Goldman Sachs Trust, et al.; Notice of Application, 46062-46066 [E8-18069]
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Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices
the continuation, or continuation after
amendment, of the Plan in its meeting
minutes, which must be made and
preserved for a period of not less than
six years from the date of such meeting,
the first two years in an easily accessible
place.
VI. Public Offerings: The fund will not
make a public offering of the fund’s
common shares other than:
A. A rights offering below NAV to
holders of the fund’s common stock;
B. An offering in connection with a
dividend reinvestment plan, merger,
consolidation, acquisition, spin off or
reorganization of the fund; or
C. An offering other than an offering
described in conditions VI.A and VI.B
above, unless, with respect to such other
offering:
1. The fund’s average annual
distribution rate for the six months
ending on the last day of the month
ended immediately prior to the most
recent distribution declaration date,5
expressed as a percentage of NAV per
share as of such date, is no more than
1 percentage point greater than the
fund’s average annual total return for
the 5-year period ending on such date; 6
and
2. The transmittal letter
accompanying any registration
statement filed with the Commission in
connection with such offering discloses
that the fund has received an order
under section 19(b) to permit it to make
periodic distributions of long-term
capital gains with respect to its common
stock as frequently as twelve times each
year, and as frequently as distributions
are specified by or determined in
accordance with the terms of any
outstanding preferred stock that such
fund may issue.
VII. Amendments to Rule 19b–1: The
requested order will expire on the
effective date of any amendments to rule
19b–1 that provide relief permitting
certain closed-end investment
companies to make periodic
distributions of long-term capital gains
with respect to their outstanding
common stock as frequently as twelve
times each year.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–18150 Filed 8–6–08; 8:45 am]
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BILLING CODE 8010–01–P
5 If the fund has been in operation fewer than two
years, the measured period will begin immediately
following the fund’s first public offering.
6 If the fund has been in operation fewer than five
years, the measured period will begin immediately
following the fund’s first public offering.
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SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28347; 812–13456]
Goldman Sachs Trust, et al.; Notice of
Application
July 31, 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:
SUMMARY OF THE APPLICATION:
Applicants request an order that would
permit certain registered open-end
management investment companies to
acquire shares of other registered openend management investment companies
and unit investment trusts that are
within and outside the same group of
investment companies.
APPLICANTS: Goldman Sachs Trust
(‘‘GST’’), Goldman Sachs Variable
Insurance Trust (‘‘VIT,’’ and together
with GST, the ‘‘Trusts’’), Goldman
Sachs Asset Management, L.P.
(‘‘GSAM’’) and Goldman Sachs Asset
Management International (‘‘GSAMI,’’
and together with GSAM, the
‘‘Advisers’’).
FILING DATES: The application was filed
on November 27, 2007 and amended on
May 29, 2008. 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 August 25, 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 Jack W. Murphy,
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Esq., Dechert LLP, 1775 I Street, NW.,
Washington, DC 20006–2401.
FOR FURTHER INFORMATION CONTACT:
Barbara T. Heussler, Senior Counsel, at
(202) 551–6990, or Marilyn Mann,
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
20549–1520 (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’’). GST currently offers
86 Funds and VIT offers 11 Funds.
Shares of the Trusts are registered under
the Securities Act of 1933, as amended
(the ‘‘1933 Act’’). Shares of GST are
offered directly to the public. Shares of
VIT are not offered directly to the public
but only to insurance company separate
accounts (‘‘Separate Accounts’’) that
fund variable annuity and variable life
insurance contracts (‘‘Variable
Contracts’’) issued by participating
insurance companies. The Separate
Accounts may be registered under the
Act (‘‘Registered Separate Accounts’’),
or unregistered thereunder
(‘‘Unregistered Separate Accounts’’).
2. GSAM is a Delaware limited
partnership and a wholly-owned
subsidiary of The Goldman Sachs
Group, Inc. GSAM is a registered
investment adviser under the
Investment Advisers Act of 1940, as
amended (the ‘‘Advisers Act’’) and
serves as investment adviser for eightysix of the Funds. GSAMI is a company
organized under the laws of England
and Wales and is a registered
investment adviser under the Advisers
Act. GSAMI is indirectly wholly-owned
by The Goldman Sachs Group, Inc.
3. Applicants request relief to permit:
(a) A Fund (each a ‘‘Fund of Funds’’) to
acquire shares of registered open-end
management investment companies (the
‘‘Unaffiliated Investment Companies’’)
and unit investment trusts (‘‘UITs’’) that
are not part of the same ‘‘group of
investment companies’’ as defined in
section 12(d)(1)(G)(ii) of the Act
(‘‘Unaffiliated Trusts,’’ and together
with Unaffiliated Investment
Companies, the ‘‘Unaffiliated Funds’’);
(b) the Unaffiliated Investment
Companies, their principal underwriters
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and any broker or dealer (‘‘Broker’’)
registered under the Securities
Exchange Act of 1934 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 underwriters and any
Brokers to sell their shares to the Fund
of Funds.1 Certain of the Unaffiliated
Funds have obtained exemptions from
the Commission to permit their shares
to be listed and traded on a national
securities exchange at negotiated prices
(‘‘ETFs’’). Each Fund of Funds may also
invest in other securities and financial
instruments that are not issued by
registered investment companies and
are consistent with its investment
objective and restrictions.
Applicants’ Legal Analysis
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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
1 Applicants request that the order extend to any
future series of the Trusts, 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 Advisers or any other investment adviser
controlling, controlled by, or under common
control with the Advisers (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.
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any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Applicants seek an exemption under
section 12(d)(1)(J) of the Act from the
limitations of sections 12(d)(1)(A) and
(B) to the extent necessary to permit the
Funds of Funds to acquire shares of the
Underlying Funds in excess of the limits
set forth in section 12(d)(1)(A) of the Act
and to permit the Unaffiliated
Investment Companies and Affiliated
Funds, their principal underwriters and
any Broker to sell their shares to the
Funds of Funds in excess of the limits
set forth in section 12(d)(1)(B) of the
Act.
3. Applicants state that the proposed
arrangement will not give rise to the
policy concerns underlying sections
12(d)(1)(A) and (B), which include
concerns about undue influence by a
fund of funds or its affiliated persons
over underlying funds, excessive
layering of fees, and overly complex
fund structures. Accordingly, applicants
believe that the requested 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 submit that: (a) the Advisers
and any person controlling, controlled
by or under common control with the
Advisers, any investment company and
any issuer that would be an investment
company but for section 3(c)(1) or
section 3(c)(7) of the Act advised or
sponsored by the Advisers or any
person controlling, controlled by or
under common control with the
Advisers (collectively, the ‘‘Group’’);
and (b) any investment adviser within
the meaning of section 2(a)(20)(B) of the
Act to a Fund of Funds (‘‘Sub-Adviser’’)
and any person controlling, controlled
by or under common control with the
Sub-Adviser, and any investment
company or issuer that would be an
investment company but for section
3(c)(1) or 3(c)(7) of the Act (or portion
of such investment company or issuer)
advised by the Sub-Adviser or any
person controlling, controlled by or
under common control with the SubAdviser (collectively, the ‘‘Sub-Adviser
Group’’) will not control (individually
or in the aggregate) an Unaffiliated Fund
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46063
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 Advisers, any Sub-Adviser,
promoter or principal underwriter of a
Fund of Funds, as well as any person
controlling, controlled by, or under
common control with any of those
entities (each, a ‘‘Fund of Funds
Affiliate’’) from taking advantage of an
Unaffiliated Fund with respect to
transactions between a Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or its investment
adviser(s), sponsor, promoter, and
principal underwriter and any person
controlling, controlled by or under
common control with any of those
entities (each, an ‘‘Unaffiliated Fund
Affiliate’’). No Fund of Funds or Fund
of Funds Affiliate (except to the extent
it is acting in its capacity as an
investment adviser to an Unaffiliated
Investment Company or sponsor to an
Unaffiliated Trust) will cause an
Unaffiliated Fund to purchase a security
in an offering of securities during the
existence of any underwriting or selling
syndicate of which a principal
underwriter is an officer, director,
trustee, advisory board member,
investment adviser, Sub-Adviser or
employee of the Fund of Funds, or a
person of which any such officer,
director, trustee, investment adviser,
Sub-Adviser, member of an advisory
board, or employee is an affiliated
person (each, an ‘‘Underwriting
Affiliate,’’ except any person whose
relationship to the Unaffiliated Fund is
covered by section 10(f) of the Act is not
an Underwriting Affiliate). An offering
of securities during the existence of any
underwriting or selling syndicate of
which a principal underwriter is an
Underwriting Affiliate is an ‘‘Affiliated
Underwriting.’’
6. To further assure that an
Unaffiliated Investment Company
understands the implications of a Fund
of Funds’ investment under the
requested exemptive relief, prior to its
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’’).
Applicants note that an Unaffiliated
Fund (other than an ETF whose shares
are purchased by a Fund of Funds in the
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secondary market) will retain its right at
all times to reject any investment by a
Fund of Funds.2
7. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. To assure that
the advisory fees are not duplicative,
applicants state that, in connection with
the approval of any advisory contract
under section 15 of the Act, the Board
of each Fund of Funds, including a
majority of the trustees who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act
(‘‘Independent Trustees’’) will find that
the 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 an 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 with respect
to Registered Separate Accounts that
invest in a Fund of Funds, no sales load
will be charged at the Fund of Funds
level or at the Underlying Fund level.
Other sales charges and service fees, as
defined in Rule 2830 of the Conduct
Rules of the National Association of
Securities Dealers (‘‘NASD Conduct
Rule 2830’’), will only be charged at the
Fund of Funds level or at the
Underlying Fund level, not both. With
respect to other investments in a Fund
of Funds, any sales charges and/or
service fees charged with respect to
shares of a Fund of Funds will not
exceed the limits applicable to funds of
funds set forth in NASD Conduct Rule
2830.
9. Applicants represent that each
Fund of Funds will represent in the
Participation Agreement that no
insurance company sponsoring a
Registered Separate Account funding
Variable Contracts will be permitted to
invest in the Fund of Funds unless the
insurance company has certified to the
Fund of Funds that the aggregate of all
2 An Unaffiliated Fund, including an ETF, would
retain its right to reject any initial investment by a
Fund of Funds in excess of the limits in section
12(d)(1)(A)(i) of the Act by declining to execute the
Participation Agreement with the Fund of Funds.
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fees and charges associated with each
contract that invests in the Fund of
Funds, including fees and charges at the
separate account, Fund of Funds, and
Underlying Fund levels, are reasonable
in relation to the services rendered, the
expenses expected to be incurred, and
the risks assumed by the insurance
company.
10. Applicants state that the proposed
arrangement will not create an overly
complex fund structure because no
Underlying Fund will acquire securities
of any other investment company or
company relying on section 3(c)(1) or
3(c)(7) of the Act in excess of the limits
contained in section 12(d)(1)(A) of the
Act, except in certain circumstances
identified in condition 12 below.
Applicants also represent that a Fund of
Funds’ prospectus and sales literature
will contain clear, concise, ‘‘plain
English’’ disclosure designed to inform
investors about the unique
characteristics of the proposed
arrangement, including, but not limited
to, the expense structure and the
additional expenses of investing in
Underlying Funds.
B. Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and its affiliated persons or
affiliated persons of such persons.
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
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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 concerned; 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.
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
the purchase by the Fund of Funds of shares of an
Underlying Fund or (b) an affiliated person of an
Underlying Fund, or an affiliated person of such
person, for the sale by the Underlying Fund of its
shares to a Fund of Funds is subject to section 17(e)
of the Act. The Participation Agreement also will
include this acknowledgement.
4 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Unaffiliated
Fund that operates as an ETF through secondary
market transactions rather than through principal
transactions with the Unaffiliated Fund. To the
extent that a Fund of Funds purchases or redeems
shares from an ETF that is an affiliated person, or
an affiliated person of an affiliated person of the
Fund of Funds, in exchange for a basket of specified
securities as described in the application for the
exemptive order upon which the ETF relies,
applicants also request relief from section 17(a) for
those transactions.
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outstanding voting securities of an
Unaffiliated Fund, the Group or a SubAdviser Group, each in the aggregate,
becomes a holder of more than 25% of
the outstanding voting securities of the
Unaffiliated Fund, then the Group or the
Sub-Adviser Group (except for any
member of the Group or the SubAdviser Group that is a Separate
Account) will vote its shares of the
Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares. This condition will not apply to
a Sub-Adviser Group with respect to an
Unaffiliated Fund for which the SubAdviser or a person controlling,
controlled by, or under common control
with the Sub-Adviser acts as the
investment adviser within the meaning
of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment
Company) or as the sponsor (in the case
of an Unaffiliated Trust).
A Registered Separate Account will
seek voting instructions from its
Variable Contract holders and will vote
its shares of an Unaffiliated Fund in
accordance with the instructions
received and will vote those shares for
which no instructions were received in
the same proportion as the shares for
which instructions were received. An
Unregistered Separate Account will
either (i) vote its shares of the
Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares; or (ii) seek voting instructions
from its Variable Contract holders and
vote its shares in accordance with the
instructions received and vote those
shares for which no instructions were
received in the same proportion as the
shares for which instructions were
received.
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in an Unaffiliated Fund to
influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Independent
Trustees, will adopt procedures
reasonably designed to assure that the
Adviser and any Sub-Adviser to the
Fund of Funds are conducting the
investment program of the Fund of
Funds without taking into account any
consideration received by the Fund of
Funds or Fund of Funds Affiliate from
an Unaffiliated Fund or an Unaffiliated
Fund Affiliate in connection with any
services or transactions.
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4. Once an investment by a Fund of
Funds in the securities of an
Unaffiliated Investment Company
exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of
the Unaffiliated Investment Company,
including a majority of the Independent
Trustees, will determine that any
consideration paid by the Unaffiliated
Investment Company to a Fund of
Funds or a Fund of Funds Affiliate in
connection with any services or
transactions: (a) Is fair and reasonable in
relation to the nature and quality of the
services and benefits received by the
Unaffiliated Investment Company; (b) is
within the range of consideration that
the Unaffiliated Investment Company
would be required to pay to another
unaffiliated entity in connection with
the same services or transactions; and
(c) does not involve overreaching on the
part of any person concerned. This
condition does not apply with respect to
any services or transactions between an
Unaffiliated Investment Company and
its investment adviser(s), or any person
controlling, controlled by, or under
common control with such investment
adviser(s).
5. No Fund of Funds or Fund of
Funds Affiliate (except to the extent it
is acting in its capacity as an investment
adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated
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
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46065
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
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after a change occurs. The Unaffiliated
Investment Company and the Fund of
Funds will maintain and preserve a
copy of the order, the Participation
Agreement, and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
9. Before approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Independent Trustees,
shall find that the advisory fees charged
under the advisory contract are based on
services provided that are in addition to,
rather than duplicative of, services
provided under the advisory contract(s)
of any Underlying Fund in which the
Fund of Funds may invest. Such
finding, and the basis upon which the
finding was made, will be recorded fully
in the minute books of the appropriate
Fund of Funds.
10. The Advisers will waive fees
otherwise payable to them by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b-1 under the Act)
received from an Unaffiliated Fund by
the Adviser, or an affiliated person of
the Adviser, other than any advisory
fees paid to the Adviser or its affiliated
person by the Unaffiliated Fund, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
Any Sub-Adviser will waive fees
otherwise payable to the Sub-Adviser,
directly or indirectly, by the Fund of
Funds in an amount at least equal to any
compensation received by the SubAdviser, or an affiliated person of the
Sub-Adviser, from an Unaffiliated Fund,
other than any advisory fees paid to the
Sub-Adviser or its affiliated person by
the Unaffiliated Investment Company,
in connection with the investment by
the Fund of Funds in the Unaffiliated
Investment Company made at the
direction of the Sub-Adviser. In the
event that the Sub-Adviser waives fees,
the benefit of the waiver will be passed
through to the Fund of Funds.
11. With respect to Registered
Separate Accounts that invest in a Fund
of Funds, no sales load will be charged
at the Fund of Funds level or at the
Underlying Fund level. Other sales
charges and service fees, as defined in
NASD Conduct Rule 2830, if any, will
be charged at the Fund of Funds level
or at the Underlying Fund level, not
both. With respect to other investments
in a Fund of Funds, any sales charges
and/or service fees charged with respect
to shares of a Fund of Funds will not
exceed the limits applicable to funds of
VerDate Aug<31>2005
16:49 Aug 06, 2008
Jkt 214001
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,
Acting Secretary.
[FR Doc. E8–18069 Filed 8–6–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28350; 812–13425]
Javelin Exchange-Traded Trust, et al.;
Notice of Application
July 31, 2008.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
2(a)(32), 5(a)(1), 22(d), 22(e) and 24(d) of
the Act and rule 22c–1 under the Act,
under section 12(d)(1)(J) 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 sections 17(a)(1) and (a)(2) of the
Act.
AGENCY:
Applicants
request an order that would permit (a)
series of open-end management
investment companies to issue shares
(‘‘Fund Shares’’) that can be redeemed
only in large aggregations (‘‘Creation
Unit Aggregations’’); (b) secondary
market transactions in Fund Shares to
occur at negotiated prices; (c) dealers to
sell Fund Shares to purchasers in the
secondary market unaccompanied by a
SUMMARY OF APPLICATION:
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
prospectus when prospectus delivery is
not required by the Securities Act of
1933 (‘‘Securities Act’’); (d) certain
series to pay redemption proceeds,
under certain circumstances, more than
seven days after the tender of a Creation
Unit Aggregation for redemption; (e)
certain affiliated persons of the series to
deposit securities into, and receive
securities from, the series in connection
with the purchase and redemption of
Creation Unit Aggregations; and (f)
certain registered management
investment companies and unit
investment trusts outside of the same
group of investment companies as the
series to acquire Fund Shares.
APPLICANTS: Javelin Exchange-Traded
Trust (the ‘‘Trust’’), Javelin Investment
Management, LLC (the ‘‘Adviser’’) and
ALPS Distributors, Inc. (the
‘‘Distributor’’).
FILING DATES: The application was filed
on September 21, 2007, and amended
on May 9, 2008 and July 31, 2008.
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 August 25, 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 Brinton W. Frith,
Javelin Investment Management, LLC,
338 The Great Road, Princeton, NJ
08540.
John
Yoder, Senior Counsel, at (202) 551–
6878, or Mary Kay Frech, 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 Room, U.S. Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1520,
telephone (202) 551–5850.
FOR FURTHER INFORMATION CONTACT:
E:\FR\FM\07AUN1.SGM
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]]>Agencies
[Federal Register Volume 73, Number 153 (Thursday, August 7, 2008)]
[Notices]
[Pages 46062-46066]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-18069]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28347; 812-13456]
Goldman Sachs Trust, et al.; Notice of Application
July 31, 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: Goldman Sachs Trust (``GST''), Goldman Sachs Variable
Insurance Trust (``VIT,'' and together with GST, the ``Trusts''),
Goldman Sachs Asset Management, L.P. (``GSAM'') and Goldman Sachs Asset
Management International (``GSAMI,'' and together with GSAM, the
``Advisers'').
Filing Dates: The application was filed on November 27, 2007 and
amended on May 29, 2008. 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 August 25, 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 Jack W. Murphy,
Esq., Dechert LLP, 1775 I Street, NW., Washington, DC 20006-2401.
FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel,
at (202) 551-6990, or Marilyn Mann, 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
20549-1520 (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''). GST currently offers 86
Funds and VIT offers 11 Funds. Shares of the Trusts are registered
under the Securities Act of 1933, as amended (the ``1933 Act''). Shares
of GST are offered directly to the public. Shares of VIT are not
offered directly to the public but only to insurance company separate
accounts (``Separate Accounts'') that fund variable annuity and
variable life insurance contracts (``Variable Contracts'') issued by
participating insurance companies. The Separate Accounts may be
registered under the Act (``Registered Separate Accounts''), or
unregistered thereunder (``Unregistered Separate Accounts'').
2. GSAM is a Delaware limited partnership and a wholly-owned
subsidiary of The Goldman Sachs Group, Inc. GSAM is a registered
investment adviser under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act'') and serves as investment adviser for
eighty-six of the Funds. GSAMI is a company organized under the laws of
England and Wales and is a registered investment adviser under the
Advisers Act. GSAMI is indirectly wholly-owned by The Goldman Sachs
Group, Inc.
3. Applicants request relief to permit: (a) A Fund (each a ``Fund
of Funds'') to acquire shares of registered open-end management
investment companies (the ``Unaffiliated Investment Companies'') and
unit investment trusts (``UITs'') that are not part of the same ``group
of investment companies'' as defined in section 12(d)(1)(G)(ii) of the
Act (``Unaffiliated Trusts,'' and together with Unaffiliated Investment
Companies, the ``Unaffiliated Funds''); (b) the Unaffiliated Investment
Companies, their principal underwriters
[[Page 46063]]
and any broker or dealer (``Broker'') registered under the Securities
Exchange Act of 1934 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 underwriters
and any Brokers to sell their shares to the Fund of Funds.\1\ Certain
of the Unaffiliated Funds have obtained exemptions from the Commission
to permit their shares to be listed and traded on a national securities
exchange at negotiated prices (``ETFs''). Each Fund of Funds may also
invest in other securities and financial instruments that are not
issued by registered investment companies and are consistent with its
investment objective and restrictions.
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\1\ Applicants request that the order extend to any future
series of the Trusts, 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 Advisers or any other investment
adviser controlling, controlled by, or under common control with the
Advisers (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.
---------------------------------------------------------------------------
Applicants' Legal Analysis
Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act prohibits a registered investment
company from acquiring shares of an investment company if the
securities represent more than 3% of the total outstanding voting stock
of the acquired company, more than 5% of the total assets of the
acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter and
any broker or dealer from selling the shares of the investment company
to another investment company if the sale will cause the acquiring
company to own more than 3% of the acquired company's voting stock, or
if the sale will cause more than 10% of the acquired company's voting
stock to be owned by investment companies generally.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction, or any class or classes of
persons, securities or transactions, from any provision of section
12(d)(1) if the exemption is consistent with the public interest and
the protection of investors. Applicants seek an exemption under section
12(d)(1)(J) of the Act from the limitations of sections 12(d)(1)(A) and
(B) to the extent necessary to permit the Funds of Funds to acquire
shares of the Underlying Funds in excess of the limits set forth in
section 12(d)(1)(A) of the Act and to permit the Unaffiliated
Investment Companies and Affiliated Funds, their principal underwriters
and any Broker to sell their shares to the Funds of Funds in excess of
the limits set forth in section 12(d)(1)(B) of the Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections 12(d)(1)(A) and (B),
which include concerns about undue influence by a fund of funds or its
affiliated persons over underlying funds, excessive layering of fees,
and overly complex fund structures. Accordingly, applicants believe
that the requested 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 submit that: (a) the Advisers and
any person controlling, controlled by or under common control with the
Advisers, any investment company and any issuer that would be an
investment company but for section 3(c)(1) or section 3(c)(7) of the
Act advised or sponsored by the Advisers or any person controlling,
controlled by or under common control with the Advisers (collectively,
the ``Group''); and (b) any investment adviser within the meaning of
section 2(a)(20)(B) of the Act to a Fund of Funds (``Sub-Adviser'') and
any person controlling, controlled by or under common control with the
Sub-Adviser, and any investment company or issuer that would be an
investment company but for section 3(c)(1) or 3(c)(7) of the Act (or
portion of such investment company or issuer) advised by the Sub-
Adviser or any person controlling, controlled by or under common
control with the Sub-Adviser (collectively, the ``Sub-Adviser Group'')
will not control (individually or in the aggregate) an Unaffiliated
Fund within the meaning of section 2(a)(9) of the Act.
5. Applicants further state that condition 2 below precludes a Fund
of Funds or the Advisers, any Sub-Adviser, promoter or principal
underwriter of a Fund of Funds, as well as any person controlling,
controlled by, or under common control with any of those entities
(each, a ``Fund of Funds Affiliate'') from taking advantage of an
Unaffiliated Fund with respect to transactions between a Fund of Funds
or a Fund of Funds Affiliate and the Unaffiliated Fund or its
investment adviser(s), sponsor, promoter, and principal underwriter and
any person controlling, controlled by or under common control with any
of those entities (each, an ``Unaffiliated Fund Affiliate''). No Fund
of Funds or Fund of Funds Affiliate (except to the extent it is acting
in its capacity as an investment adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated
Fund to purchase a security in an offering of securities during the
existence of any underwriting or selling syndicate of which a principal
underwriter is an officer, director, trustee, advisory board member,
investment adviser, Sub-Adviser or employee of the Fund of Funds, or a
person of which any such officer, director, trustee, investment
adviser, Sub-Adviser, member of an advisory board, or employee is an
affiliated person (each, an ``Underwriting Affiliate,'' except any
person whose relationship to the Unaffiliated Fund is covered by
section 10(f) of the Act is not an Underwriting Affiliate). An offering
of securities during the existence of any underwriting or selling
syndicate of which a principal underwriter is an Underwriting Affiliate
is an ``Affiliated Underwriting.''
6. To further assure that an Unaffiliated Investment Company
understands the implications of a Fund of Funds' investment under the
requested exemptive relief, prior to its 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''). Applicants note that an Unaffiliated
Fund (other than an ETF whose shares are purchased by a Fund of Funds
in the
[[Page 46064]]
secondary market) will retain its right at all times to reject any
investment by a Fund of Funds.\2\
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\2\ An Unaffiliated Fund, including an ETF, would retain its
right to reject any initial investment by a Fund of Funds in excess
of the limits in section 12(d)(1)(A)(i) of the Act by declining to
execute the Participation Agreement with the Fund of Funds.
---------------------------------------------------------------------------
7. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. To assure that the advisory fees
are not duplicative, applicants state that, in connection with the
approval of any advisory contract under section 15 of the Act, the
Board of each Fund of Funds, including a majority of the trustees who
are not ``interested persons,'' as defined in section 2(a)(19) of the
Act (``Independent Trustees'') will find that the 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 an 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 with respect to Registered Separate
Accounts that invest in a Fund of Funds, no sales load will be charged
at the Fund of Funds level or at the Underlying Fund level. Other sales
charges and service fees, as defined in Rule 2830 of the Conduct Rules
of the National Association of Securities Dealers (``NASD Conduct Rule
2830''), will only be charged at the Fund of Funds level or at the
Underlying Fund level, not both. With respect to other investments in a
Fund of Funds, any sales charges and/or service fees charged with
respect to shares of a Fund of Funds will not exceed the limits
applicable to funds of funds set forth in NASD Conduct Rule 2830.
9. Applicants represent that each Fund of Funds will represent in
the Participation Agreement that no insurance company sponsoring a
Registered Separate Account funding Variable Contracts will be
permitted to invest in the Fund of Funds unless the insurance company
has certified to the Fund of Funds that the aggregate of all fees and
charges associated with each contract that invests in the Fund of
Funds, including fees and charges at the separate account, Fund of
Funds, and Underlying Fund levels, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks
assumed by the insurance company.
10. Applicants state that the proposed arrangement will not create
an overly complex fund structure because no Underlying Fund will
acquire securities of any other investment company or company relying
on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits
contained in section 12(d)(1)(A) of the Act, except in certain
circumstances identified in condition 12 below. Applicants also
represent that a Fund of Funds' prospectus and sales literature will
contain clear, concise, ``plain English'' disclosure designed to inform
investors about the unique characteristics of the proposed arrangement,
including, but not limited to, the expense structure and the additional
expenses of investing in Underlying Funds.
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and its
affiliated persons or affiliated persons of such persons. 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 is subject to
section 17(e) 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 concerned; 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 rather than through
principal transactions with the Unaffiliated Fund. To the extent
that a Fund of Funds purchases or redeems shares from an ETF that is
an affiliated person, or an affiliated person of an affiliated
person of the Fund of Funds, in exchange for a basket of specified
securities as described in the application for the exemptive order
upon which the ETF relies, applicants also request relief from
section 17(a) for those transactions.
---------------------------------------------------------------------------
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
[[Page 46065]]
outstanding voting securities of an Unaffiliated Fund, the Group or a
Sub-Adviser Group, each in the aggregate, becomes a holder of more than
25% of the outstanding voting securities of the Unaffiliated Fund, then
the Group or the Sub-Adviser Group (except for any member of the Group
or the Sub-Adviser Group that is a Separate Account) will vote its
shares of the Unaffiliated Fund in the same proportion as the vote of
all other holders of the Unaffiliated Fund's shares. This condition
will not apply to a Sub-Adviser Group with respect to an Unaffiliated
Fund for which the Sub-Adviser or a person controlling, controlled by,
or under common control with the Sub-Adviser acts as the investment
adviser within the meaning of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment Company) or as the sponsor (in the
case of an Unaffiliated Trust).
A Registered Separate Account will seek voting instructions from
its Variable Contract holders and will vote its shares of an
Unaffiliated Fund in accordance with the instructions received and will
vote those shares for which no instructions were received in the same
proportion as the shares for which instructions were received. An
Unregistered Separate Account will either (i) vote its shares of the
Unaffiliated Fund in the same proportion as the vote of all other
holders of the Unaffiliated Fund's shares; or (ii) seek voting
instructions from its Variable Contract holders and vote its shares in
accordance with the instructions received and vote those shares for
which no instructions were received in the same proportion as the
shares for which instructions were received.
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in an
Unaffiliated Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Trustees, will adopt procedures reasonably designed to
assure that the Adviser and any Sub-Adviser to the Fund of Funds are
conducting the investment program of the Fund of Funds without taking
into account any consideration received by the Fund of Funds or Fund of
Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund
Affiliate in connection with any services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Investment Company exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment
Company, including a majority of the Independent Trustees, will
determine that any consideration paid by the Unaffiliated Investment
Company to a Fund of Funds or a Fund of Funds Affiliate in connection
with any services or transactions: (a) Is fair and reasonable in
relation to the nature and quality of the services and benefits
received by the Unaffiliated Investment Company; (b) is within the
range of consideration that the Unaffiliated Investment Company would
be required to pay to another unaffiliated entity in connection with
the same services or transactions; and (c) does not involve
overreaching on the part of any person concerned. This condition does
not apply with respect to any services or transactions between an
Unaffiliated Investment Company and its investment adviser(s), or any
person controlling, controlled by, or under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Investment Company or sponsor to an Unaffiliated 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
[[Page 46066]]
after a change occurs. The Unaffiliated Investment Company and the Fund
of Funds will maintain and preserve a copy of the order, the
Participation Agreement, and the list with any updated information for
the duration of the investment and for a period of not less than six
years thereafter, the first two years in an easily accessible place.
9. Before approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Independent Trustees, shall find that the advisory fees charged under
the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Fund of Funds
may invest. Such finding, and the basis upon which the finding was
made, will be recorded fully in the minute books of the appropriate
Fund of Funds.
10. The Advisers will waive fees otherwise payable to them by a
Fund of Funds in an amount at least equal to any compensation
(including fees received pursuant to any plan adopted by an
Unaffiliated Investment Company pursuant to rule 12b-1 under the Act)
received from an Unaffiliated Fund by the Adviser, or an affiliated
person of the Adviser, other than any advisory fees paid to the Adviser
or its affiliated person by the Unaffiliated Fund, in connection with
the investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-
Adviser will waive fees otherwise payable to the Sub-Adviser, directly
or indirectly, by the Fund of Funds in an amount at least equal to any
compensation received by the Sub-Adviser, or an affiliated person of
the Sub-Adviser, from an Unaffiliated Fund, other than any advisory
fees paid to the Sub-Adviser or its affiliated person by the
Unaffiliated Investment Company, in connection with the investment by
the Fund of Funds in the Unaffiliated Investment Company made at the
direction of the Sub-Adviser. In the event that the Sub-Adviser waives
fees, the benefit of the waiver will be passed through to the Fund of
Funds.
11. With respect to Registered Separate Accounts that invest in a
Fund of Funds, no sales load will be charged at the Fund of Funds level
or at the Underlying Fund level. Other sales charges and service fees,
as defined in NASD Conduct Rule 2830, if any, will be charged at the
Fund of Funds level or at the Underlying Fund level, not both. With
respect to other investments in a Fund of Funds, any sales charges and/
or service fees charged with respect to shares of a 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,
Acting Secretary.
[FR Doc. E8-18069 Filed 8-6-08; 8:45 am]
BILLING CODE 8010-01-P
