Phoenix Life Insurance Company, et al.; Notice of Application, 16239-16243 [E9-8068]

Download as PDF dwashington3 on PROD1PC60 with NOTICES Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices disclosure system to collect specific information; and (2) disseminate such information to the public. Rule 13f–1 3 under the Exchange Act requires institutional investment managers that exercise investment discretion over accounts—having in the aggregate a fair market value of at least $100,000,000 of exchange-traded or NASDAQ-quoted equity securities—to file quarterly reports with the Commission on Form 13F.4 The information collection requirements apply to institutional investment managers that meet the $100 million reporting threshold. Section 13(f)(5) of the Exchange Act defines an ‘‘institutional investment manager’’ as any person, other than a natural person, investing in or buying and selling securities for its own account, and any person exercising investment discretion with respect to the account of any other person. Form 13F under the Exchange Act defines ‘‘investment discretion’’ for purposes of Form 13F reporting. The reporting system required by Section 13(f) of the Exchange Act is intended, among other things, to create in the Commission a central repository of historical and current data about the investment activities of institutional investment managers, and to improve the body of factual data available to regulators and the public. The Commission staff estimates that 4,052 respondents make approximately 16,208 responses under the rule each year. The staff estimates that on average, Form 13F filers spend 98.8 hours/year to prepare and submit the report. In addition, the staff estimates that 210 respondents file approximately 840 amendments each year. The staff estimates that on average, Form 13F filers spend 4 hours/year to prepare and submit amendments to Form 13F. The total annual burden of the rule’s requirements for all respondents therefore is estimated to be 401,178 hours ((4,052 filers × 98.8 hours) + (210 filers × 4 hours)). The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act. The estimate is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments are invited on: (a) Whether the collections of information are necessary for the proper 3 17 4 17 CFR 240.13f–1. CFR 249.325. VerDate Nov<24>2008 15:28 Apr 08, 2009 Jkt 217001 performance of the functions of the Commission, including whether the information has practical utility; (b) the accuracy of the Commission’s estimate of the burdens of the collections of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burdens of the collections of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to Charles Boucher, Director/CIO, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or send an e-mail to: PRA_Mailbox@sec.gov. Dated: April 3, 2009. Florence E. Harmon, Deputy Secretary. [FR Doc. E9–8067 Filed 4–8–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. IC–28686; 812–13564] Phoenix Life Insurance Company, et al.; Notice of Application April 3, 2009. AGENCY: Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of application to amend a prior 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 APPLICATION: Applicants request an order that would amend and supersede as to them (‘‘Amended Order’’) a prior order that permits certain registered open-end management investment companies to acquire shares of other registered open-end management investment companies and unit investment trusts (‘‘UITs’’) both within and outside the same group of investment companies (‘‘Prior Order’’).1 1 Phoenix Life Insurance Co, et al., Investment Company Act Release Nos. 27315 (May 8, 2006) (notice) and 27388 (June 5, 2006) (order). The Prior Order granted relief to the applicants and also to Phoenix Investment Counsel, Inc. (‘‘PIC’’), Phoenix Pholios, and certain registered open-end management investment companies and their series advised by PIC or any entity controlling, controlled by or under common control with PIC. PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 16239 The Amended Order would subject applicants to different conditions than the Prior Order and delete a condition of the Prior Order. APPLICANTS: (a) Phoenix Life Insurance Company (‘‘Phoenix’’), PHL Variable Insurance Company (‘‘PHL Variable’’) and Phoenix Life and Annuity Company (‘‘PLAC,’’ and together with Phoenix, PHL Variable and any insurance company controlling, controlled by or under common control with Phoenix, PHL Variable or PLAC, the ‘‘Insurance Companies’’); (b) Phoenix Edge Series Fund (the ‘‘Edge Fund’’), including the currently existing series and all future series thereof; (c) any existing or future registered open-end management investment companies and any series thereof that are part of the same ‘‘group of investment companies,’’ as defined in section 12(d)(1)(G)(ii) of the Act, as the Edge Fund, and are, or will be, advised by Phoenix Variable Advisors, Inc. (‘‘PVA’’) or any entity controlling, controlled by or under common control with PVA (together with series of the Edge Fund, ‘‘Phoenix Funds’’ or ‘‘Funds’’); and (d) PVA. FILING DATES: The application was filed on August 11, 2008 and amended on March 9, 2009. 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. April 27, 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 Kathleen A. McGah, Esq., Phoenix Life Insurance Company, One American Row, H–11, Hartford, CT 06102. FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel, at (202) 551–6868, or Julia Kim Gilmer, Branch Chief, at (202) 551–6821 (Division of Investment Management, Office of Investment Company Regulation). E:\FR\FM\09APN1.SGM 09APN1 16240 Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices The following is a summary of the application. The complete application may be obtained for a fee at the Public Reference Room, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1520 (telephone (202) 551–5850). SUPPLEMENTARY INFORMATION: dwashington3 on PROD1PC60 with NOTICES Applicants’ Representations 1. Phoenix is a New York life insurance company and an indirect wholly-owned subsidiary of The Phoenix Companies Inc. (‘‘The Phoenix Companies’’) a publicly traded Delaware corporation. PHL Variable is a Connecticut life insurance company and an indirect wholly-owned subsidiary of Phoenix. PLAC is a Connecticut life insurance company and an indirect wholly-owned subsidiary of The Phoenix Companies. The Insurance Companies issue group and individual variable annuity contracts and variable life insurance policies (collectively, the ‘‘Contracts’’) that offer opportunities to invest in the Edge Fund through separate accounts registered under the Act (‘‘Registered Separate Accounts’’) and separate accounts exempt from registration under the Act (‘‘Unregistered Separate Accounts,’’ and together with the Registered Separate Accounts, the ‘‘Separate Accounts’’). PVA is an affiliated person of the Insurance Companies, is registered under the Investment Advisers Act of 1940 and serves as investment adviser to each of the Funds that is a series of the Edge Funds. 2. The Edge Fund is a Massachusetts business trust registered under the Act as an open-end management investment company, and currently offers 18 Funds.2 Except for organizational seed capital for certain of the Funds invested by PVA or an affiliate, shares of the Edge Fund currently are sold exclusively to the Insurance Companies on behalf of their Separate Accounts to fund benefits under the Contracts. Shares of the Edge Fund may also be offered in the future to unaffiliated insurance companies to fund benefits under variable annuity contracts and variable life insurance policies issued by the unaffiliated insurance companies, and directly to certain qualified pension and profit sharing plans pursuant to an order granted by the Commission.3 2 All entities that currently intend to rely on the Amended Order are named as applicants. Any other entity that relies on the Amended Order in the future will comply with the terms and conditions of the application. 3 The Phoenix Edge Series Fund, Investment Company Act Release Nos. 25687 (July 26, 2002) (notice) and 25703 (August 20, 2002) (order). VerDate Nov<24>2008 15:28 Apr 08, 2009 Jkt 217001 3. The Prior Order permits Funds (each a ‘‘Fund of Funds’’) to invest in: (a) Other Funds in the same group of investment companies as the Fund of Funds (‘‘Affiliated Funds’’), and/or (b) registered open-end management investment companies (‘‘Unaffiliated Management Companies’’) and UITs (‘‘Unaffiliated Trusts’’) 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 Funds’’, and together with the Affiliated Funds, the ‘‘Underlying Funds’’). The Prior Order also permits the Underlying Funds, their principal underwriters, and any broker or dealer registered under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) to sell shares of an Underlying Fund to a Fund of Funds. Certain of the Unaffiliated Funds may be ‘‘exchange-traded funds’’ that are registered under the Act as UITs or open-end management investment companies and have received exemptive relief to sell their shares on a national securities exchange at negotiated prices (‘‘ETFs’’). 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 a ‘‘Manager.’’ 4. The Amended Order would amend and supersede the Prior Order as to the applicants by deleting condition 2, which prohibited a Fund of Funds or its Manager, sub-adviser, promoter, principal underwriter and any person controlling, controlled by or under common control with any of these entities (each, a ‘‘Fund of Funds Affiliate’’) from receiving from an Unaffiliated Fund or its investment adviser(s), sponsor, promoter, principal underwriter and any person controlling, controlled by or under common control with any of these entities (each, an ‘‘Unaffiliated Fund Affiliate’’) any consideration in connection with any services, transactions or the investment by the Fund of Funds in the Unaffiliated Fund. The Amended Order will subject applicants to certain other conditions governing the payment of such consideration consistent with recent Commission precedent. 5. Each Fund of Funds may also make investments in government securities, domestic and foreign common and preferred stock, fixed income securities, futures transactions, options on the foregoing and in other securities or instruments that are not issued by registered investment companies and that are consistent with its investment objective, including money market instruments. Applicants state that the requested relief will provide an efficient and simple method of allowing PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 investors to create a comprehensive asset allocation program. 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 from the limitations of sections 12(d)(1)(A) and (B) of the Act to the extent necessary to permit the Funds of Funds to acquire shares of Underlying Funds and to permit the Underlying Funds, their principal underwriters and any broker or dealer registered under the Exchange Act to sell shares of the Underlying Funds to the Funds of Funds. 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 over underlying funds, excessive layering of fees, and overly complex fund structures. Accordingly, applicants believe that the requested exemption continues to be consistent with the public interest and the protection of investors. 4. Applicants state that the proposed structure will not result in the exercise of 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, E:\FR\FM\09APN1.SGM 09APN1 dwashington3 on PROD1PC60 with NOTICES Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices since they are part of the same group of investment companies. To limit the control a Fund of Funds or its affiliated persons may have over an Unaffiliated Fund, applicants remain subject to a condition prohibiting: (a) A Manager and any person controlling, controlled by or under common control with such Manager, and 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 Manager or any person controlling, controlled by or under common control with the Manager (collectively, a ‘‘Group’’), and (b) any other investment adviser within the meaning of section 2(a)(20)(B) of the Act to a Fund of Funds (a ‘‘SubAdviser’’), any person controlling, controlled by or under common control with a Sub-Adviser, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised by the Sub-Adviser or any person controlling, controlled by or under common control with the SubAdviser (collectively, a ‘‘Sub-Adviser Group’’) from controlling (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. 5. Applicants further state that proposed condition 2 precludes a Fund of Funds or 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 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 Management Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an officer, director, trustee, advisory board member, investment adviser, SubAdviser, or employee of the Fund of Funds, or a person of which any such officer, director, trustee, advisory board member, investment adviser, SubAdviser, 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 VerDate Nov<24>2008 15:28 Apr 08, 2009 Jkt 217001 Underwriting Affiliate is an ‘‘Affiliated Underwriting.’’ 6. To further assure that an Unaffiliated Management Company understands the implications of an investment by a Fund of Funds under the requested Amended Order, prior to its investment in an Unaffiliated Management Company in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds and Unaffiliated Management Company will execute an agreement stating, without limitation, that their boards of directors or trustees and their investment advisers understand the terms and conditions of the Amended Order and agree to fulfill their responsibilities under the Amended 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 the right to reject an investment by a Fund of Funds.4 7. Applicants state that they do not believe that the proposed arrangement will involve excessive layering of fees. To assure that the investment advisory fees are not duplicative, applicants state that, 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 directors or trustees (‘‘Board’’) of each Fund of Funds, including a majority of the directors or 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 a Fund of Fund’s advisory contract(s) 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 Manager 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 Fund by the Manager, or an affiliated person of the Manager, other than any advisory fees paid to the Manager or an affiliated person of the Manager by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. 8. Applicants state that with respect to Registered Separate Accounts that invest in a Fund of Funds, no sales load 4 An Unaffiliated Fund, including an ETF, would retain its right to reject any initial investment by a Fund of Funds in excess of the limit in section 12(d)(1)(A)(i) of the Act by declining to execute the Participation Agreement with the Fund of Funds. PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 16241 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’’), if any, 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 insurance 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, will be 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. Applicants note that an Underlying Fund will be prohibited from acquiring 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), except in certain circumstances identified in condition 12 below. B. Section 17(a) 1. Section 17(a) of the Act generally prohibits sales or purchases of securities between a registered investment company and any affiliated person of the company. Section 2(a)(3) of the Act defines an ‘‘affiliated person’’ of another person to include (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 might be deemed to be under common control of the Manager, and therefore affiliated E:\FR\FM\09APN1.SGM 09APN1 16242 Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices dwashington3 on PROD1PC60 with NOTICES persons of one another. Applicants also state that the Funds of Funds and the Underlying Funds might be deemed to be affiliated persons of one another 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.5 3. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (b) the proposed transaction is consistent with the policies of each registered investment company involved; and (c) the proposed transaction is consistent with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt any person or transactions from any provision of the Act if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 4. Applicants submit that the proposed arrangement satisfies the standards for relief under sections 17(b) and 6(c) of the Act as the terms of the arrangement 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.6 Applicants also state that the proposed structure will be consistent with the policies of each Fund of Funds and Underlying Fund, and with the general purposes of the Act. 5 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. 6 Applicants note that a Fund of Funds generally would purchase and sell shares of an Underlying Fund that operates as an ETF through secondary market transactions at market prices rather than through principal transactions with the Underlying Fund at net asset value. Applicants would not rely on the requested relief from section 17(a) for such secondary market transactions. A Fund of Funds could seek to transact in ‘‘creation units’’ directly with an ETF pursuant to the requested Section 17(a) relief. VerDate Nov<24>2008 15:28 Apr 08, 2009 Jkt 217001 Applicants’ Conditions Applicants agree that any Amended Order granting the requested relief shall be subject to the following conditions: 1. The members of a 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 the Sub-Adviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Unaffiliated Fund, it (except for any member of the Group or the Sub-Adviser Group that is a Separate Account) will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares. This condition will not apply to a Sub-Adviser Group with respect to an Unaffiliated Fund for which the SubAdviser or a person controlling, controlled by, or under common control with the Sub-Adviser acts as the investment adviser within the meaning of section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Management Company) or as the sponsor (in the case of an Unaffiliated Trust). A Registered Separate Account will seek voting instructions from its Contract holders and will vote its shares of an Unaffiliated Fund in accordance with the instructions received and will vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. An Unregistered Separate Account will either: (i) Vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares; or (ii) seek voting instructions from its Contract holders and vote its shares in accordance with the instructions received and vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. 2. No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate. PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 3. The Board of each Fund of Funds, including a majority of the Independent Trustees, will adopt procedures reasonably designed to assure that the Manager and any Sub-Adviser are conducting the investment program of the Fund of Funds without taking into account any consideration received by the Fund of Funds or Fund of Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Fund of Funds in the securities of an Unaffiliated Management Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Management Company, including a majority of the Independent Trustees, will determine that any consideration paid by the Unaffiliated Management 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 Management Company; (b) is within the range of consideration that the Unaffiliated Management 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 Management 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 Management 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 Management Company, including a majority of the Independent Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Management Company in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of the Unaffiliated Management 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 Management Company will review these purchases periodically, but no less frequently than annually, to determine whether or not the purchases E:\FR\FM\09APN1.SGM 09APN1 dwashington3 on PROD1PC60 with NOTICES Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices were influenced by the investment by the Fund of Funds in the Unaffiliated Management Company. The Board of the Unaffiliated Management Company will consider, among other things: (a) Whether or not the purchases were consistent with the investment objectives and policies of the Unaffiliated Management 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 or not the amount of securities purchased by the Unaffiliated Management Company in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board of the Unaffiliated Management 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 interest of shareholders. 7. Each Unaffiliated Management 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 Management Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth the: (a) Party from whom the securities were acquired; (b) identity of the underwriting syndicate’s members; (c) terms of the purchase; and (d) information or materials upon which the determinations of the Board of the Unaffiliated Management Company were made. 8. Prior to its investment in shares of an Unaffiliated Management Company in excess of the limit set forth 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 of directors or trustees and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities VerDate Nov<24>2008 15:28 Apr 08, 2009 Jkt 217001 under the order. At the time of its investment in shares of an Unaffiliated Management Company in excess of the limit set forth in section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Management Company of the investment. At such time, the Fund of Funds will also transmit to the Unaffiliated Management Company a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Unaffiliated Management Company of any changes to the list as soon as reasonably practicable after a change occurs. The Unaffiliated Management 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. Each Manager 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 Fund by the Manager, or an affiliated person of the Manager, other than any advisory fees paid to the Manager or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-Adviser will waive fees otherwise payable to the Sub-Adviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received by the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Underlying 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. PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 16243 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 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. 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, Deputy Secretary. [FR Doc. E9–8068 Filed 4–8–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59690; File No. SR–CBOE– 2009–019] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Cancellation Fees April 2, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 18, 2009, the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ or the 1 15 2 17 E:\FR\FM\09APN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 09APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 67 (Thursday, April 9, 2009)]
[Notices]
[Pages 16239-16243]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-8068]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28686; 812-13564]


Phoenix Life Insurance Company, et al.; Notice of Application

April 3, 2009.

AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application to amend a prior 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 Application: Applicants request an order that would amend 
and supersede as to them (``Amended Order'') a prior order that permits 
certain registered open-end management investment companies to acquire 
shares of other registered open-end management investment companies and 
unit investment trusts (``UITs'') both within and outside the same 
group of investment companies (``Prior Order'').\1\ The Amended Order 
would subject applicants to different conditions than the Prior Order 
and delete a condition of the Prior Order.
---------------------------------------------------------------------------

    \1\ Phoenix Life Insurance Co, et al., Investment Company Act 
Release Nos. 27315 (May 8, 2006) (notice) and 27388 (June 5, 2006) 
(order). The Prior Order granted relief to the applicants and also 
to Phoenix Investment Counsel, Inc. (``PIC''), Phoenix Pholios, and 
certain registered open-end management investment companies and 
their series advised by PIC or any entity controlling, controlled by 
or under common control with PIC.

Applicants: (a) Phoenix Life Insurance Company (``Phoenix''), PHL 
Variable Insurance Company (``PHL Variable'') and Phoenix Life and 
Annuity Company (``PLAC,'' and together with Phoenix, PHL Variable and 
any insurance company controlling, controlled by or under common 
control with Phoenix, PHL Variable or PLAC, the ``Insurance 
Companies''); (b) Phoenix Edge Series Fund (the ``Edge Fund''), 
including the currently existing series and all future series thereof; 
(c) any existing or future registered open-end management investment 
companies and any series thereof that are part of the same ``group of 
investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, as the Edge Fund, and are, or will be, advised by Phoenix Variable 
Advisors, Inc. (``PVA'') or any entity controlling, controlled by or 
under common control with PVA (together with series of the Edge Fund, 
---------------------------------------------------------------------------
``Phoenix Funds'' or ``Funds''); and (d) PVA.

Filing Dates: The application was filed on August 11, 2008 and amended 
on March 9, 2009. 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. April 27, 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 Kathleen A. 
McGah, Esq., Phoenix Life Insurance Company, One American Row, H-11, 
Hartford, CT 06102.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel, 
at (202) 551-6868, or Julia Kim Gilmer, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

[[Page 16240]]


SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Public Reference Room, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1520 (telephone (202) 551-5850).

Applicants' Representations

    1. Phoenix is a New York life insurance company and an indirect 
wholly-owned subsidiary of The Phoenix Companies Inc. (``The Phoenix 
Companies'') a publicly traded Delaware corporation. PHL Variable is a 
Connecticut life insurance company and an indirect wholly-owned 
subsidiary of Phoenix. PLAC is a Connecticut life insurance company and 
an indirect wholly-owned subsidiary of The Phoenix Companies. The 
Insurance Companies issue group and individual variable annuity 
contracts and variable life insurance policies (collectively, the 
``Contracts'') that offer opportunities to invest in the Edge Fund 
through separate accounts registered under the Act (``Registered 
Separate Accounts'') and separate accounts exempt from registration 
under the Act (``Unregistered Separate Accounts,'' and together with 
the Registered Separate Accounts, the ``Separate Accounts''). PVA is an 
affiliated person of the Insurance Companies, is registered under the 
Investment Advisers Act of 1940 and serves as investment adviser to 
each of the Funds that is a series of the Edge Funds.
    2. The Edge Fund is a Massachusetts business trust registered under 
the Act as an open-end management investment company, and currently 
offers 18 Funds.\2\ Except for organizational seed capital for certain 
of the Funds invested by PVA or an affiliate, shares of the Edge Fund 
currently are sold exclusively to the Insurance Companies on behalf of 
their Separate Accounts to fund benefits under the Contracts. Shares of 
the Edge Fund may also be offered in the future to unaffiliated 
insurance companies to fund benefits under variable annuity contracts 
and variable life insurance policies issued by the unaffiliated 
insurance companies, and directly to certain qualified pension and 
profit sharing plans pursuant to an order granted by the Commission.\3\
---------------------------------------------------------------------------

    \2\ All entities that currently intend to rely on the Amended 
Order are named as applicants. Any other entity that relies on the 
Amended Order in the future will comply with the terms and 
conditions of the application.
    \3\ The Phoenix Edge Series Fund, Investment Company Act Release 
Nos. 25687 (July 26, 2002) (notice) and 25703 (August 20, 2002) 
(order).
---------------------------------------------------------------------------

    3. The Prior Order permits Funds (each a ``Fund of Funds'') to 
invest in: (a) Other Funds in the same group of investment companies as 
the Fund of Funds (``Affiliated Funds''), and/or (b) registered open-
end management investment companies (``Unaffiliated Management 
Companies'') and UITs (``Unaffiliated Trusts'') 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 
Funds'', and together with the Affiliated Funds, the ``Underlying 
Funds''). The Prior Order also permits the Underlying Funds, their 
principal underwriters, and any broker or dealer registered under the 
Securities Exchange Act of 1934 (``Exchange Act'') to sell shares of an 
Underlying Fund to a Fund of Funds. Certain of the Unaffiliated Funds 
may be ``exchange-traded funds'' that are registered under the Act as 
UITs or open-end management investment companies and have received 
exemptive relief to sell their shares on a national securities exchange 
at negotiated prices (``ETFs''). 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 a ``Manager.''
    4. The Amended Order would amend and supersede the Prior Order as 
to the applicants by deleting condition 2, which prohibited a Fund of 
Funds or its Manager, sub-adviser, promoter, principal underwriter and 
any person controlling, controlled by or under common control with any 
of these entities (each, a ``Fund of Funds Affiliate'') from receiving 
from an Unaffiliated Fund or its investment adviser(s), sponsor, 
promoter, principal underwriter and any person controlling, controlled 
by or under common control with any of these entities (each, an 
``Unaffiliated Fund Affiliate'') any consideration in connection with 
any services, transactions or the investment by the Fund of Funds in 
the Unaffiliated Fund. The Amended Order will subject applicants to 
certain other conditions governing the payment of such consideration 
consistent with recent Commission precedent.
    5. Each Fund of Funds may also make investments in government 
securities, domestic and foreign common and preferred stock, fixed 
income securities, futures transactions, options on the foregoing and 
in other securities or instruments that are not issued by registered 
investment companies and that are consistent with its investment 
objective, including money market instruments. Applicants state that 
the requested relief will provide an efficient and simple method of 
allowing investors to create a comprehensive asset allocation program.

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 from the limitations of sections 12(d)(1)(A) and 
(B) of the Act to the extent necessary to permit the Funds of Funds to 
acquire shares of Underlying Funds and to permit the Underlying Funds, 
their principal underwriters and any broker or dealer registered under 
the Exchange Act to sell shares of the Underlying Funds to the Funds of 
Funds.
    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 over 
underlying funds, excessive layering of fees, and overly complex fund 
structures. Accordingly, applicants believe that the requested 
exemption continues to be consistent with the public interest and the 
protection of investors.
    4. Applicants state that the proposed structure will not result in 
the exercise of 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,

[[Page 16241]]

since they are part of the same group of investment companies. To limit 
the control a Fund of Funds or its affiliated persons may have over an 
Unaffiliated Fund, applicants remain subject to a condition 
prohibiting: (a) A Manager and any person controlling, controlled by or 
under common control with such Manager, and 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 Manager or 
any person controlling, controlled by or under common control with the 
Manager (collectively, a ``Group''), and (b) any other investment 
adviser within the meaning of section 2(a)(20)(B) of the Act to a Fund 
of Funds (a ``Sub-Adviser''), any person controlling, controlled by or 
under common control with a 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, a ``Sub-
Adviser Group'') from controlling (individually or in the aggregate) an 
Unaffiliated Fund within the meaning of section 2(a)(9) of the Act.
    5. Applicants further state that proposed condition 2 precludes a 
Fund of Funds or 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 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 Management 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, advisory board member, 
investment adviser, Sub-Adviser, 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 Management Company 
understands the implications of an investment by a Fund of Funds under 
the requested Amended Order, prior to its investment in an Unaffiliated 
Management Company in excess of the limit in section 12(d)(1)(A)(i), a 
Fund of Funds and Unaffiliated Management Company will execute an 
agreement stating, without limitation, that their boards of directors 
or trustees and their investment advisers understand the terms and 
conditions of the Amended Order and agree to fulfill their 
responsibilities under the Amended 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 the right to reject an investment by a Fund of Funds.\4\
---------------------------------------------------------------------------

    \4\ An Unaffiliated Fund, including an ETF, would retain its 
right to reject any initial investment by a Fund of Funds in excess 
of the limit in section 12(d)(1)(A)(i) of the Act by declining to 
execute the Participation Agreement with the Fund of Funds.
---------------------------------------------------------------------------

    7. Applicants state that they do not believe that the proposed 
arrangement will involve excessive layering of fees. To assure that the 
investment advisory fees are not duplicative, applicants state that, 
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 directors or trustees (``Board'') of each Fund 
of Funds, including a majority of the directors or 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 a Fund of Fund's advisory contract(s) 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 Manager 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 Fund by the Manager, or an affiliated person of 
the Manager, other than any advisory fees paid to the Manager or an 
affiliated person of the Manager by the Unaffiliated Fund, in 
connection with the investment by the Fund of Funds in the Unaffiliated 
Fund.
    8. Applicants state that with respect to Registered Separate 
Accounts that invest in a Fund of Funds, no sales load will be charged 
at the Fund of Funds level or at the Underlying Fund level. Other sales 
charges and service fees, as defined in Rule 2830 of the Conduct Rules 
of the National Association of Securities Dealers (``NASD Conduct Rule 
2830''), if any, 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 insurance 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, will be 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. Applicants note that an Underlying 
Fund will be prohibited from acquiring 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), 
except in certain circumstances identified in condition 12 below.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include (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 might be deemed to be under common control of the Manager, and 
therefore affiliated

[[Page 16242]]

persons of one another. Applicants also state that the Funds of Funds 
and the Underlying Funds might be deemed to be affiliated persons of 
one another 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.\5\
---------------------------------------------------------------------------

    \5\ 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 involved; and (c) the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the Commission to exempt any person or 
transactions from any provision of the Act if such exemption is 
necessary or appropriate in the public interest and consistent with the 
protection of investors and the purposes fairly intended by the policy 
and provisions of the Act.
    4. Applicants submit that the proposed arrangement satisfies the 
standards for relief under sections 17(b) and 6(c) of the Act as the 
terms of the arrangement 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.\6\ 
Applicants also state that the proposed structure will be consistent 
with the policies of each Fund of Funds and Underlying Fund, and with 
the general purposes of the Act.
---------------------------------------------------------------------------

    \6\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Underlying Fund that operates as an 
ETF through secondary market transactions at market prices rather 
than through principal transactions with the Underlying Fund at net 
asset value. Applicants would not rely on the requested relief from 
section 17(a) for such secondary market transactions. A Fund of 
Funds could seek to transact in ``creation units'' directly with an 
ETF pursuant to the requested Section 17(a) relief.
---------------------------------------------------------------------------

Applicants' Conditions

    Applicants agree that any Amended Order granting the requested 
relief shall be subject to the following conditions:
    1. The members of a 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 
the Sub-Adviser Group, each in the aggregate, becomes a holder of more 
than 25% of the outstanding voting securities of the Unaffiliated Fund, 
it (except for any member of the Group or the Sub-Adviser Group that is 
a Separate Account) will vote its shares of the Unaffiliated Fund in 
the same proportion as the vote of all other holders of the 
Unaffiliated Fund's shares. This condition will not apply to a Sub-
Adviser Group with respect to an Unaffiliated Fund for which the Sub-
Adviser or a person controlling, controlled by, or under common control 
with the Sub-Adviser acts as the investment adviser within the meaning 
of section 2(a)(20)(A) of the Act (in the case of an Unaffiliated 
Management Company) or as the sponsor (in the case of an Unaffiliated 
Trust).
    A Registered Separate Account will seek voting instructions from 
its Contract holders and will vote its shares of an Unaffiliated Fund 
in accordance with the instructions received and will vote those shares 
for which no instructions were received in the same proportion as the 
shares for which instructions were received. An Unregistered Separate 
Account will either: (i) Vote its shares of the Unaffiliated Fund in 
the same proportion as the vote of all other holders of the 
Unaffiliated Fund's shares; or (ii) seek voting instructions from its 
Contract holders and vote its shares in accordance with the 
instructions received and vote those shares for which no instructions 
were received in the same proportion as the shares for which 
instructions were received.
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in an 
Unaffiliated Fund to influence the terms of any services or 
transactions between the Fund of Funds or a Fund of Funds Affiliate and 
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
    3. The Board of each Fund of Funds, including a majority of the 
Independent Trustees, will adopt procedures reasonably designed to 
assure that the Manager and any Sub-Adviser are conducting the 
investment program of the Fund of Funds without taking into account any 
consideration received by the Fund of Funds or Fund of Funds Affiliate 
from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in 
connection with any services or transactions.
    4. Once an investment by a Fund of Funds in the securities of an 
Unaffiliated Management Company exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Management 
Company, including a majority of the Independent Trustees, will 
determine that any consideration paid by the Unaffiliated Management 
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 Management Company; (b) is within the 
range of consideration that the Unaffiliated Management 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 Management 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 Management 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 Management Company, including a 
majority of the Independent Trustees, will adopt procedures reasonably 
designed to monitor any purchases of securities by the Unaffiliated 
Management Company in an Affiliated Underwriting once an investment by 
a Fund of Funds in the securities of the Unaffiliated Management 
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 Management Company will review these 
purchases periodically, but no less frequently than annually, to 
determine whether or not the purchases

[[Page 16243]]

were influenced by the investment by the Fund of Funds in the 
Unaffiliated Management Company. The Board of the Unaffiliated 
Management Company will consider, among other things: (a) Whether or 
not the purchases were consistent with the investment objectives and 
policies of the Unaffiliated Management 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 or not the amount of securities purchased by the 
Unaffiliated Management Company in Affiliated Underwritings and the 
amount purchased directly from an Underwriting Affiliate have changed 
significantly from prior years. The Board of the Unaffiliated 
Management 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 interest of shareholders.
    7. Each Unaffiliated Management 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 Management Company 
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth 
the: (a) Party from whom the securities were acquired; (b) identity of 
the underwriting syndicate's members; (c) terms of the purchase; and 
(d) information or materials upon which the determinations of the Board 
of the Unaffiliated Management Company were made.
    8. Prior to its investment in shares of an Unaffiliated Management 
Company in excess of the limit set forth 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 
of directors or trustees 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 Management Company in excess of the limit set 
forth in section 12(d)(1)(A)(i), a Fund of Funds will notify the 
Unaffiliated Management Company of the investment. At such time, the 
Fund of Funds will also transmit to the Unaffiliated Management Company 
a list of the names of each Fund of Funds Affiliate and Underwriting 
Affiliate. The Fund of Funds will notify the Unaffiliated Management 
Company of any changes to the list as soon as reasonably practicable 
after a change occurs. The Unaffiliated Management 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. Each Manager 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 
Fund by the Manager, or an affiliated person of the Manager, other than 
any advisory fees paid to the Manager or its affiliated person by the 
Unaffiliated Fund, in connection with the investment by the Fund of 
Funds in the Unaffiliated Fund. Any Sub-Adviser will waive fees 
otherwise payable to the Sub-Adviser, directly or indirectly, by the 
Fund of Funds in an amount at least equal to any compensation received 
by the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an 
Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser 
or its affiliated person by the Unaffiliated Fund, in connection with 
the investment by the Fund of Funds in the Unaffiliated Underlying 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. 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 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.
    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,
Deputy Secretary.
 [FR Doc. E9-8068 Filed 4-8-09; 8:45 am]
BILLING CODE 8010-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.