Aberdeen Asset Management Inc. and Aberdeen Funds, et al.; Notice of Application, 58687-58691 [E8-23691]
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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Notices
58687
6811, 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 Room,
100 F Street, NE., Washington, DC
20549–1520 (telephone (202) 551–5850).
specific information, as well as portions
of the Governors’ Decision, should
remain confidential.
In its Request, the Postal Service
provides an analysis of the contract
which, among other things, concludes
that it is consistent with 39 U.S.C.
3633(a) and 39 CFR 3015.7(c). The
analysis notes that the contract is not
risk free, but concludes that the risks are
manageable. See Attachment to
Governors’ Decision.
SECURITIES AND EXCHANGE
COMMISSION
II. Notice of Filings
1. The Trust, a Delaware statutory
trust, is registered under the Act as an
open-end management investment
company and offers multiple series,
each of which has its own distinct
investment objectives and policies
(‘‘Funds’’).1 The Trust currently offers
26 Funds. The Aberdeen Optimal
Summary of the Application:
Allocations Fund: Defensive; Aberdeen
Applicants request an order that would
Optimal Allocations Fund: Moderate;
permit certain series of registered open- Aberdeen Optimal Allocations Fund:
end management investment companies Moderate Growth; Aberdeen Optimal
to acquire shares of other registered
Allocations Fund: Growth; and
open-end management investment
Aberdeen Optimal Allocations Fund:
companies and unit investment trusts
Specialty (collectively, the ‘‘Optimal
that are within or outside the same
Allocation Funds’’) are the only Funds
group of investment companies.
that currently intend to rely on the
Applicants: Aberdeen Funds (the
requested relief. Shares of the Optimal
‘‘Trust’’) and Aberdeen Asset
Allocation Funds are offered directly to
Management Inc. (the ‘‘Adviser’’).
the public and may be offered to
Filing Dates: The application was
insurance company separate accounts
filed on May 8, 2008. Applicants have
(‘‘Separate Accounts’’) that fund
agreed to file an amendment during the
variable annuity and variable life
notice period, the substance of which is insurance contracts (‘‘Variable
reflected herein.
Contracts’’) issued by insurance
Hearing or Notification of Hearing: An companies that are not affiliates of the
order granting the application will be
Adviser. The Separate Accounts may be
issued unless the Commission orders a
registered under the Act (‘‘Registered
hearing. Interested persons may request Separate Accounts’’), or unregistered
a hearing by writing to the
thereunder (‘‘Unregistered Separate
Commission’s Secretary and serving
Accounts’’).
applicants with a copy of the request,
2. The Adviser is a Delaware
personally or by mail. Hearing requests
corporation and a registered investment
should be received by the Commission
adviser under the Investment Advisers
by 5:30 p.m. on October 27, 2008, and
Act of 1940, and serves as investment
should be accompanied by proof of
adviser to each Fund. The Adviser is a
service on applicants in the form of an
wholly owned subsidiary of Aberdeen
affidavit or, for lawyers, a certificate of
Asset Management PLC.
service. Hearing requests should state
3. Applicants request relief to permit:
the nature of the writer’s interest, the
(a) Certain Funds (each a ‘‘Fund of
reason for the request, and the issues
Funds’’) to acquire shares of registered
contested. Persons who wish to be
open-end management investment
notified of a hearing may request
1 Applicants request that the order extend to any
notification by writing to the
future series of the Trust, and any other existing or
Commission’s Secretary.
future registered open-end management investment
ADDRESSES: Secretary, U.S. Securities
companies and their series that are part of the same
and Exchange Commission, 100 F
group of investment companies, as defined in
section 12(d)(1)(G)(ii) of the Act, as the Trust and
Street, NE., Washington, DC 20549–
1090; Applicants: Adviser, 1735 Market are, or may in the future be, advised by the Adviser
or any other investment adviser controlling,
Street, 37th Floor, Philadelphia, PA
controlled by, or under common control with the
19103; Trust, 5 Tower Bridge, 300 Barr
Adviser (included in the term, ‘‘Funds’’). The Trust
is the only registered investment company that
Harbor Drive, Ste. 300, West
currently intends to rely on the requested order.
Conshohocken, PA 19428.
Any other entity that relies on the order in the
FOR FURTHER INFORMATION CONTACT: Jean future will comply with the terms and conditions
Minarick, Senior Counsel, at (202) 551– of the application.
The Commission establishes Docket
Nos. MC2008–8 and CP2008–26 for
consideration of the Request pertaining
to the Priority Mail Contract 1 product
and the related contract. In keeping with
practice, these dockets are addressed on
a consolidated basis for purposes of this
order; however, future filings should be
made in the specific docket in which
issues being addressed pertain.
Interested persons may submit
comments on whether the Postal
Service’s filings in the captioned
dockets are consistent with the policies
of 39 U.S.C. 3632, 3633, or 3642.
Comments are due no later than October
9, 2008. The public portions of these
filings can be accessed via the
Commission’s Web site (https://
www.prc.gov).
The Commission appoints Michael
Ravnitzky to serve as Public
Representative in the captioned filings.
III. Ordering Paragraphs
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It is ordered:
1. The Commission establishes Docket
Nos. MC2008–8 and CP2008–26 for
consideration of the matters raised in
each docket.
2. The Commission, pursuant to 39
U.S.C. 505, appoints Michael Ravnitzky
to serve as officer of the Commission
(Public Representative) to represent the
interests of the general public in these
proceedings.
3. Comments by interested persons in
these proceedings are due no later than
October 9, 2008.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. E8–23733 Filed 10–6–08; 8:45 am]
BILLING CODE 7710–FW–P
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[Investment Company Act Release No.
28429; 812–13530]
Aberdeen Asset Management Inc. and
Aberdeen Funds, et al.; Notice of
Application
September 30, 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:
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Applicants’ Representations
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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Notices
companies (the ‘‘Unaffiliated Funds’’)
and unit investment trusts
(‘‘Unaffiliated Trusts,’’ and together
with the Unaffiliated Funds, the
‘‘Unaffiliated Underlying Funds’’) that
are not part of the same ‘‘group of
investment companies’’ as defined in
section 12(d)(1)(G)(ii) of the Act; (b) the
Unaffiliated Funds, their principal
underwriters 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 Funds of Funds to acquire shares of
certain other Funds (the ‘‘Affiliated
Funds,’’ and together with the
Unaffiliated Underlying Funds, the
‘‘Underlying Funds’’); and (d) the
Affiliated Funds, their principal
underwriters and any Brokers to sell
their shares to the Fund of Funds.
Certain of the Unaffiliated Underlying
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. Any
investment adviser to a Fund of Funds
that meets the definition of section
2(a)(20)(A) of the Act is referred to as
‘‘Fund of Funds’ Adviser.’’
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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
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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 Funds
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
Underlying Fund, applicants submit
that: (a) The Fund of Funds’ Adviser
and any person controlling, controlled
by or under common control with the
Fund of Funds’ 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 Fund of
Funds’ Adviser or any person
controlling, controlled by or under
common control with the Fund of
Funds’ 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
(‘‘Fund of Funds’ Sub-Adviser’’), any
person controlling, controlled by or
under common control with the Fund of
Funds’ 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 or sponsored by the
Fund of Funds’ Sub-Adviser or any
person controlling, controlled by or
under common control with the Fund of
Funds’ Sub-Adviser (collectively, the
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‘‘Sub-Adviser Group’’) will not control
(individually or in the aggregate) an
Unaffiliated Underlying 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 Fund of Funds’ Adviser,
any Fund of Funds’ 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 Underlying Fund with
respect to transactions between a Fund
of Funds or a Fund of Funds Affiliate
and the Unaffiliated Underlying 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
Fund or sponsor to an Unaffiliated
Trust) will cause an Unaffiliated
Underlying 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, Fund of
Funds’ Adviser, Fund of Funds’ SubAdviser or employee of the Fund of
Funds, or a person of which any such
officer, director, trustee, Fund of Funds’
Adviser, Fund of Funds’ 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 Underlying 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 Fund understands the
implications of a Fund of Funds’
investment under the requested
exemptive relief, prior to its investment
in the shares of an Unaffiliated Fund in
excess of the limit in section
12(d)(1)(A)(i) of the Act, a Fund of
Funds and the Unaffiliated Fund 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
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Unaffiliated Fund (other than an ETF
whose shares are purchased by a Fund
of Funds in the secondary market) will
retain its right at all times to reject any
investment by a Fund of Funds.2
7. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. To assure that
the 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 a Fund of Funds’ 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 Fund
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated
Underlying Fund by the Fund of Funds’
Adviser, or an affiliated person of the
Fund of Funds’ Adviser, other than any
advisory fees paid to the Fund of Funds’
Adviser or an affiliated person of the
Fund of Funds’Adviser by the
Unaffiliated Underlying Fund, in
connection with the investment by the
Fund of Funds in the Unaffiliated
Underlying 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
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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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 Fund of Funds’ 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
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58689
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 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 Underlying Fund within
the meaning of section 2(a)(9) of the Act.
3 Applicants acknowledge that receipt of
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.
4 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Unaffiliated
Underlying Fund that operates as an ETF through
secondary market transactions rather than through
principal transactions with the Unaffiliated
Underlying 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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58690
Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Notices
The members of a Sub-Adviser Group
will not control (individually or in the
aggregate) an Unaffiliated Underlying
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 Underlying
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 Underlying 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 Underlying Fund in the
same proportion as the vote of all other
holders of the Unaffiliated Underlying
Fund’s shares. This condition will not
apply to a Sub-Adviser Group with
respect to an Unaffiliated Underlying
Fund for which the Fund of Funds’ SubAdviser or a person controlling,
controlled by, or under common control
with the Fund of Funds’ Sub-Adviser
acts as the investment adviser within
the meaning section 2(a)(20)(A) of the
Act (in the case of an Unaffiliated Fund)
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 Underlying
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 Underlying Fund in the
same proportion as the vote of all other
holders of the Unaffiliated Underlying
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 Underlying
Fund to influence the terms of any
services or transactions between the
Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated
Underlying 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
Funds of Funds’ Adviser and any Fund
of Funds’ Sub-Adviser to the Fund of
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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
Underlying 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 Fund exceeds the limit of
section 12(d)(1)(A)(i) of the Act, the
Board of the Unaffiliated Fund,
including a majority of the Independent
Trustees, will determine that any
consideration paid by the Unaffiliated
Fund 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 Fund; (b) is
within the range of consideration that
the Unaffiliated Fund would be required
to pay to another unaffiliated entity in
connection with the same services or
transactions; and (c) does not involve
overreaching on the part of any person
concerned. This condition does not
apply with respect to any services or
transactions between an Unaffiliated
Fund 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 Fund or
sponsor to an Unaffiliated Trust) will
cause an Unaffiliated Underlying Fund
to purchase a security in any Affiliated
Underwriting.
6. The Board of an Unaffiliated Fund,
including a majority of the Independent
Trustees, will adopt procedures
reasonably designed to monitor any
purchases of securities by the
Unaffiliated Fund in an Affiliated
Underwriting once an investment by a
Fund of Funds in the securities of the
Unaffiliated Fund 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 Fund will
review these purchases 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 Fund.
The Board of the Unaffiliated Fund will
consider, among other things: (a)
Whether the purchases were consistent
with the investment objectives and
policies of the Unaffiliated Fund; (b)
how the performance of securities
purchased in an Affiliated Underwriting
compares to the performance of
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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 Fund in
Affiliated Underwritings and the
amount purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of an Unaffiliated Fund will take
any appropriate actions based on its
review, including, if appropriate, the
institution of procedures designed to
assure that purchases of securities in
Affiliated Underwritings are in the best
interests of shareholders.
7. Each Unaffiliated Fund will
maintain and preserve permanently in
an easily accessible place a written copy
of the procedures described in the
preceding condition, and any
modifications to such procedures, and
will maintain and preserve for a period
of not less than six years from the end
of the fiscal year in which any purchase
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 Fund
exceeds the limit of section
12(d)(1)(A)(i) of the Act, setting forth
from whom the securities were
acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the determinations of the Board of the
Unaffiliated Fund were made.
8. Prior to an investment in shares of
an Unaffiliated Fund in excess of the
limit in section 12(d)(1)(A)(i) of the Act,
the Fund of Funds and the Unaffiliated
Fund 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 Fund in excess
of the limit in section 12(d)(1)(A)(i), a
Fund of Funds will notify the
Unaffiliated Fund of the investment. At
such time, the Fund of Funds will also
transmit to the Unaffiliated Fund a list
of the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the
Unaffiliated Fund of any changes to the
list as soon as reasonably practicable
after a change occurs. The Unaffiliated
Fund and the Fund of Funds will
maintain and preserve a copy of the
order, the Participation Agreement, and
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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Notices
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. Prior to reliance on the requested
order and subsequently in connection
with the approval of any investment
advisory contract under section 15 of
the Act, the Board of each Fund of
Funds, including a majority of the
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
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 Funds of Funds’ 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 Fund
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated
Underlying Fund by the Funds of
Funds’ Adviser, or an affiliated person
of the Fund of Funds’ Adviser, other
than any advisory fees paid to the Fund
of Funds’ Adviser or its affiliated person
by the Unaffiliated Fund, in connection
with the investment by the Fund of
Funds in the Unaffiliated Underlying
Fund. Any Fund of Funds’ Sub-Adviser
will waive fees otherwise payable to the
Fund of Funds’ Sub-Adviser, directly or
indirectly, by the Fund of Funds in an
amount at least equal to any
compensation received from an
Unaffiliated Underlying Fund by the
Fund of Funds’ Sub-Adviser, or an
affiliated person of the Fund of Funds’
Sub-Adviser, other than any advisory
fees paid to the Fund of Funds’ SubAdviser or its affiliated person by an
Unaffiliated Fund, in connection with
the investment by the Fund of Funds in
the Unaffiliated Underlying Fund made
at the direction of the Fund of Funds’
Sub-Adviser. In the event that the Fund
of Funds’ 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
VerDate Aug<31>2005
18:23 Oct 06, 2008
Jkt 217001
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
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. E8–23691 Filed 10–6–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–28431; 812–13540]
Eaton Vance Floating-Rate Income
Trust, et al.; Notice of Application
October 2, 2008.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 6(c) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
18(a)(1)(A) and (B) of the Act.
AGENCY:
Eaton Vance Floating-Rate
Income Trust, Eaton Vance Senior
Floating-Rate Trust, Eaton Vance Senior
Income Trust, Eaton Vance Credit
Opportunities Fund, and Eaton Vance
Limited Duration Income Fund (each, a
‘‘Fund’’ and collectively, ‘‘Funds’’).
SUMMARY OF APPLICATION: Applicants
request an order (‘‘Order’’) granting an
exemption from sections 18(a)(1)(A) and
(B) of the Act for a two-year period
immediately following the date of the
Order. The Order would permit each
Fund to issue debt securities subject to
asset coverage of 200% that would be
used to refinance all of the Fund’s
APPLICANTS:
PO 00000
Frm 00163
Fmt 4703
Sfmt 4703
58691
issued and outstanding auction
preferred shares (‘‘APS Shares’’). The
Order also would permit each Fund to
declare dividends or any other
distributions on, or purchase, capital
stock during the term of the Order,
provided that any class of senior
securities representing indebtedness has
asset coverage of at least 200% after
deducting the amount of such
transaction.
FILING DATES: The application was filed
on June 10, 2008, and amended on July
2, 2008, July 29, 2008, and September 2,
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 October 22, 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, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090.
Applicants: c/o Frederick S. Marius,
Chief Legal Officer, Eaton Vance
Management, 255 State Street, Boston,
MA 02109.
FOR FURTHER INFORMATION CONTACT:
Courtney S. Thornton, Senior Counsel,
at (202) 551–6812, or Janet M.
Grossnickle, Assistant Director, at (202)
942–6821 (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 SEC’s
Public Reference Room, 100 F Street,
NE., Washington, DC 20549–1520 (tel.
202–551–5850).
Applicants’ Representations
1. Each of the Funds is organized as
a Massachusetts business trust and is a
closed-end management investment
company registered under the Act. Each
Fund is advised by Eaton Vance
Management (‘‘Eaton Vance’’) and has
issued and outstanding a class of
common shares and a class of one or
more series of APS Shares.
E:\FR\FM\07OCN1.SGM
07OCN1
]]>Agencies
[Federal Register Volume 73, Number 195 (Tuesday, October 7, 2008)]
[Notices]
[Pages 58687-58691]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23691]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28429; 812-13530]
Aberdeen Asset Management Inc. and Aberdeen Funds, et al.; Notice
of Application
September 30, 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 series of registered open-end management investment
companies to acquire shares of other registered open-end management
investment companies and unit investment trusts that are within or
outside the same group of investment companies.
Applicants: Aberdeen Funds (the ``Trust'') and Aberdeen Asset
Management Inc. (the ``Adviser'').
Filing Dates: The application was filed on May 8, 2008. Applicants
have agreed to file an amendment during the notice period, the
substance of which is reflected herein.
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 October 27, 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: Adviser, 1735
Market Street, 37th Floor, Philadelphia, PA 19103; Trust, 5 Tower
Bridge, 300 Barr Harbor Drive, Ste. 300, West Conshohocken, PA 19428.
FOR FURTHER INFORMATION CONTACT: Jean Minarick, Senior Counsel, at
(202) 551-6811, 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 Room, 100 F Street, NE., Washington, DC
20549-1520 (telephone (202) 551-5850).
Applicants' Representations
1. The Trust, a Delaware statutory trust, is registered under the
Act as an open-end management investment company and offers multiple
series, each of which has its own distinct investment objectives and
policies (``Funds'').\1\ The Trust currently offers 26 Funds. The
Aberdeen Optimal Allocations Fund: Defensive; Aberdeen Optimal
Allocations Fund: Moderate; Aberdeen Optimal Allocations Fund: Moderate
Growth; Aberdeen Optimal Allocations Fund: Growth; and Aberdeen Optimal
Allocations Fund: Specialty (collectively, the ``Optimal Allocation
Funds'') are the only Funds that currently intend to rely on the
requested relief. Shares of the Optimal Allocation Funds are offered
directly to the public and may be offered to insurance company separate
accounts (``Separate Accounts'') that fund variable annuity and
variable life insurance contracts (``Variable Contracts'') issued by
insurance companies that are not affiliates of the Adviser. The
Separate Accounts may be registered under the Act (``Registered
Separate Accounts''), or unregistered thereunder (``Unregistered
Separate Accounts'').
---------------------------------------------------------------------------
\1\ Applicants request that the order extend to any future
series of the Trust, 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 Trust 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 Trust is the only
registered investment company that currently intends 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. The Adviser is a Delaware corporation and a registered
investment adviser under the Investment Advisers Act of 1940, and
serves as investment adviser to each Fund. The Adviser is a wholly
owned subsidiary of Aberdeen Asset Management PLC.
3. Applicants request relief to permit: (a) Certain Funds (each a
``Fund of Funds'') to acquire shares of registered open-end management
investment
[[Page 58688]]
companies (the ``Unaffiliated Funds'') and unit investment trusts
(``Unaffiliated Trusts,'' and together with the Unaffiliated Funds, the
``Unaffiliated Underlying Funds'') that are not part of the same
``group of investment companies'' as defined in section 12(d)(1)(G)(ii)
of the Act; (b) the Unaffiliated Funds, their principal underwriters
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
Funds of Funds to acquire shares of certain other Funds (the
``Affiliated Funds,'' and together with the Unaffiliated Underlying
Funds, the ``Underlying Funds''); and (d) the Affiliated Funds, their
principal underwriters and any Brokers to sell their shares to the Fund
of Funds. Certain of the Unaffiliated Underlying 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. Any investment adviser to a Fund of Funds that meets the
definition of section 2(a)(20)(A) of the Act is referred to as ``Fund
of Funds' Adviser.''
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 Funds 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 Underlying Fund, applicants submit that: (a) The
Fund of Funds' Adviser and any person controlling, controlled by or
under common control with the Fund of Funds' 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 Fund of Funds' Adviser or any person controlling, controlled by or
under common control with the Fund of Funds' 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 (``Fund of Funds'
Sub-Adviser''), any person controlling, controlled by or under common
control with the Fund of Funds' 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 or sponsored by the Fund of Funds' Sub-Adviser or any person
controlling, controlled by or under common control with the Fund of
Funds' Sub-Adviser (collectively, the ``Sub-Adviser Group'') will not
control (individually or in the aggregate) an Unaffiliated Underlying
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 Fund of Funds' Adviser, any Fund of Funds' 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 Underlying Fund with respect to
transactions between a Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Underlying 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 Fund or sponsor to an
Unaffiliated Trust) will cause an Unaffiliated Underlying 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,
Fund of Funds' Adviser, Fund of Funds' Sub-Adviser or employee of the
Fund of Funds, or a person of which any such officer, director,
trustee, Fund of Funds' Adviser, Fund of Funds' 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 Underlying 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 Fund understands the
implications of a Fund of Funds' investment under the requested
exemptive relief, prior to its investment in the shares of an
Unaffiliated Fund in excess of the limit in section 12(d)(1)(A)(i) of
the Act, a Fund of Funds and the Unaffiliated Fund 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
[[Page 58689]]
Unaffiliated Fund (other than an ETF whose shares are purchased by a
Fund of Funds in the secondary market) will retain its right at all
times to reject any investment by a Fund of Funds.\2\
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\2\ An Unaffiliated Fund, including an ETF, would retain its
right to reject any initial investment by a Fund of Funds in excess
of the 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 a Fund of Funds' 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 Fund pursuant to rule 12b-1 under the Act) received from
an Unaffiliated Underlying Fund by the Fund of Funds' Adviser, or an
affiliated person of the Fund of Funds' Adviser, other than any
advisory fees paid to the Fund of Funds' Adviser or an affiliated
person of the Fund of Funds'Adviser by the Unaffiliated Underlying
Fund, in connection with the investment by the Fund of Funds in the
Unaffiliated Underlying 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 Fund of Funds'
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 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 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 Underlying Fund that
operates as an ETF through secondary market transactions rather than
through principal transactions with the Unaffiliated Underlying
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 Underlying Fund within the meaning of
section 2(a)(9) of the Act.
[[Page 58690]]
The members of a Sub-Adviser Group will not control (individually or
in the aggregate) an Unaffiliated Underlying 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 Underlying 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 Underlying 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 Underlying
Fund in the same proportion as the vote of all other holders of the
Unaffiliated Underlying Fund's shares. This condition will not apply to
a Sub-Adviser Group with respect to an Unaffiliated Underlying Fund for
which the Fund of Funds' Sub-Adviser or a person controlling,
controlled by, or under common control with the Fund of Funds' Sub-
Adviser acts as the investment adviser within the meaning section
2(a)(20)(A) of the Act (in the case of an Unaffiliated Fund) 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 Underlying 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 Underlying Fund in the same proportion
as the vote of all other holders of the Unaffiliated Underlying 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 Underlying Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Underlying 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 Funds of Funds' Adviser and any Fund of Funds' 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 Underlying 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 Fund exceeds the limit of section 12(d)(1)(A)(i) of the
Act, the Board of the Unaffiliated Fund, including a majority of the
Independent Trustees, will determine that any consideration paid by the
Unaffiliated Fund 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 Fund; (b) is within the range of
consideration that the Unaffiliated Fund would be required to pay to
another unaffiliated entity in connection with the same services or
transactions; and (c) does not involve overreaching on the part of any
person concerned. This condition does not apply with respect to any
services or transactions between an Unaffiliated Fund 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 Fund or sponsor to an Unaffiliated Trust) will cause an
Unaffiliated Underlying Fund to purchase a security in any Affiliated
Underwriting.
6. The Board of an Unaffiliated Fund, including a majority of the
Independent Trustees, will adopt procedures reasonably designed to
monitor any purchases of securities by the Unaffiliated Fund in an
Affiliated Underwriting once an investment by a Fund of Funds in the
securities of the Unaffiliated Fund 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 Fund will
review these purchases 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 Fund. The Board of
the Unaffiliated Fund will consider, among other things: (a) Whether
the purchases were consistent with the investment objectives and
policies of the Unaffiliated Fund; (b) how the performance of
securities purchased in an Affiliated Underwriting compares to the
performance of comparable securities purchased during a comparable
period of time in underwritings other than Affiliated Underwritings or
to a benchmark such as a comparable market index; and (c) whether the
amount of securities purchased by the Unaffiliated Fund in Affiliated
Underwritings and the amount purchased directly from an Underwriting
Affiliate have changed significantly from prior years. The Board of an
Unaffiliated Fund will take any appropriate actions based on its
review, including, if appropriate, the institution of procedures
designed to assure that purchases of securities in Affiliated
Underwritings are in the best interests of shareholders.
7. Each Unaffiliated Fund will maintain and preserve permanently in
an easily accessible place a written copy of the procedures described
in the preceding condition, and any modifications to such procedures,
and will maintain and preserve for a period of not less than six years
from the end of the fiscal year in which any purchase 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 Fund exceeds the limit of section
12(d)(1)(A)(i) of the Act, setting forth from whom the securities were
acquired, the identity of the underwriting syndicate's members, the
terms of the purchase, and the information or materials upon which the
determinations of the Board of the Unaffiliated Fund were made.
8. Prior to an investment in shares of an Unaffiliated Fund in
excess of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Fund 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 Fund in excess of the limit in
section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated
Fund of the investment. At such time, the Fund of Funds will also
transmit to the Unaffiliated Fund a list of the names of each Fund of
Funds Affiliate and Underwriting Affiliate. The Fund of Funds will
notify the Unaffiliated Fund of any changes to the list as soon as
reasonably practicable after a change occurs. The Unaffiliated Fund and
the Fund of Funds will maintain and preserve a copy of the order, the
Participation Agreement, and
[[Page 58691]]
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. Prior to reliance on the requested order and subsequently in
connection with the approval of any investment advisory contract under
section 15 of the Act, the Board of each Fund of Funds, including a
majority of the 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 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 Funds of Funds' 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 Fund pursuant to rule 12b-1 under the Act) received
from an Unaffiliated Underlying Fund by the Funds of Funds' Adviser, or
an affiliated person of the Fund of Funds' Adviser, other than any
advisory fees paid to the Fund of Funds' Adviser or its affiliated
person by the Unaffiliated Fund, in connection with the investment by
the Fund of Funds in the Unaffiliated Underlying Fund. Any Fund of
Funds' Sub-Adviser will waive fees otherwise payable to the Fund of
Funds' Sub-Adviser, directly or indirectly, by the Fund of Funds in an
amount at least equal to any compensation received from an Unaffiliated
Underlying Fund by the Fund of Funds' Sub-Adviser, or an affiliated
person of the Fund of Funds' Sub-Adviser, other than any advisory fees
paid to the Fund of Funds' Sub-Adviser or its affiliated person by an
Unaffiliated Fund, in connection with the investment by the Fund of
Funds in the Unaffiliated Underlying Fund made at the direction of the
Fund of Funds' Sub-Adviser. In the event that the Fund of Funds' 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
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. E8-23691 Filed 10-6-08; 8:45 am]
BILLING CODE 8011-01-P
