[Federal Register: June 4, 2007 (Volume 72, Number 106)]
[Notices]
[Page 30885-30889]
[DOCID:fr04jn07-102]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27844; 812-13288]

HealthShares\TM\, Inc. and XShares Advisors LLC; Notice of
Application

May 29, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J)
of the Investment Company Act of 1940 (the ``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 sections 17(a)(1) and (2) of
the Act.

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    Summary of the Application: The requested order would permit
certain registered management investment companies and unit investment
trusts registered under the Act (``UITs'') to acquire shares of certain
registered open-end management investment companies and UITs, including
those that operate as exchange-traded funds, that are outside the same
group of investment companies as the acquiring investment companies.

    Applicants: HealthShares\TM\, Inc. (the ``Corporation'') and
XShares Advisors LLC (the ``Advisor'').
    Filing Dates: The application was filed on May 2, 2006 and amended
on February 13, 2007 and May 29, 2007. Applicants have agreed to file
an amendment during the notice period, the substance of which is
reflected in this notice.
    Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on June 20, 2007, 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, 420 Lexington
Avenue, Suite 2626, New York, NY 10170.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, or Nadya B. Roytblat, Assistant Director, at (202) 551-
6821 (Division of Investment Management, Office of Investment Company
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington DC 20549-0102 (telephone<PHONE_NUMBER>).

Applicants' Representations

    1. The Corporation is an open-end management investment company
registered under the Act and organized as a Maryland corporation. The
Corporation is comprised of separate series that pursue distinct
investment objectives and strategies (the ``Funds''). The existing
Funds are offered as exchange-traded funds that operate in reliance on
an order from the Commission permitting their shares to be redeemed in
large aggregations (``Creation Units'').\1\ The Advisor is registered
as an investment adviser under the Investment Advisers Act of 1940
(``Advisers Act'') and serves as investment adviser to the Funds.\2\
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    \1\ HealthShares\TM\, Inc., et al., Investment Company Act
Release Nos. 27553 (Nov. 17, 2006) (notice) and 27594 (Dec. 7, 2006)
(order) (the ``HealthShares\TM\ Order'').
    \2\ All references to the term ``Advisor'' includes successors-
in-interest to the Advisor. Successors-in-interest are limited to
any entity resulting from a name change, a reorganization of the
Advisor into another jurisdiction or a change in the type of
business organization.
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    2. Applicants request relief to permit registered management
investment companies and UITs that are not part of the same ``group of
investment companies,'' within the meaning of section 12(d)(1)(G)(ii)
of the Act, as the Corporation (such registered management investment
companies are ``Investing Management Companies'', such UITs are
``Investing Trusts'', and Investing Management Companies and Investing
Trusts are collectively ``Funds of Funds''), to acquire shares of the
Funds in excess of the limits in section 12(d)(1)(A) of the Act, and to
permit a Fund, any principal underwriter for a Fund, and any broker or
dealer registered under the Securities Exchange Act of 1934
(``Broker'') to sell shares of a Fund to a Fund of Funds in excess of
the limits of section 12(d)(1)(B) of the Act. Applicants request that
the relief apply to: (1) Each registered open-end management investment
company or UIT that currently or subsequently is part of the same
``group of investment companies,'' within the meaning of section
12(d)(1)(G)(ii) of the Act, as the Corporation, and is advised or
sponsored by the Advisor or any entity controlling, controlled by, or
under common control with the Advisor (such registered open-end
management investment companies or their series are ``Open-end Funds'',
such UITs or their series are ``UIT Funds,'' and both Open-end Funds
and UIT Funds are included in the term ``Funds''); (2) each Fund of
Funds that enters into a Participation Agreement (as defined below)
with a Fund to purchase shares of the Fund; and (3) any principal
underwriter to a Fund or Broker selling shares of a Fund.\3\ Applicants
also seek an exemption from sections 17(a)(1) and (2) of the Act to
permit a Fund to sell shares to, and redeem its shares from, and engage
in certain in-kind transactions with, a Fund of Funds that owns 5% or
more of the shares of a Fund. A sponsor of a UIT is referred to as a
``Sponsor.''
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    \3\ All entities that currently intend to rely on the requested
order are named as applicants. Any other entity that relies on the
order in the future will comply with the terms and conditions of the
application. A Fund of Funds may rely on the requested order only to
invest in the Funds and not in any other registered investment
company.
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    3. Each Investing Management Company will be advised by an
investment adviser within the meaning of section 2(a)(20)(A) of the Act
and registered as an investment adviser under the Advisers Act (``Fund
of Funds Adviser''). A Fund of Funds Adviser may contract with an
investment adviser which meets the definition of section 2(a)(20)(B) of
the Act (``Fund of Funds Subadviser''). Applicants state that the Funds
of Funds will be interested in using the Funds as part of their overall
investment strategy.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act, in relevant part, 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 its shares 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) to permit Funds of Funds to acquire shares of the Funds in
excess of the limits in section 12(d)(1)(A), and a Fund, any principal
underwriter for a Fund and any Broker to sell shares of a Fund to a
Fund of Funds in excess of the limits of section 12(d)(1)(B).
    3. Applicants state that the terms and conditions of the proposed
arrangement will adequately address 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 is consistent with the public interest and the
protection of investors.
    4. Applicants believe that neither a Fund of Funds nor a Fund of
Funds Affiliate would be able to exert undue influence over the
Funds.\4\ To limit the control that a Fund of Funds may have over a
Fund, applicants propose a condition prohibiting the Fund of Funds
Adviser or Sponsor of the Investing Trust, any person controlling,
controlled by, or under common control with the Fund of Funds Adviser
or Sponsor of the Investing Trust, 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 that is advised or sponsored by the Fund of Funds Adviser or
Sponsor of the Investing Trust, or any person controlling, controlled
by, or under common control with the Fund of Funds Adviser or Sponsor
of the Investing Trust (``Fund of Funds Advisory Group'') from
controlling (individually or in the aggregate) a Fund within the
meaning of section 2(a)(9) of the Act. The same prohibition would apply
to the Fund of Funds Subadviser, any person controlling, controlled by
or under common control with the Fund of Funds 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 or sponsored by the Fund of Funds
Subadviser or any person controlling, controlled by or under common
control with the Fund of Funds Subadviser (``Fund of Funds Subadviser
Group''). Applicants propose other conditions to limit the potential
for undue influence over the Funds, including that 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 Open-end Fund or Sponsor to a
UIT Fund) will cause a 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 Underwriting Affiliate
(``Affiliated Underwriting''). An ``Underwriting Affiliate'' is a
principal underwriter in any underwriting or selling syndicate that is
an officer, director, member of an advisory board, Fund of Funds
Adviser, Fund of Funds Subadviser, Sponsor of the Investing Trust, or
employee of the Fund of Funds, or a person of which any such officer,
director, member of an advisory board, Fund of Funds Adviser, Fund of
Funds Subadviser, Sponsor of the Investing Trust, or employee is an
affiliated person. An Underwriting Affiliate does not include any
person whose relationship to a Fund is covered by section 10(f) of the
Act.
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    \4\ A ``Fund of Funds Affiliate'' is a Fund of Funds Adviser,
Fund of Funds Subadviser, a Sponsor of an Investing Trust, a
promoter, or a principal underwriter of a Fund of Funds, and any
person controlling, controlled by, or under common control with any
of those entities. A ``Fund Affiliate'' is an investment adviser,
Sponsor, promoter, or principal underwriter of a Fund, and any
person controlling, controlled by, or under common control with any
of those entities.
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    5. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. The board of directors or trustees
of each Investing Management Company, including a majority of the
directors or trustees who are not ``interested persons'' (within the
meaning of section 2(a)(19) of the Act) (``Disinterested Trustees''),
will find that the advisory fees charged to the Investing Management
Company are based on services provided that will be in addition to,
rather than duplicative of, the services provided under the advisory
contract(s) of any Open-end Fund in which the Investing Management
Company may invest. In addition, a Fund of Funds Adviser, or trustee or
Sponsor of an Investing Trust will waive fees otherwise payable to it
by the Fund of Funds in an amount at least equal to any compensation
(including fees received pursuant to any plan adopted by an Open-end
Fund under rule 12b-1 under the Act) received from a Fund by the Fund
of Funds Adviser, trustee or Sponsor of the Investing Trust, or an
affiliated person of the Fund of Funds Adviser, trustee or Sponsor of
the Investing Trust, other than any advisory fees paid to the Fund of
Funds Adviser, trustee or Sponsor of the Investing Trust or its
affiliated person, by an Open-end Fund, in connection with the
investment by the Fund of Funds in the Fund. Applicants also 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 Fund level. Other sales charges and service fees, as defined in
Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc. (``NASD Conduct Rules''), if any, will only be
charged at the Fund of Funds level or at the 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 the Fund of Funds
will not exceed the limits applicable to a fund of funds as set forth
in Rule 2830 of the NASD Conduct Rules. Further, 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 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.
    6. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Fund will
acquire 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 to the extent permitted by an
exemptive order that allows the Fund to purchase shares of an
affiliated money market fund for short-term cash management purposes or
rule 12d1-1 under the Act. Applicants also represent that to ensure
that the Funds of Funds comply with the terms and conditions of the
requested relief from section 12(d)(1)(A)of the Act, a Fund of Funds
must enter into a participation agreement between the Corporation, on
behalf of the relevant Fund, and the Funds of Funds (``Participation
Agreement'') before investing in a Fund beyond the limits imposed by
section 12(d)(1)(A). The Participation Agreement will require the Fund
of Funds to adhere to the terms and conditions of the requested order.
The Participation Agreement will include an acknowledgment from the
Fund of Funds that it may rely on the requested order only to invest in
the Funds and not in any other registered investment company. The
Participation Agreement will further require each Fund of Funds that
exceeds the 5% or 10% limitations in sections 12(d)(1)(A)(ii) and (iii)
of the Act to disclose in its prospectus that it may invest in the
Funds, and to disclose, in ``plain English,'' in its prospectus the
unique characteristics of the Fund of Funds investing in the Funds,
including but not limited to the expense structure and any additional
expenses of investing in the Funds. Each Fund of Funds also will comply
with the disclosure requirements

concerning the costs of investing in Funds set forth in Investment
Company Act Release No. 27399.
    7. Applicants also note that a Fund may choose to reject a direct
purchase of shares in Creation Units by a Fund of Funds. To the extent
that a Fund of Funds purchases shares of a Fund in the secondary
market, the Fund would still retain its ability to reject purchases of
its shares through its decision to enter into the Participation
Agreement prior to any investment by the Fund of Funds in excess of the
limits of section 12(d)(1)(A).

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 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.
    2. Applicants seek relief from section 17(a) to permit a Fund that
is an affiliated person of a Fund of Funds because the Fund of Funds
holds 5% or more of the Fund's shares to sell its shares to and redeem
its shares from a Fund of Funds. Applicants believe that any proposed
transactions directly between a Fund and Fund of Funds will be
consistent with the policies of each Fund and Fund of Funds. The
Participation Agreement will require any Fund of Funds that purchases
shares from a Fund to represent that the purchase of shares from the
Fund by a Fund of Funds will be accomplished in compliance with the
investment restrictions of the Fund of Funds and will be consistent
with the investment policies set forth in the Fund of Funds'
registration statement.\5\
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    \5\ To the extent that purchases and sales of shares of a Fund
occur in the secondary market and not through principal transactions
directly between a Fund of Funds and a Fund, relief from section
17(a) would not be necessary. However, the requested relief would
apply to direct sales of shares in Creation Units by a Fund to a
Fund of Funds and redemptions of those shares. The requested relief
is also intended to cover the in-kind transactions that would
accompany such sales and redemptions as described in the application
for the HealthSharesTM Order.
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    3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (i) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (ii) the proposed transaction is consistent with the
policies of each registered investment company involved; and (iii) the
proposed transaction is consistent with the general purposes of the
Act. Section 6(c) of the Act permits the Commission to exempt any
person or transactions from any provision of the Act if such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act.
    4. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 17(b) and 6(c) of the Act.\6\
Applicants state that the terms of the transactions are reasonable and
fair and do not involve overreaching. Applicants note that any
consideration paid for the purchase or redemption of shares directly
from a Fund will be based on the net asset value of the Fund.
Applicants state that the proposed transactions will be consistent with
the policies of each Fund of Funds and Fund and with the general
purposes of the Act.
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    \6\ 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 a
Fund or (b) an affiliated person of a Fund, or an affiliated person
of such person, for the sale by the Fund of its shares to a Fund of
Funds is subject to section 17(e) of the Act. The Participation
Agreement also will include this acknowledgment.
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Applicants' Conditions

    Applicants agree that any order granting the requested relief will
be subject to the following conditions:
    1. The members of a Fund of Funds Advisory Group will not control
(individually or in the aggregate) a Fund within the meaning of section
2(a)(9) of the Act. The members of a Fund of Funds Subadviser Group
will not control (individually or in the aggregate) a 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 a Fund, the Fund of Funds Advisory
Group or the Fund of Funds Subadviser Group, each in the aggregate,
becomes a holder of more than 25% of the outstanding voting securities
of a Fund, it (except for any member of the Fund of Funds Advisory
Group or Fund of Funds Subadviser Group that is a separate account)
will vote its shares of the Fund in the same proportion as the vote of
all other holders of the Fund's shares. This condition does not apply
to the Fund of Funds Subadviser Group with respect to a Fund for which
the Fund of Funds Subadviser or a person controlling, controlled by, or
under common control with the Fund of Funds Subadviser acts as the
investment adviser within the meaning of section 2(a)(20)(A) of the Act
(in the case of an Open-end Fund) or as the Sponsor (in the case of a
UIT Fund). A registered separate account will seek voting instructions
from its contract holders and will vote its shares 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 Fund in the same proportion as the
vote of all other holders of the 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 shares of a
Fund to influence the terms of any services or transactions between the
Fund of Funds or a Fund of Funds Affiliate and the Fund or a Fund
Affiliate.
    3. The board of directors or trustees of an Investing Management
Company, including a majority of the Disinterested Trustees, will adopt
procedures reasonably designed to assure that the Fund of Funds Adviser
and any Fund of Funds Subadviser are conducting the investment program
of the Investing Management Company without taking into account any
consideration received by the Investing Management Company or a Fund of
Funds Affiliate from a Fund or a Fund Affiliate in connection with any
services or transactions.
    4. Once an investment by a Fund of Funds in the securities of an
Open-end Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act,
the board of trustees of the Open-end Fund (``Board''), including a
majority of the Disinterested Trustees, will determine that any
consideration paid by the Open-end Fund to a Fund of Funds or a Fund of
Funds Affiliate in connection with any services or transactions: (a) Is
fair and reasonable in relation to the nature and quality of the
services and benefits received by the Open-end Fund; (b) is within the
range of consideration that the Open-end Fund would be required to pay
to another unaffiliated entity in connection with the same services or
transactions; and (c) does not involve overreaching on the part of any
person concerned. This condition does not apply with respect to any
services or transactions between an

Open-end Fund and its investment adviser(s), or any person controlling,
controlled by, or under common control with such investment adviser(s).
    5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Open-end Fund or Sponsor to a UIT Fund) will cause a Fund to purchase a
security in any Affiliated Underwriting.
    6. The Board of an Open-end Fund, including a majority of the
Disinterested Trustees, will adopt procedures reasonably designed to
monitor any purchases of securities by the Open-end Fund in an
Affiliated Underwriting once an investment by a Fund of Funds in the
securities of the Fund exceeds the limit in section 12(d)(1)(A)(i) of
the Act, including any purchases made directly from an Underwriting
Affiliate. The Board of the Open-end Fund will review these purchases
periodically, but no less frequently than annually, to determine
whether the purchases were influenced by the investment by the Fund of
Funds in the Open-end Fund. The Board of the Open-end Fund will
consider, among other things, (i) whether the purchases were consistent
with the investment objectives and policies of the Open-end Fund; (ii)
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 (iii) whether the amount of securities purchased by
the Open-end Fund in Affiliated Underwritings and the amount purchased
directly from an Underwriting Affiliate have changed significantly from
prior years. The Board of the Open-end Fund will take any appropriate
actions based on its review, including, if appropriate, the institution
of procedures designed to assure that purchases of securities in
Affiliated Underwritings are in the best interests of shareholders.
    7. The Open-end Fund will maintain and preserve permanently in an
easily accessible place a written copy of the procedures described in
the preceding condition, and any modifications to such procedures, and
will maintain and preserve for a period of not less than six years from
the end of the fiscal year in which any purchase in an Affiliated
Underwriting occurred, the first two years in an easily accessible
place, a written record of each purchase of securities in Affiliated
Underwritings once an investment by a Fund of Funds in the securities
of the Open-end Fund exceeds the limit in section 12(d)(1)(A)(i) of the
Act, setting forth from whom the securities were acquired, the identity
of the underwriting syndicate's members, the terms of the purchase, and
the information or materials upon which the determinations of the Board
of the Open-end Fund were made.
    8. Before investing in a Fund in excess of the limits in section
12(d)(1)(A), the Fund of Funds and the Fund will execute a
Participation Agreement stating, without limitation, that their boards
of directors or trustees and their investment advisers, or Sponsors and
trustees, as applicable, 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 Open-end Fund in excess of
the limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the
Open-end Fund of the investment. At such time, the Fund of Funds will
also transmit to the Open-end Fund a list of the names of each Fund of
Funds Affiliate and Underwriting Affiliate. The Fund of Funds will
notify the Open-end Fund of any changes to the list of the names as
soon as reasonably practicable after a change occurs. The Fund and the
Fund of Funds will maintain and preserve a copy of the order, the
agreement and, in the case of an Open-end Fund, 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 directors or trustees of each Investing Management
Company, including a majority of the Disinterested Trustees, will find
that the advisory fees charged under such advisory contract are based
on services provided that will be in addition to, rather than
duplicative of, the services provided under the advisory contract(s) of
any Open-end Fund in which the Investing Management Company may invest.
These findings and their basis will be recorded fully in the minute
books of the appropriate Investing Management Company.
    10. A Fund of Funds Adviser or trustee or Sponsor of an Investing
Trust will waive fees otherwise payable to it by the Fund of Funds in
an amount at least equal to any compensation (including fees received
pursuant to any plan adopted by an Open-end Fund under rule 12b-1 under
the Act) received from a Fund by the Fund of Funds Adviser, trustee, or
Sponsor of the Investing Trust, or an affiliated person of the Fund of
Funds Adviser, trustee or Sponsor of the Investing Trust, other than
any advisory fees paid to the Fund of Funds Adviser, trustee or Sponsor
of the Investing Trust or its affiliated person, by an Open-end Fund,
in connection with the investment by the Fund of Funds in the Fund. Any
Fund of Funds Subadviser will waive fees otherwise payable to the Fund
of Funds Subadviser, directly or indirectly, by the Investing
Management Company in an amount at least equal to any compensation
received from a Fund by the Fund of Funds Subadviser, or an affiliated
person of the Fund of Funds Subadviser, other than any advisory fees
paid to the Fund of Funds Subadviser or its affiliated person by an
Open-end Fund, in connection with the investment by the Investing
Management Company in the Fund made at the direction of the Fund of
Funds Subadviser. In the event that the Fund of Funds Subadviser waives
fees, the benefit of the waiver will be passed through to the Investing
Management Company.
    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 Fund level. Other sales charges and service fees, as defined
in Rule 2830 of the NASD Conduct Rules, if any, will only be charged at
the Fund of Funds level or at the 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 the Fund of Funds will not
exceed the limits applicable to a fund of funds as set forth in Rule
2830 of the NASD Conduct Rules.
    12. No Fund will acquire 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 to the
extent permitted by an exemptive order that allows the Fund to purchase
shares of an affiliated money market fund for short-term cash
management purposes or rule 12d1-1 under the Act.

    For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-10700 Filed 6-1-07; 8:45 am]

BILLING CODE 8010-01-P