondary
market transactions at market prices rather than
through principal transactions with the Unaffiliated
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 that is an Unaffiliated Fund pursuant
to the requested section 17(a) relief. Applicants are
not requesting, and the Commission is not granting,
any relief from section 17(a) to purchase and
redeem Creation Units of any ETF that is an
Affiliated Fund.
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the Fund of Funds or a Fund 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 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 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 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 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
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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
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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 Adviser will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to 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 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,
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23JAN1
Federal Register / Vol. 73, No. 15 / Wednesday, January 23, 2008 / Notices
the benefit of the waiver will be passed
through to the Fund of Funds.
11. Any sales charges and/or service
fees charged with respect to shares of a
Fund of Funds will not exceed the
limits applicable to funds of funds set
forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act, in excess of
the limits contained in section
12(d)(1)(A) of the Act, except to the
extent that such Underlying Fund: (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. E8–1057 Filed 1–22–08; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57154; File No. SR–Amex–
2008–03]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to
‘‘Amex Only’’ Orders and Quotes
ebenthall on PROD1PC69 with NOTICES
January 15, 2008.
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 January 9,
2008, the American Stock Exchange LLC
(‘‘Amex’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
substantially by the Amex. The Amex
has submitted the proposed rule change
under Section 19(b)(3)(A) of the Act 3
and Rule 19b–4(f)(6) thereunder,4 which
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
2 17
VerDate Aug<31>2005
15:17 Jan 22, 2008
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Amex proposes to amend Rule
131—AEMI, ‘‘Types of Orders,’’ to
provide for ‘‘Amex Only’’ orders and
quotes that will trade only at the Amex
or be cancelled.
The text of the proposed rule change
is available at https://www.amex.com,
the principal office of the Amex, and the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Amex included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The Amex has
prepared summaries, set forth in
sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
1 15
renders the proposal effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Amex proposes to add new
paragraph (z) to Rule 131—AEMI to
adopt a new order and a new quote
type: the ‘‘Amex Only’’ order (‘‘AOO’’)
and the ‘‘Amex Only’’ quote (‘‘AOQ’’).
AOOs and AOQs will enable quoting
and other market participants to post
liquidity on the AEMI Book that will
trade only at the Amex, and therefore
will not incur the costs of routing to
away markets. If any portion of an AOO
or AOQ would otherwise be required,
under Regulation NMS,5 to route to
another market to avoid a trade-through
or a locked or crossed market, AEMI
would automatically cancel that portion
of the AOO or AOQ. Additionally, if
auto-ex is disabled during the regular
trading session, all AOOs or AOQs on
the AEMI Book would be cancelled (and
all incoming AOOs and AOQs rejected),
because neither AOOs nor AOQs would
be permitted to participate in intra-day
pair-offs.
AOOs and AOQs may be entered only
during the pre-opening or regular
trading session. AOOs may be limit or
5 17
Jkt 214001
PO 00000
CFR 242.600 et seq.
Frm 00107
Fmt 4703
Sfmt 4703
4027
market orders. Quoting participants
entering AOQs are limited to one per
price point per side of the market in the
particular security being quoted, and
only those streaming quotes to the
Amex via proprietary systems will have
AOQ functionality, when
implemented.6
The Amex states that it is introducing
AOOs and AOQs in response to market
participants’ strong demands for more
flexible order and quote types that will
provide more control over transaction
charges—one of the primary present
drivers of order flow decisions. By using
AOOs and AOQs, market participants
on Amex will be able to be certain of
either trading immediately against the
contra side of the market on Amex,
posting all or part of their order/quote
on the AEMI Book, or cancelling the
order/quote. The Amex notes that
another market already has a similar
order type in place,7 so competitive
reasons also are driving the Amex’s
decision to offer comparable
functionality to liquidity providers.
2. Statutory Basis
The proposed rule change is designed
to be consistent with Regulation NMS,
as well as Section 6(b) of the Act,8 in
general, and furthers the objectives of
Section 6(b)(5) of the Act,9 in particular,
in that it is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Amex believes that the proposed
rule change does not impose any burden
on competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
6 See
Rule 131—AEMI, Commentary .04.
NYSE Rule 13 (‘‘Do Not Ship’’ or ‘‘DNS’’
Orders). See also Securities Exchange Act Release
No. 55768 (May 15, 2007), 72 FR 28532 (May 21,
2007) (File No. SR–NYSE–2007–24) (notice of filing
and immediate effectiveness of proposal to establish
the DNS order type).
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
7 See
E:\FR\FM\23JAN1.SGM
23JAN1
]]>Agencies
[Federal Register Volume 73, Number 15 (Wednesday, January 23, 2008)]
[Notices]
[Pages 4023-4027]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-1057]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28119; 812-13424]
Northern Institutional Funds, et al.; Notice of Application
January 16, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (``Act'') for an exemption from
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act.
-----------------------------------------------------------------------
Summary of the Application: Applicants request an order that would
permit certain registered open-end management investment companies to
acquire shares of other registered open-end management investment
companies and unit investment trusts that are within and outside the
same group of investment companies.
Applicants: Northern Institutional Funds (``NIF''), Northern Funds
(``NF,'' and together with NIF, the ``Trusts''), and Northern Trust
Investments, N.A. (``Adviser'').
Filing Dates: The application was filed on September 12, 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 February 11, 2008, 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, c/o Diana E.
McCarthy, Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry
Streets, Philadelphia, PA 19103-6996.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel,
at (202) 551-6868, or Mary Kay Frech, Branch Chief, 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 Delaware statutory trusts, are
registered under the Act as open-end management investment companies
and offer multiple series, each of which has its own distinct
investment objectives and policies (``Funds''). The Balanced Portfolio,
a series of NIF, is currently the only Fund that intends to rely on the
requested relief. The Adviser, a wholly-owned subsidiary of The
Northern Trust Company, is registered as an investment adviser under
the Investment Advisers Act of 1940 and serves as investment adviser to
the Funds.
[[Page 4024]]
2. Applicants request relief to permit: (a) A Fund (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 defined in section 12(d)(1)(G)(ii) of the Act) 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, the ``Unaffiliated
Funds''); (b) the Unaffiliated Funds, their principal underwriter and
any broker or dealer registered under the Securities Exchange Act of
1934 (``Broker'') to sell their shares to the Fund 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, their principal underwriter and
Brokers to sell their shares to the Fund of Funds.\1\ 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'').\2\ Each Fund of
Funds also may invest in government securities, domestic and foreign
common and preferred stock, income-bearing securities, certain types of
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.
---------------------------------------------------------------------------
\1\ Applicants request that the order extend to any future
Funds, and any other existing or future registered open-end
management investment companies and their series 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 Adviser or any other investment adviser
controlling, controlled by, or under common control with the Adviser
(included in the term, ``Funds''). The Trusts are the only
registered investment companies that currently intend to rely on the
requested order. Any other entity that relies on the order in the
future will comply with the terms and conditions of the application.
\2\ Certain of the Affiliated Funds also may operate as ETFs;
however, no Fund of Funds will be an ETF. See also infra note 5.
---------------------------------------------------------------------------
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 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 to sell 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 exemption is consistent with the public interest and
the protection of investors.
4. Applicants state that the proposed arrangement will not result
in undue influence by a Fund of Funds or its affiliated persons over
the Underlying Funds. 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 propose condition 1 below, which
prohibits: (a) The Adviser and any person controlling, controlled by or
under common control with the Adviser, 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 Adviser or any
person controlling, controlled by or under common control with the
Adviser (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'') from controlling (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 below precludes a Fund
of Funds or the Adviser, any Sub-Adviser, promoter or principal
underwriter of a Fund of Funds, and any person controlling, controlled
by, or under common control with any of those entities (each, a ``Fund
Affiliate'') from taking advantage of an Unaffiliated Fund with respect
to transactions between a Fund of Funds or a Fund 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 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
[[Page 4025]]
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, a 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'').
7. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. 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 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 Adviser will waive fees otherwise payable to it by a Fund of Funds
in an amount at least equal to any compensation (including fees
received pursuant to 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 any sales charges and/or service fees
charged with respect to shares of a Fund of Funds will not exceed the
limits applicable to funds of funds set forth in Rule 2830 of the
Conduct Rules of the NASD.
9. Applicants state that the proposed arrangement will not create
an overly complex fund structure. Applicants note that an Underlying
Fund will be prohibited from acquiring securities of any investment
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in
excess of the limits contained in section 12(d)(1)(A) of the Act,
except in certain circumstances identified in condition 12 below.
Applicants also represent that a Fund of Funds' prospectus and sales
literature will contain 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.
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 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.
2. Applicants state that the Funds of Funds and the Affiliated
Funds may be deemed to be under common control of the Adviser and
therefore affiliated persons of one another. Applicants also state that
a Fund of Funds and the Underlying Funds may be deemed to be affiliated
persons of each other if a Fund of Funds acquires 5% or more of an
Underlying Fund's outstanding voting securities. In light of these
possible affiliations, section 17(a) could prevent an Underlying Fund
from selling shares to and redeeming shares from a Fund of Funds.\3\
---------------------------------------------------------------------------
\3\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Fund of Funds, or an affiliated person
of such person, for the purchase by the Fund of Funds of shares of
an Underlying Fund or (b) an affiliated person of an Underlying
Fund, or an affiliated person of such person, for the sale by the
Underlying Fund of its shares to a Fund of Funds may be prohibited
by section 17(e)(1) of the Act. The Participation Agreement also
will include this acknowledgement.
---------------------------------------------------------------------------
3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act. Section
6(c) of the Act permits the Commission to exempt any person or
transactions from any provision of the Act if such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
4. Applicants submit that the proposed 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.
Applicants state that the terms upon which an Underlying Fund will sell
its shares to or purchase its shares from a Fund of Funds will be based
on the net asset value of each Underlying Fund.\4\ Applicants also
state that the proposed transactions will be consistent with the
policies of each Fund of Funds and Underlying Fund, and with the
general purposes of the Act.
---------------------------------------------------------------------------
\4\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Unaffiliated Fund that operates as an
ETF through secondary market transactions at market prices rather
than through principal transactions with the Unaffiliated 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 that is an Unaffiliated Fund pursuant to the requested section
17(a) relief. Applicants are not requesting, and the Commission is
not granting, any relief from section 17(a) to purchase and redeem
Creation Units of any ETF that is an Affiliated Fund.
---------------------------------------------------------------------------
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The members of a 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 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).
2. No Fund of Funds or Fund 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
[[Page 4026]]
the Fund of Funds or a Fund 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
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 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 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 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 Adviser will waive fees otherwise payable to it by a Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to 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 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,
[[Page 4027]]
the benefit of the waiver will be passed through to the Fund of Funds.
11. Any sales charges and/or service fees charged with respect to
shares of a Fund of Funds will not exceed the limits applicable to
funds of funds set forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire securities of any other
investment company or company relying on section 3(c)(1) or 3(c)(7) of
the Act, in excess of the limits contained in section 12(d)(1)(A) of
the Act, except to the extent that such Underlying Fund: (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. E8-1057 Filed 1-22-08; 8:45 am]
BILLING CODE 8011-01-P
