Allstate Financial Investment Trust, et al.; Notice of Application, 4058-4062 [E9-1083]
Download as PDF
<![CDATA[
4058
Federal Register / Vol. 74, No. 13 / Thursday, January 22, 2009 / Notices
1:30 p.m. Briefing on Uranium
Enrichment—Part 2 (Public
Meeting).
(Contact for both parts: Brian Smith,
301–492–3137)
Both parts of this meeting will be
webcast live at the Web address—
www.nrc.gov
3 p.m. Briefing on Uranium
Enrichment (Closed—Ex. 1).
Week of February 9, 2009—Tentative
There are no meetings scheduled for
the week of February 9, 2009.
Week of February 16, 2009—Tentative
There are no meetings scheduled for
the week of February 16, 2009.
rmajette on PRODPC74 with NOTICES
Week of February 23, 2009—Tentative
There are no meetings scheduled for
the week of February 23, 2009.
*
*
*
*
*
*The schedule for Commission
meetings is subject to change on short
notice. To verify the status of meetings,
call (recording)—(301) 415–1292.
Contact person for more information:
Rochelle Bavol, (301) 415–1651.
*
*
*
*
*
The NRC Commission Meeting
Schedule can be found on the Internet
at: www.nrc.gov/about-nrc/policymaking/schedule.html
*
*
*
*
*
The NRC provides reasonable
accommodation to individuals with
disabilities where appropriate. If you
need a reasonable accommodation to
participate in these public meetings, or
need this meeting notice or the
transcript or other information from the
public meetings in another format (e.g.,
braille, large print), please notify the
NRC’s Disability Program Coordinator,
Rohn Brown, at 301–492–2279, TDD:
301–415–2100, or by e-mail at
rohn.brown@nrc.gov. Determinations on
requests for reasonable accommodation
will be made on a case-by-case basis.
*
*
*
*
*
This notice is distributed by mail to
several hundred subscribers; if you no
longer wish to receive it, or would like
to be added to the distribution, please
contact the Office of the Secretary,
Washington, DC 20555 (301–415–1969).
In addition, distribution of this meeting
notice over the Internet system is
available. If you are interested in
receiving this Commission meeting
schedule electronically, please send an
electronic message to
darlene.wright@nrc.gov.
VerDate Nov<24>2008
14:47 Jan 21, 2009
Jkt 217001
January 15, 2009.
Rochelle C. Bavol,
Office of the Secretary.
[FR Doc. E9–1370 Filed 1–16–09; 11:15 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28581; 812–13523]
Allstate Financial Investment Trust, et
al.; Notice of Application
January 12, 2009.
1090; Applicants, c/o Renee M. Hardt,
Vedder Price P.C., 222 N. LaSalle Street,
Chicago, IL 60601.
FOR FURTHER INFORMATION CONTACT:
Keith A. Gregory, Senior Counsel, at
(202) 551–6815, or Mary Kay Frech,
Branch Chief, at (202) 551–6821 (Office
of Investment Company Regulation,
Division of Investment Management).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Room,
100 F Street, NE., Washington, DC
20549–1520 (telephone (202) 551–5850).
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.
Applicants’ Representations
1. The Trust, a Delaware statutory
trust, is registered under the Act as an
open-end management investment
company. The Trust is a series trust
which currently offers eight series, each
of which has its own investment
objectives and policies (‘‘Funds’’).1
2. The Adviser, a Delaware limited
liability company, is registered as an
Summary of the Application:
investment adviser under the
Applicants request an order that would
Investment Advisers Act of 1940 (the
permit certain registered open-end
‘‘Advisers Act’’) and serves as
management investment companies to
investment adviser to the Funds. The
acquire shares of other registered openAdviser is a wholly-owned subsidiary of
end management investment companies Allstate Life Insurance Company, which
and unit investment trusts that are
is an indirect, wholly-owned subsidiary
within and outside the same group of
of The Allstate Corporation. The
investment companies.
Adviser currently employs
Applicants: Allstate Financial
AllianceBerstein L.P. to manage the
Investment Trust (‘‘Trust’’) and Allstate
Funds of Funds (as defined below) and
Institutional Advisers, LLC (‘‘Adviser’’). Allstate Investment Management
Filing Dates: The application was
Company (‘‘AIMCO’’), an affiliate of the
filed on April 18, 2008 and amended on Adviser, to manage the Allstate Large
October 14, 2008. Applicants have
Cap Index, a Fund of the Trust.
agreed to file an amendment during the
AllianceBernstein L.P. and AIMCO are,
notice period, the substance of which is and any future subadviser will be,
reflected in this notice.
registered under the Advisers Act.
Hearing or Notification of Hearing: An
3. Applicants request relief to permit:
order granting the application will be
(a) A Fund (each a ‘‘Fund of Funds’’) to
issued unless the Commission orders a
acquire shares of registered open-end
hearing. Interested persons may request management investment companies (the
a hearing by writing to the
‘‘Unaffiliated Investment Companies’’)
Commission’s Secretary and serving
and unit investment trusts (‘‘UITs’’) that
applicants with a copy of the request,
are not part of the ‘‘same group of
personally or by mail. Hearing requests
investment companies’’ (as defined in
should be received by the Commission
section 12(d)(1)(G)(ii) of the Act) as the
by 5:30 p.m. on February 6, 2009, and
Fund of Funds (‘‘Unaffiliated Trusts,’’
should be accompanied by proof of
1 Applicants request that the order extend to any
service on applicants in the form of an
future series of the Trust, and any other existing or
affidavit or, for lawyers, a certificate of
future registered open-end management investment
service. Hearing requests should state
companies and their series that are part of the same
the nature of the writer’s interest, the
group of investment companies, as defined in
section 12(d)(1)(G)(ii) of the Act, as the Trust and
reason for the request, and the issues
are, or may in the future be, advised by the Adviser
contested. Persons who wish to be
or any other investment adviser controlling,
notified of a hearing may request
controlled by, or under common control with the
notification by writing to the
Adviser (included in the term, ‘‘Funds’’). The Trust
is the only registered investment company that
Commission’s Secretary.
currently intends to rely on the requested order.
ADDRESSES: Secretary, U.S. Securities
Any other entity that relies on the order in the
and Exchange Commission, 100 F
future will comply with the terms and conditions
of the application.
Street, NE, Washington, DC 20549–
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
E:\FR\FM\22JAN1.SGM
22JAN1
Federal Register / Vol. 74, No. 13 / Thursday, January 22, 2009 / Notices
together with the Unaffiliated
Investment Companies, the
‘‘Unaffiliated Funds’’); (b) the
Unaffiliated Funds, their principal
underwriters and any broker or dealer
registered under the Securities
Exchange Act of 1934 (‘‘Broker’’) to sell
shares of the Unaffiliated Funds to the
Fund of Funds; (c) the Fund of Funds
to acquire shares of Allstate Large Cap
Index Fund and other Funds in the
‘‘same group of investment companies’’
(as defined in section 12(d)(1)(G)(ii) of
the Act) as the Fund of Funds
(collectively, the ‘‘Affiliated Funds,’’
and together with the Unaffiliated
Funds, the ‘‘Underlying Funds’’); and
(d) the Affiliated Funds, their principal
underwriters and any Broker to sell
shares of the Affiliated Funds to the
Fund of Funds. Certain of the
Unaffiliated Funds may be registered
under the Act as either UITs or openend management investment companies
and have obtained exemptions from the
Commission necessary to permit their
shares to be listed and traded on a
national securities exchange at
negotiated prices (‘‘ETFs’’). Each Fund
of Funds also may invest in other
securities and financial instruments that
are not issued by registered investment
companies and are consistent with its
investment objective and restrictions.
rmajette on PRODPC74 with NOTICES
Applicants’ Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act
prohibits a registered investment
company from acquiring shares of an
investment company if the securities
represent more than 3% of the total
outstanding voting stock of the acquired
company, more than 5% of the total
assets of the acquiring company, or,
together with the securities of any other
investment companies, more than 10%
of the total assets of the acquiring
company. Section 12(d)(1)(B) of the Act
prohibits a registered open-end
investment company, its principal
underwriter and any broker or dealer
from selling the shares of the investment
company to another investment
company if the sale will cause the
acquiring company to own more than
3% of the acquired company’s voting
stock, or if the sale will cause more than
10% of the acquired company’s voting
stock to be owned by investment
companies generally.
2. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
VerDate Nov<24>2008
14:47 Jan 21, 2009
Jkt 217001
interest and the protection of investors.
Applicants seek an exemption under
section 12(d)(1)(J) of the Act to permit
the Funds of Funds to acquire shares of
the Underlying Funds in excess of the
limits set forth in section 12(d)(1)(A) of
the Act and to permit the Underlying
Funds, their principal underwriters and
any Broker to sell shares of the
Underlying Funds 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 Adviser
and any person controlling, controlled
by or under common control with the
Adviser, any investment company and
any issuer that would be an investment
company but for section 3(c)(1) or
section 3(c)(7) of the Act advised or
sponsored by the Adviser or any person
controlling, controlled by or under
common control with the Adviser
(collectively, the ‘‘Group’’), and (b) any
investment adviser within the meaning
of section 2(a)(20)(B) of the Act to a
Fund of Funds (‘‘Sub-Adviser’’) and any
person controlling, controlled by or
under common control with the SubAdviser, and any investment company
or issuer that would be an investment
company but for section 3(c)(1) or
3(c)(7) of the Act (or portion of such
investment company or issuer) advised
by the Sub-Adviser or any person
controlling, controlled by or under
common control with the Sub-Adviser
(collectively, the ‘‘Sub-Adviser Group’’)
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 Adviser, any Sub-Adviser,
promoter or principal underwriter of a
Fund of Funds, and any person
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
4059
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 an
investment by a Fund of Funds under
the requested order, prior to a Fund of
Funds’ investment in the shares of an
Unaffiliated Investment Company in
excess of the limit in section
12(d)(1)(A)(i) of the Act, a Fund of
Funds and the Unaffiliated Investment
Company will execute an agreement
stating, without limitation, that their
boards of directors or trustees
(‘‘Boards’’) and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order (‘‘Participation Agreement’’).
Applicants note that an Unaffiliated
Fund (other than an ETF whose shares
are purchased by a Fund of Funds in the
secondary market) will retain its right at
all times to reject any investment by a
Fund of Funds.2
2 An Unaffiliated Fund, including an ETF, would
retain its right to reject any initial investment by a
E:\FR\FM\22JAN1.SGM
Continued
22JAN1
4060
Federal Register / Vol. 74, No. 13 / Thursday, January 22, 2009 / Notices
rmajette on PRODPC74 with NOTICES
7. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. The Board of
each Fund of Funds, including a
majority of the trustees who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act
(‘‘Independent Trustees’’) will find that
the advisory fees charged under the
advisory contract are based on services
provided that are in addition to, rather
than duplicative of, services provided
pursuant to any Underlying Fund’s
advisory contract(s). Applicants further
state that the Adviser will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated Fund by
the Adviser, or an affiliated person of
the Adviser, other than any advisory
fees paid to the Adviser or an affiliated
person of the Adviser by the
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
8. Applicants state that any sales
charges and/or service fees charged with
respect to shares of a Fund of Funds
will not exceed the limits applicable to
funds of funds set forth in Rule 2830 of
the Conduct Rules of the NASD.
9. Applicants state that the proposed
arrangement will not create an overly
complex fund structure. Applicants note
that an Underlying Fund will be
prohibited from acquiring securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
in certain circumstances identified in
condition 12 below. Applicants also
represent that a Fund of Funds’
prospectus and sales literature will
contain concise, ‘‘plain English’’
disclosure designed to inform investors
about the unique characteristics of the
proposed arrangement, including, but
not limited to, the expense structure and
the additional expenses of investing in
Underlying Funds.
B. Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and any affiliated persons of
the company. Section 2(a)(3) of the Act
defines an ‘‘affiliated person’’ of another
person to include (a) any person directly
or indirectly owning, controlling, or
Fund of Funds in excess of limit in section
12(d)(1)(A)(i) of the Act by declining to execute the
Participation Agreement with the Fund of Funds.
VerDate Nov<24>2008
14:47 Jan 21, 2009
Jkt 217001
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. 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
2. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
Commission to exempt any person or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
3. 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
3 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of a Fund
of Funds, or an affiliated person of such person, for
the purchase by the Fund of Funds of shares of an
Underlying Fund or (b) an affiliated person of an
Underlying Fund, or an affiliated person of such
person, for the sale by the Underlying Fund of its
shares to a Fund of Funds may be prohibited by
section 17(e) 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
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
that the proposed transactions will be
consistent with the policies of each
Fund of Funds and Underlying Fund,
and with the general purposes of the
Act.
Applicants’ Conditions
Applicants agree that the order
granting the requested relief shall be
subject to the following conditions:
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act.
The members of a Sub-Adviser Group
will not control (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
If, as a result of a decrease in the
outstanding voting securities of an
Unaffiliated Fund, the Group or a SubAdviser Group, each in the aggregate,
becomes a holder of more than 25% of
the outstanding voting securities of the
Unaffiliated Fund, then the Group or the
Sub-Adviser Group will vote its shares
of the Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares. This condition will not apply to
a Sub-Adviser Group with respect to an
Unaffiliated Fund for which the SubAdviser or a person controlling,
controlled by, or under common control
with the Sub-Adviser acts as the
investment adviser within the meaning
section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment
Company) or as the sponsor (in the case
of an Unaffiliated Trust.
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in an Unaffiliated Fund to
influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Independent
Trustees, will adopt procedures
reasonably designed to assure that its
Adviser and any Sub-Adviser to the
Fund of Funds are conducting the
investment program of the Fund of
Funds without taking into account any
consideration received by the Fund of
Funds or Fund of Funds Affiliate from
an Unaffiliated Fund or an Unaffiliated
Fund 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 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.
E:\FR\FM\22JAN1.SGM
22JAN1
rmajette on PRODPC74 with NOTICES
Federal Register / Vol. 74, No. 13 / Thursday, January 22, 2009 / Notices
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
VerDate Nov<24>2008
14:47 Jan 21, 2009
Jkt 217001
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 the 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) the 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
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
4061
Investment Company of any changes to
the list as soon as reasonably practicable
after a change occurs. The Unaffiliated
Investment Company and the Fund of
Funds will maintain and preserve a
copy of the order, the Participation
Agreement, and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
9. Before approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Independent Trustees,
shall find that the advisory fees charged
under the advisory contract are based on
services provided that are in addition to,
rather than duplicative of, services
provided under the advisory contract(s)
of any Underlying Fund in which the
Fund of Funds may invest. Such
finding, and the basis upon which the
finding was made, will be recorded fully
in the minute books of the appropriate
Fund of Funds.
10. The Adviser will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated Fund by
the Adviser, or an affiliated person of
the Adviser, other than any advisory
fees paid to the Adviser or its affiliated
person by the Unaffiliated Investment
Company, 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 Fund 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. 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)
E:\FR\FM\22JAN1.SGM
22JAN1
4062
Federal Register / Vol. 74, No. 13 / Thursday, January 22, 2009 / Notices
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,
Deputy Secretary.
[FR Doc. E9–1083 Filed 1–21–09; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59250; File No. SR–ISE–
2008–90]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Approving Proposed Rule
Change Relating to Alternative Primary
Market Makers
I. Introduction
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: [74 FR 1734, January
13, 2009].
PLACE:
BILLING CODE 8011–01–P
January 14, 2009.
BILLING CODE 8011–01–P
STATUS:
Dated: January 15, 2009.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–1241 Filed 1–21–09; 8:45 am]
Closed Meeting.
100 F Street, NE., Washington,
DC.
DATE AND TIME OF PREVIOUSLY ANNOUNCED
MEETING: Thursday, January 15, 2009 at
On November 21, 2008, the
International Securities Exchange, LLC
(‘‘ISE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (the ‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change
relating to the introduction of
Alternative Primary Market Makers
(‘‘Alternative PMMs’’) on the Exchange.
The proposed rule change was
published for comment in the Federal
Register on December 15, 2008.3 The
Commission received no comments on
the proposal. This order approves the
proposed rule change.
1 p.m.
II. Description of the Proposal
Additional
Item.
The following item has been added to
the Thursday, January 15, 2009 Closed
Meeting agenda:
A matter related to a financial
institution.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552(b)(c)(7), (8) (9)(B) and and 17
CFR 200.402(a)(7), (8) and (9)(B) permit
consideration of the scheduled matter at
the Closed Meeting.
Commissioner Aguilar, as duty
officer, determined that Commission
business required the above change and
that no earlier notice thereof was
possible.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items. For further
information and to ascertain what, if
any, matters have been added, deleted
or postponed, please contact the Office
of the Secretary at (202) 551–5400.
The Exchange proposes to amend ISE
Rule 802 to provide for Alternative
PMMs. Currently, when the ISE lists
new options classes, it allocates them to
one of its Primary Market Makers
(‘‘PMMs’’) under ISE Rule 802. Pursuant
to power delegated to the Board, an
Allocation Committee, which consists of
representatives of Electronic Access
Members, makes allocation decisions
according to the guidelines contained in
ISE Rule 802. Under ISE Rule 802,
allocations are voluntary.4 To better
enable the Exchange to list and retain
options classes that PMMs do not wish
rmajette on PRODPC74 with NOTICES
CHANGE IN THE MEETING:
VerDate Nov<24>2008
14:47 Jan 21, 2009
Jkt 217001
1 15
U.S.C. 78s(b)(1).
CFR 240.19b-4.
3 See Securities Exchange Act Release No. 59053
(December 4, 2008), 73 FR 76078 (the ‘‘Notice’’).
4 According to ISE, at times, the Exchange is
unable to list new products because existing PMMs
are not interested in trading the options class. At
other times, ISE must delist certain products due to
lack of PMM interest. ISE represents that this occurs
most frequently with respect to options on stocks
that have pending corporate actions and options
products that are not listed at any other options
exchange. ISE believes that despite the lack of PMM
interest, these products may be of interest to other
market making firms at the Exchange.
2 17
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
to trade, ISE proposes to appoint
Competitive Market Makers (‘‘CMMs’’)
that meet certain qualifications as
Alternative PMMs when none of the
PMMs want an allocation.5
Under the proposal, if no PMMs or
Second Market PMMs (as applicable)
want the allocation, the Alternative
PMMs would be offered the opportunity
to serve as PMM in the options class in
accordance with the Exchange’s regular
allocation procedures. Once appointed
to an options class, the Alternative
PMM would have all of the
responsibilities and privileges of a PMM
under the ISE Rules with respect to all
appointed options classes.6 If an
Alternative PMM ceases trading of an
options class, that options class will be
reallocated by the Exchange. An
Alternative PMM will not have any
transferable rights in options classes to
which it is appointed nor will it have
any PMM voting rights.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.7 In particular, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,8 which requires that an exchange
have rules designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Commission believes that the
proposed rule change, which is
intended to allow the Exchange to
allocate more new products and to
facilitate the continued listing of
existing products, is consistent with the
Act. The Commission believes that the
introduction of Alternative PMMs on
5 Only CMMs that own or lease CMM Rights shall
be eligible to be appointed as an Alternative PMM.
That is, Electronic Access Members acting as
market makers in the Second Market will not be
eligible to be appointed as Alternative PMMs.
6 For example, Alternative PMMs would enjoy
privileges that include, among other things,
participation rights and small order execution
preference while accepting responsibilities that
include, among other things, the obligation to
provide continuous quotations in the options class
to which the Alternative PMM is appointed, and the
obligation to conduct the opening rotation on a
daily basis for as long as the Alternative PMM is
appointed to that options class.
7 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b)(5).
E:\FR\FM\22JAN1.SGM
22JAN1
]]>Agencies
[Federal Register Volume 74, Number 13 (Thursday, January 22, 2009)]
[Notices]
[Pages 4058-4062]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-1083]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28581; 812-13523]
Allstate Financial Investment Trust, et al.; Notice of
Application
January 12, 2009.
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: Allstate Financial Investment Trust (``Trust'') and
Allstate Institutional Advisers, LLC (``Adviser'').
Filing Dates: The application was filed on April 18, 2008 and
amended on October 14, 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 February 6, 2009, 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 Renee M. Hardt,
Vedder Price P.C., 222 N. LaSalle Street, Chicago, IL 60601.
FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at
(202) 551-6815, or Mary Kay Frech, Branch Chief, at (202) 551-6821
(Office of Investment Company Regulation, Division of Investment
Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference 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. The Trust is a series
trust which currently offers eight series, each of which has its own
investment objectives and policies (``Funds'').\1\
---------------------------------------------------------------------------
\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, a Delaware limited liability company, is registered
as an investment adviser under the Investment Advisers Act of 1940 (the
``Advisers Act'') and serves as investment adviser to the Funds. The
Adviser is a wholly-owned subsidiary of Allstate Life Insurance
Company, which is an indirect, wholly-owned subsidiary of The Allstate
Corporation. The Adviser currently employs AllianceBerstein L.P. to
manage the Funds of Funds (as defined below) and Allstate Investment
Management Company (``AIMCO''), an affiliate of the Adviser, to manage
the Allstate Large Cap Index, a Fund of the Trust. AllianceBernstein
L.P. and AIMCO are, and any future subadviser will be, registered under
the Advisers Act.
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) as the Fund of Funds (``Unaffiliated Trusts,''
[[Page 4059]]
together with the Unaffiliated Investment Companies, the ``Unaffiliated
Funds''); (b) the Unaffiliated Funds, their principal underwriters and
any broker or dealer registered under the Securities Exchange Act of
1934 (``Broker'') to sell shares of the Unaffiliated Funds to the Fund
of Funds; (c) the Fund of Funds to acquire shares of Allstate Large Cap
Index Fund and other Funds in the ``same group of investment
companies'' (as defined in section 12(d)(1)(G)(ii) of the Act) as the
Fund of Funds (collectively, the ``Affiliated Funds,'' and together
with the Unaffiliated Funds, the ``Underlying Funds''); and (d) the
Affiliated Funds, their principal underwriters and any Broker to sell
shares of the Affiliated Funds to the Fund of Funds. Certain of the
Unaffiliated Funds may be registered under the Act as either UITs or
open-end management investment companies and have obtained exemptions
from the Commission necessary to permit their shares to be listed and
traded on a national securities exchange at negotiated prices
(``ETFs''). Each Fund of Funds also may 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
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act prohibits a registered investment
company from acquiring shares of an investment company if the
securities represent more than 3% of the total outstanding voting stock
of the acquired company, more than 5% of the total assets of the
acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter and
any broker or dealer from selling the shares of the investment company
to another investment company if the sale will cause the acquiring
company to own more than 3% of the acquired company's voting stock, or
if the sale will cause more than 10% of the acquired company's voting
stock to be owned by investment companies generally.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction, or any class or classes of
persons, securities or transactions, from any provision of section
12(d)(1) if the exemption is consistent with the public interest and
the protection of investors. Applicants seek an exemption under section
12(d)(1)(J) of the Act to permit the Funds of Funds to acquire shares
of the Underlying Funds in excess of the limits set forth in section
12(d)(1)(A) of the Act and to permit the Underlying Funds, their
principal underwriters and any Broker to sell shares of the Underlying
Funds 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 Adviser and
any person controlling, controlled by or under common control with the
Adviser, any investment company and any issuer that would be an
investment company but for section 3(c)(1) or section 3(c)(7) of the
Act advised or sponsored by the Adviser or any person controlling,
controlled by or under common control with the Adviser (collectively,
the ``Group''), and (b) any investment adviser within the meaning of
section 2(a)(20)(B) of the Act to a Fund of Funds (``Sub-Adviser'') and
any person controlling, controlled by or under common control with the
Sub-Adviser, and any investment company or issuer that would be an
investment company but for section 3(c)(1) or 3(c)(7) of the Act (or
portion of such investment company or issuer) advised by the Sub-
Adviser or any person controlling, controlled by or under common
control with the Sub-Adviser (collectively, the ``Sub-Adviser Group'')
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 Adviser, any Sub-Adviser, promoter or principal
underwriter of a Fund of Funds, and any person controlling, controlled
by, or under common control with any of those entities (each, a ``Fund
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 an investment by a Fund of Funds under
the requested order, prior to a Fund of Funds' investment in the shares
of an Unaffiliated Investment Company in excess of the limit in section
12(d)(1)(A)(i) of the Act, a Fund of Funds and the Unaffiliated
Investment Company will execute an agreement stating, without
limitation, that their boards of directors or trustees (``Boards'') and
their investment advisers understand the terms and conditions of the
order and agree to fulfill their responsibilities under the order
(``Participation Agreement''). Applicants note that an Unaffiliated
Fund (other than an ETF whose shares are purchased by a Fund of Funds
in the secondary market) will retain its right at all times to reject
any investment by a Fund of Funds.\2\
---------------------------------------------------------------------------
\2\ An Unaffiliated Fund, including an ETF, would retain its
right to reject any initial investment by a Fund of Funds in excess
of limit in section 12(d)(1)(A)(i) of the Act by declining to
execute the Participation Agreement with the Fund of Funds.
---------------------------------------------------------------------------
[[Page 4060]]
7. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. The Board of each Fund of Funds,
including a majority of the trustees who are not ``interested
persons,'' as defined in section 2(a)(19) of the Act (``Independent
Trustees'') will find that the advisory fees charged under the advisory
contract are based on services provided that are in addition to, rather
than duplicative of, services provided pursuant to any Underlying
Fund's advisory contract(s). Applicants further state that the Adviser
will waive fees otherwise payable to it by a Fund of Funds in an amount
at least equal to any compensation (including fees received pursuant to
any plan adopted by an Unaffiliated Investment Company pursuant to rule
12b-1 under the Act) received from an Unaffiliated Fund by the Adviser,
or an affiliated person of the Adviser, other than any advisory fees
paid to the Adviser or an affiliated person of the Adviser by the
Unaffiliated Investment Company, in connection with the investment by
the Fund of Funds in the Unaffiliated Fund.
8. Applicants state that any sales charges and/or service fees
charged with respect to shares of a Fund of Funds will not exceed the
limits applicable to funds of funds set forth in Rule 2830 of the
Conduct Rules of the NASD.
9. Applicants state that the proposed arrangement will not create
an overly complex fund structure. Applicants note that an Underlying
Fund will be prohibited from acquiring securities of any investment
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in
excess of the limits contained in section 12(d)(1)(A) of the Act,
except in certain circumstances identified in condition 12 below.
Applicants also represent that a Fund of Funds' prospectus and sales
literature will contain concise, ``plain English'' disclosure designed
to inform investors about the unique characteristics of the proposed
arrangement, including, but not limited to, the expense structure and
the additional expenses of investing in Underlying Funds.
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and any
affiliated persons of the company. Section 2(a)(3) of the Act defines
an ``affiliated person'' of another person to include (a) any person
directly or indirectly owning, controlling, or holding with power to
vote, 5% or more of the outstanding voting securities of the other
person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote by the other person; and (c) any person directly or
indirectly controlling, controlled by, or under common control with the
other person. Applicants state that the Funds of Funds and the
Affiliated Funds may be deemed to be under common control of the
Adviser and therefore affiliated persons of one another. Applicants
also state that a Fund of Funds and the Underlying Funds may be deemed
to be affiliated persons of each other if a Fund of Funds acquires 5%
or more of an Underlying Fund's outstanding voting securities. In light
of these possible affiliations, section 17(a) could prevent an
Underlying Fund from selling shares to and redeeming shares from a Fund
of Funds.\3\
---------------------------------------------------------------------------
\3\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Fund of Funds, or an affiliated person
of such person, for the purchase by the Fund of Funds of shares of
an Underlying Fund or (b) an affiliated person of an Underlying
Fund, or an affiliated person of such person, for the sale by the
Underlying Fund of its shares to a Fund of Funds may be prohibited
by section 17(e) of the Act. The Participation Agreement also will
include this acknowledgement.
---------------------------------------------------------------------------
2. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act. Section
6(c) of the Act permits the Commission to exempt any person or
transactions from any provision of the Act if such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
3. 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 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 the order granting the requested relief shall
be subject to the following conditions:
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The members of a Sub-Adviser Group will not control
(individually or in the aggregate) an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in
the outstanding voting securities of an Unaffiliated Fund, the Group or
a Sub-Adviser Group, each in the aggregate, becomes a holder of more
than 25% of the outstanding voting securities of the Unaffiliated Fund,
then the Group or the Sub-Adviser Group will vote its shares of the
Unaffiliated Fund in the same proportion as the vote of all other
holders of the Unaffiliated Fund's shares. This condition will not
apply to a Sub-Adviser Group with respect to an Unaffiliated Fund for
which the Sub-Adviser or a person controlling, controlled by, or under
common control with the Sub-Adviser acts as the investment adviser
within the meaning section 2(a)(20)(A) of the Act (in the case of an
Unaffiliated Investment Company) or as the sponsor (in the case of an
Unaffiliated Trust.
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in an
Unaffiliated Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Trustees, will adopt procedures reasonably designed to
assure that its Adviser and any Sub-Adviser to the Fund of Funds are
conducting the investment program of the Fund of Funds without taking
into account any consideration received by the Fund of Funds or Fund of
Funds Affiliate from an Unaffiliated Fund or an Unaffiliated
[[Page 4061]]
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 the 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) the information or materials upon which the determinations of the
Board of the Unaffiliated Investment Company were made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit in section 12(d)(1)(A)(i) of the Act,
the Fund of Funds and the Unaffiliated Investment Company will execute
a Participation Agreement stating, without limitation, that their
Boards and their investment advisers understand the terms and
conditions of the order and agree to fulfill their responsibilities
under the order. At the time of its investment in shares of an
Unaffiliated Investment Company in excess of the limit in section
12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Investment
Company of the investment. At such time, the Fund of Funds will also
transmit to the Unaffiliated Investment Company a list of the names of
each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated Investment Company of any changes to
the list as soon as reasonably practicable after a change occurs. The
Unaffiliated Investment Company and the Fund of Funds will maintain and
preserve a copy of the order, the Participation Agreement, and the list
with any updated information for the duration of the investment and for
a period of not less than six years thereafter, the first two years in
an easily accessible place.
9. Before approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Independent Trustees, shall find that the advisory fees charged under
the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Fund of Funds
may invest. Such finding, and the basis upon which the finding was
made, will be recorded fully in the minute books of the appropriate
Fund of Funds.
10. The Adviser will waive fees otherwise payable to it by a Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to any plan adopted by an Unaffiliated
Investment Company pursuant to rule 12b-1 under the Act) received from
an Unaffiliated Fund by the Adviser, or an affiliated person of the
Adviser, other than any advisory fees paid to the Adviser or its
affiliated person by the Unaffiliated Investment Company, 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 Fund 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. 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)
[[Page 4062]]
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,
Deputy Secretary.
[FR Doc. E9-1083 Filed 1-21-09; 8:45 am]
BILLING CODE 8011-01-P
