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Code · REGISTER · 2006-10-16 · Nuclear Regulatory Commission · Notices

Notices. Issuance of Environmental Assessment and Finding of No Significant Impact for License Amendment

12,367 words·~56 min read·/register/2006/10/16/06-8718

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 6820-FN-M NATIONAL FOUNDATION FOR THE ARTS AND THE HUMANITIES National Endowment for the Arts; National Council on the Arts 159th Meeting Pursuant to section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92-463), as amended, notice is hereby given that a meeting of the National Council on the Arts will be held on November 9, 2006 in Room M-09 at the Nancy Hanks Center, 1100 Pennsylvania Avenue, NW., Washington, DC 20506. This meeting, from 8:30 a.m. to 10:30 a.m.
(ending time is approximate), will be open to the public on a space available basis. Following opening remarks and announcements by the Senior Deputy Chairman, there will be two presentations: one on 40 years of NEA support for Media Arts and one on 40 years of NEA support for Theater and Musical Theater. This will be followed by review and voting on applications and guidelines. The meeting will conclude with general discussion. If, in the course of the open session discussion, it becomes necessary for the Council to discuss non-public commercial or financial information of intrinsic value, the Council will go into closed session pursuant to subsection (c)(4) of the Government in the Sunshine Act, 5 U.S.C. 552b.
Additionally, discussion concerning purely personal information about individuals, submitted with grant applications, such as personal biographical and salary data or medical information, may be conducted by the Council in closed session in accordance with subsection (c)(6) of 5 U.S.C. 552b. Any interested persons may attend, as observers, Council discussions and reviews that are open to the public. If you need special accommodations due to a disability, please contact the Office of AccessAbility, National Endowment for the Arts, 1100 Pennsylvania Avenue, NW., Washington, DC 20506, 202/682-5532, TTY-TDD 202/682-5429, at least seven
(7)days prior to the meeting. Further information with reference to this meeting can be obtained from the Office of Communications, National Endowment for the Arts, Washington, DC 20506, at 202/682-5570. Dated: October 5, 2006. Kathy Plowitz-Worden, Panel Coordinator, Office of Guidelines and Panel Operations. [FR Doc. E6-17092 Filed 10-13-06; 8:45 am] BILLING CODE 7537-01-P NUCLEAR REGULATORY COMMISSION [Docket No. 04000341] Notice of Availability of Environmental Assessment and Finding of No Significant Impact for License Amendment to Source Materials License No. STC-133 Authorizing the Use of Site-Specific Derived Concentration Guideline Levels When Determining if Unrestricted Release Criteria Has Been Met for the Defense Logistics Agency, Defense Nuclear Supply Center Depot in Somerville, NJ AGENCY: Nuclear Regulatory Commission. ACTION: Issuance of Environmental Assessment and Finding of No Significant Impact for License Amendment. FOR FURTHER INFORMATION CONTACT: Dennis Lawyer, Health Physicist, Commercial and R&D Branch, Division of Nuclear Materials Safety, Region 1, 475 Allendale Road, King of Prussia, Pennsylvania; telephone 610-337-5366; fax number 610-337-5393; or by e-mail: *drl1@nrc.gov.* SUPPLEMENTARY INFORMATION: I. Introduction The U.S. Nuclear Regulatory Commission
(NRC)is considering the issuance of a license amendment to Source Materials License No. STC-133. This license is held by Defense Logistics Agency (DLA or the Licensee) at multiple sites. The site at issue is its Defense National Stockpile Center located at U.S. Highway Route 206 South in Somerville, New Jersey (the Facility). Issuance of the amendment would authorize the licensee to use site-specific Derived Concentration Guideline Levels (DCGLs) in a later survey of the Facility to determine if the Facility can be released for unrestricted use under the criteria in 10 CFR 20.1402. The use of the site-specific DCGLs requires an exemption to the definition of weighting factors in 10 CFR 20.1003. The Licensee requested this action in a letter dated October 19, 2005. The NRC has prepared an Environmental Assessment
(EA)in support of this proposed action in accordance with the requirements of Title 10, Code of Federal Regulations (CFR), part 51 (10 CFR part 51). Based on the EA, the NRC has concluded that a Finding of No Significant Impact (FONSI) is appropriate with respect to the proposed action. The NRC plans to issue the amendment following the publication of this FONSI and EA in the **Federal Register** . II. Environmental Assessment Identification of Proposed Action The proposed action would approve the Licensee's October 19, 2005, license amendment request to use site-specific DCGLs as part of a later request (not yet submitted) to release the Facility for unrestricted use under the criteria in 10 CFR 20.1402. License No. STC-133 was issued on July 23, 1983, pursuant to 10 CFR part 40, and has been amended periodically since that time. This license authorized the Licensee to use unsealed source material for purposes of storage, sampling, repackaging, and transfer. Based on the approved DCGLs, the Licensee will conduct surveys of the Facility and provide information to the NRC to demonstrate that the Facility meets the criteria in Subpart E of 10 CFR Part 20 for unrestricted release. Need for the Proposed Action The Licensee has ceased conducting licensed activities at the Facility, and seeks the approval of site-specific DCGLs through issuance of an exemption to the definition of weighting factors in 10 CFR 20.1003. The licensee needs these site specific DCGL values for later determining if the Facility meets the criteria for unrestricted use. NRC is fulfilling its responsibilities under the Atomic Energy Act to make a timely decision on a proposed license amendment that ensures protection of public health and safety and the environment. Environmental Impacts of the Proposed Action The historical review of licensed activities conducted at the Facility shows that such activities involved use of the following radionuclides with half-lives greater than 120 days: natural uranium and thorium mixtures. An amendment specifying the site specific DCGLs is required before the Licensee can use such DCGL values to later demonstrate compliance with unrestricted release criteria. The Licensee conducted site-specific dose modeling using input parameters specific to the Facility and a conservative assumption that all residual radioactivity is in equilibrium. Federal Guidance Report Number 13 was used to modify the dose conversion factors because it is based on an improved, more realistic dosimetry model. The selected critical age group is adults as the expected future use of this facility will be industrial. Based on the type of building, and its proximity to an existing railroad, there is no compelling evidence to indicate that the building will be used for other than industrial activities. The NRC has reviewed the Licensee's methodology and proposed DCGLs and finds that the proposed DCGLs are acceptable for use at the Facility. Federal Guidance Report Number 13, as an updated dosimetry model, uses different weighting factors than is published in 10 CFR part 20. The weighting factors are used to determine effective dose equivalent and total dose equivalent. Therefore, an exemption to the definition of weighting factors in 10 CFR 20.1003 is required to use Federal Guidance Report Number 13. The use of Federal Guidance Report Number 13 for dose modeling and weighting factors is acceptable for this Facility. Based on its review, the staff has concluded that the proposed action will not have a significant effect on the quality of the human environment. Environmental Impacts of the Alternatives to the Proposed Action Due to the largely administrative nature of the proposed action, its environmental impacts are small. Therefore, the only alternative the staff considered is the no-action alternative, under which the staff would leave things as they are by simply denying the amendment request. Denying the amendment request would result in no change in current environmental impacts. The environmental impacts of the proposed action and the no-action alternative are therefore similar, and the no-action alternative is accordingly not further considered. Conclusion The NRC staff has concluded that the site specific DCGLs identified by the Licensee are acceptable for use at its Facility. Because the proposed action will not significantly impact the quality of the human environment, the NRC staff concludes that the proposed action is the preferred alternative. Agencies and Persons Consulted NRC provided a draft of this EA to the State of New Jersey's Department of Environmental Protection for review on June 21, 2006. On July 20, 2006, the State of New Jersey responded by letter. The State agreed with the conclusions of the EA if the DCGL's are adjusted from the NRC's 25 millirem per year standard to the Department of Environmental Protection's remediation criterion of 15 millirem per year (N.J.A.C. 7:28-12.8(a)). While, 15 millirem per year is the State of New Jersey criterion, for the purpose of NRC consideration of the proposed action, the NRC must implement DCGLs that support the 25 millirem per year standard set forth in 10 CFR 20.1402. The Department of Environmental Protection also requests that the deed restriction referenced on page 2 of the letter dated April 26, 2006, “Defense Logistics Agency, Request for Additional Information Concerning Application for Amendment to License” [ML061220479] be in place before approval of NRC license termination. The NRC found that based on the type of building, railroad distribution, and truck access, there is no compelling evidence to indicate that the building will be used for other than industrial activities. NRC determined that no deed restriction will be necessary should the Licensee pursue its plans to seek the unrestricted use of its Facility. The NRC staff has determined that the proposed action is of a procedural nature, and will not affect listed species or critical habitat. Therefore, no further consultation is required under Section 7 of the Endangered Species Act. The NRC staff has also determined that the proposed action is not the type of activity that has the potential to cause effects on historic properties. Therefore, no further consultation is required under Section 106 of the National Historic Preservation Act. III. Finding of No Significant Impact The NRC staff has prepared this EA in support of the proposed action. On the basis of this EA, the NRC finds that there are no significant environmental impacts from the proposed action, and that preparation of an environmental impact statement is not warranted. Accordingly, the NRC has determined that a Finding of No Significant Impact is appropriate. IV. Further Information Documents related to this action, including the application for license amendment and supporting documentation, are available electronically at the NRC's Electronic Reading Room at *http://www.nrc.gov/reading-rm/adams.html.* From this site, you can access the NRC's Agencywide Document Access and Management System (ADAMS), which provides text and image files of NRC's public documents. The documents related to this action are listed below, along with their ADAMS accession numbers. 1. NUREG-1757, “Consolidated NMSS Decommissioning Guidance”; 2. Title 10 Code of Federal Regulations, part 20, subpart E, “Radiological Criteria for License Termination”; 3. Title 10, Code of Federal Regulations, part 51, “Environmental Protection Regulations for Domestic Licensing and Related Regulatory Functions”; 4. Letter dated October 19, 2005, “Amendment to Source Materials License” [Adams Accession No. ML053060017]; 5. Letter dated December 29, 2005, “Amendment to Source Material License STC-133—Request to use Commodity Specific DCGLs at Binghamton and Somerville Depots” [ML060040304]; 6. Letter dated February 7, 2006, “Amendment to Source Material License STC-133—Request to Use Commodity Specific DCGLs at Binghamton and Somerville Depots” [ML060410319]; 7. Letter dated April 26, 2006, “Defense Logistics Agency, Request for Additional Information Concerning Application for Amendment to License” [ML061220479]; 8. “Radiological Historical Site Assessment Report, Defense National Stockpile Center, Somerville Depot, Hillsborough, NJ” dated January 2006 [ML060730422]; 9. “Radiological Historical Site Assessment Report, Defense National Stockpile Center, Binghamton Depot, Binghamton, NY” dated February 2006 [ML060730408]. If you do not have access to ADAMS, or if there are problems in accessing the documents located in ADAMS, contact the NRC Public Document Room
(PDR)Reference staff at 1-800-397-4209, 301-415-4737, or by e-mail to *pdr@nrc.gov.* These documents may also be viewed electronically on the public computers located at the NRC's PDR, O 1 F21, One White Flint North, 11555 Rockville Pike, Rockville, MD 20852. The PDR reproduction contractor will copy documents for a fee. Dated at Region 1, 475 Allendale Road, King of Prussia this 6th day of October 2006. For the Nuclear Regulatory Commission. James P. Dwyer, Chief, Commercial and R&D Branch, Division of Nuclear Materials Safety, Region 1. [FR Doc. E6-17078 Filed 10-13-06; 8:45 am] BILLING CODE 7590-01-P OFFICE OF MANAGEMENT AND BUDGET Proposed Implementation Guidance for Title V of the E-Government Act, Confidential Information Protection and Statistical Efficiency Act of 2002 (CIPSEA) AGENCY: Office of Management and Budget, Executive Office of the President. ACTION: Notice and request for comments. SUMMARY: The Confidential Information Protection andStatistical Efficiency Act of 2002 (CIPSEA) can provide strong confidentiality protections for statistical information collections, such as surveys and censuses, as well as for other statistical activities, such as data analysis, modeling, and sample design, that are sponsored or conducted by Federal agencies. The purpose of the proposed CIPSEA implementation guidance is to inform agencies about the requirements for using CIPSEA and clarify the circumstances under which CIPSEA can be used. The Office of Management and Budget
(OMB)requests comments on the proposed Implementation Guidance for Title V of the E-Government Act, the Confidential Information Protection and Statistical Efficiency Act of 2002. The complete text of the proposed guidance is available on the OMB Web site at *http://www.whitehouse.gov/omb/inforeg/statpolicy.html.* Authority: 31 U.S.C. 1104(d); 44 U.S.C. 3504 (specifically (a)(1)(B)(iii) and (v), (e)(1),
(3)and (5), and (g)(1)); Pub. L. 107-347 503(a), 44 U.S.C. 3501 note. DATES: To ensure consideration during the final decision-making process, written comments must be provided to OMB no later than December 15, 2006. ADDRESSES: Due to potential delays in OMB's receipt and processing of mail, respondents are strongly encouraged to submit comments electronically to ensure timely receipt. We cannot guarantee that comments mailed will be received before the comment closing date. Electronic comments may be submitted to: Brian A. Harris-Kojetin at *bharrisk@omb.eop.gov.* Please provide the full body of your comments in the text of the electronic message and as an attachment. Please include your name, title, organization, postal address, telephone number, and e-mail address in the text of the message. Comments may also be submitted via facsimile to
(202)395-7245. Comments may be mailed to Brian Harris-Kojetin, Ph.D., Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW., New Executive Office Building, Room 10201, Washington, DC 20503. All comments submitted in response to this notice will be made available to the public, including by posting them on OMB's Web site. For this reason, please do not include in your comments information of a confidential nature, such as sensitive personal information or proprietary information. FOR FURTHER INFORMATION CONTACT: Brian Harris-Kojetin, Ph.D., Statistical and Science Policy Office, Office of Information and Regulatory Affairs, Office of Management and Budget, NEOB, Room 10201, 725 17th Street, NW., Washington, DC 20503. Telephone: 202-395-3093. SUPPLEMENTARY INFORMATION: Background Statistics collected and published by the Federal Government constitute a significant portion of the available information about the United States' economy, population, natural resources, environment, and public and private institutions. There are more than 70 Federal agencies or organizational units that carry out statistical activities as their principal mission or in conjunction with other program missions, such as providing services or enforcing regulations. In addition to these 70 agencies, many other Federal agencies or units may collect statistical information to use for specific program needs. Prior to the enactment CIPSEA, a patchwork of legislative protections governed the confidentiality of data gathered for statistical purposes by the different agencies and units. Some agencies had strong statutory authority to protect the confidentiality of the data they gathered for statistical purposes, while other agencies had weak or no legislative authority to protect confidentiality. In addition, the ability of the designated statistical agencies to share information to improve the efficiency of the Federal statistical system was limited by statutory constraints affecting those agencies. By establishing a uniform policy for all Federal statistical collections, this law will reduce public confusion, uncertainty, and concern about the treatment of confidential statistical information by different Federal agencies. By establishing consistent rational principles and processes to buttress confidentiality pledges, the guidance that implements the law will harmonize confidentiality claims and set minimum standards for safeguarding confidential statistical information. Such consistent protection of confidential statistical information will, in turn, reduce the perceived risks of more efficient working relationships among statistical agencies, relationships that can reduce both the cost and reporting burden imposed by statistical programs. Development and Review In 2003, OMB and the other members of the Interagency Council on Statistical Policy
(ICSP)formed an interagency group to discuss issues that OMB and the agencies anticipated would arise in the implementation of CIPSEA. OMB was particularly interested in understanding the questions and concerns that these statistical agencies had about the new law and how it would affect their activities. OMB also sought to incorporate the best practices of these agencies for handling confidential statistical information. An initial draft of this implementation guidance was reviewed by the ICSP members, and OMB revised the draft guidance in response to the comments that we received. Based on the use of the law by agencies over the past three years, OMB has also addressed in the proposed guidance specific issues that have arisen, such as nonstatistical agencies' use of CIPSEA. Issues for Comment With this notice, OMB requests comments on the proposed Implementation Guidance for Title V of the E-Government Act, the Confidential Information Protection and Statistical Efficiency Act of 2002 (CIPSEA). OMB seeks comments from interested parties on all aspects of this proposed guidance. In particular, OMB seeks comments on the appropriate use of CIPSEA by statistical and nonstatistical agencies, and the appropriate wording for CIPSEA and non-CIPSEA pledges. OMB also seeks comments on the necessary elements for contracts and written agreements for agents covered in Appendix A of the guidance. Steven D. Aitken, Acting Administrator, Office of Information and Regulatory Affairs. [FR Doc. E6-17086 Filed 10-13-06; 8:45 am] BILLING CODE 3110-01-P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. IC-27512; 812-12986] Delaware Management Business Trust, et al.; Notice of Application October 10, 2006. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of an application under section 6(c) of the Investment Company Act of 1940 (“Act”) for an exemption from section 15(a) of the Act and rule 18f-2 under the Act, as well as certain disclosure requirements. Summary of application: Applicants request an order that would permit them to enter into and materially amend subadvisory agreements without shareholder approval and would grant relief from certain disclosure requirements. Applicants: Delaware Management Business Trust, Optimum Fund Trust, Lincoln Variable Insurance Products Trust (the “Lincoln Trust”), Delaware Group Adviser Funds, Delaware Group Cash Reserve, Delaware Group Equity Funds I, Delaware Group Equity Funds II, Delaware Group Equity Funds III, Delaware Group Equity Funds IV, Delaware Group Equity Funds V, Delaware Group Foundation Funds, Delaware Group Global & International Funds, Delaware Group Government Fund, Delaware Group Income Funds, Delaware Group Limited-Term Government Funds, Delaware Group State Tax-Free Income Trust, Delaware Group Tax Free Fund, Delaware Group Tax Free Money Fund, Delaware Pooled Trust, Delaware VIP Trust, Voyageur Insured Funds, Voyageur Intermediate Tax Free Funds, Delaware Investments Municipal Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual Funds III and Voyageur Tax Free Funds (each a “Trust” and collectively, the “Trusts”) and Delaware Management Company (the “Adviser”). Filing dates: The application was filed on June 25, 2003 and amended on December 8, 2005 and October 4, 2006. 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 November 6, 2006, and should be accompanied by proof of service on the 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 may request notification of a hearing by writing to the Commission's Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington DC, 20549-1090. Applicants, David P. O'Conner, Esq., Delaware Investments, One Commerce Square, 2005 Market Street, Philadelphia, PA, 19103-7094; Colleen E. Tonn, Esq., The Lincoln National Life Insurance Company, 1300 S. Clinton Street, Fort Wayne, IN 46802. FOR FURTHER INFORMATION CONTACT: John Yoder, Senior Counsel, at
(202)551-6878, or Mary Kay Frech, Branch Chief, at
(202)551-6821 (Division of Investment Management, Office of Investment Company Regulation). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, U.S. Securities and Exchange Commission, 100 F Street NE., Washington DC 20549-0102 (tel. 202-551-5850). Applicants' Representations 1. Each Trust is organized as a Delaware statutory trust and is registered under the Act as an open-end management investment company. The Trusts currently offer 101 series (each, a “Fund” and collectively, the “Funds”), each of which has its own investment objectives, restrictions, and policies. 1 The Adviser is registered as an investment adviser under the Investment Advisers Act of 1940 (“Advisers Act”) and serves as investment adviser to the Funds pursuant to an investment advisory agreement with each Trust (each, an “Advisory Agreement”). Each Advisory Agreement has been approved by the shareholders 2 of each Fund and by such Fund's board of trustees (the “Board”), including a majority of the trustees who are not “interested persons,” as defined in section 2(a)(19) of the Act, of the Trust (“Independent Trustees”). 1 Applicants request that any relief granted pursuant to the application also apply to any existing or future registered open-end management investment company or series thereof that:
(i)Is advised by the Adviser or any entity controlling, controlled by, or under common control with the Adviser;
(ii)uses the “manager of managers” structure described in the application; and
(iii)complies with the terms and conditions of the application (included in the term “Funds”). The Trusts are the only existing investment companies that currently intend to rely on the order. If the name of any Fund, at any time, contains the name of a Sub-Adviser, the name of the Adviser will precede the name of the Sub-Adviser. 2 The term “shareholder” includes variable life insurance policy and variable annuity contract owners that are unitholders of any separate account for which a Fund of the Lincoln Trust serves as a funding medium. 2. Under the terms of each Advisory Agreement, the Adviser is authorized to manage the investment of the assets of each Fund. Each Advisory Agreement permits the Adviser to delegate its investment advisory responsibilities to one or more investment advisers (“Sub-Advisers”) pursuant to sub-advisory agreements (each, a “Sub-Advisory Agreement”), subject to approval by the Board. The Adviser monitors and evaluates the Sub-Advisers and recommends to the Board their hiring, retention or termination. The Board, including a majority of the Independent Trustees, will approve each Sub-Advisory Agreement. Each Sub-Adviser is an investment adviser registered under the Advisers Act. The Adviser compensates each Sub-Adviser out of the fees paid to the Adviser under the Advisory Agreement. 3. Applicants request relief to permit the Adviser to enter into and materially amend Sub-Advisory Agreements without obtaining shareholder approval. The requested relief will not extend to any Sub-Adviser that is an affiliated person, as defined in section 2(a)(3) of the Act, of a Fund or the Adviser, other than by reason of serving as a Sub-Adviser to one or more of the Funds (“Affiliated Sub-Adviser”). None of the current Sub-Advisers is an Affiliated Sub-Adviser. 4. Applicants also request an exemption from the various disclosure provisions described below that may require the Funds to disclose the fees paid by the Adviser to the Sub-Advisers. An exemption is requested to permit a Fund to disclose (as both a dollar amount and as a percentage of the Fund's net assets):
(a)The aggregate fees paid to the Adviser and any Affiliated Sub-Advisers; and
(b)the aggregate fees paid to Sub-Advisers other than Affiliated Sub-Advisers (“Aggregate Fee Disclosure”). If a Fund employs an Affiliated Sub-Adviser, the Fund will provide separate disclosure of any fees paid to the Affiliated Sub-Adviser. Applicants' Legal Analysis 1. Section 15(a) of the Act provides, in relevant part, that it is unlawful for any person to act as an investment adviser to a registered investment company except under a written contract that has been approved by the vote of a majority of the company's outstanding voting securities. Rule 18f-2 under the Act provides that each series or class of stock in a series company affected by a matter must approve such matter if the Act requires shareholder approval. 2. Form N-1A is the registration statement used by open-end investment companies. Item 14(a)(3) of Form N-1A requires disclosure of the method and amount of the investment adviser's compensation. 3. Rule 20a-1 under the Act requires proxies solicited with respect to an investment company to comply with Schedule 14A under the Securities Exchange Act of 1934 (“1934 Act”). Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, require a proxy statement for a shareholder meeting at which the advisory contract will be voted upon to include the “rate of compensation of the investment adviser,” the “aggregate amount of the investment adviser's fees,” a description of the “terms of the contract to be acted upon,” and, if a change in the advisory fee is proposed, the existing and proposed fees and the difference between the two fees. 4. Form N-SAR is the semi-annual report filed with the Commission by registered investment companies. Item 48 of Form N-SAR requires investment companies to disclose the rate schedule for fees paid to their investment advisers, including the Sub-Advisers. 5. Regulation S-X sets forth the requirements for financial statements required to be included as part of investment company registration statements and shareholder reports filed with the Commission. Sections 6-07(2)(a), (b), and
(c)of Regulation S-X require that investment companies include in their financial statements information about investment advisory fees. 6. Section 6(c) 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 provisions of the Act, or from any rule thereunder, 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. Applicants state that their requested relief meets this standard for the reasons discussed below. 7. Applicants state that the Funds' shareholders will rely on the Adviser to select the Sub-Advisers best suited to achieve a Fund's investment objectives. Applicants assert that, from the perspective of the investor, the role of the Sub-Advisers is comparable to that of individual portfolio managers employed by traditional investment advisory firms. Applicants contend that requiring shareholder approval of Sub-Advisory Agreements would impose unnecessary costs and delays on the Funds and may preclude the prompt replacement of a Sub-Adviser when considered advisable by the Board and the Adviser. Applicants note that each Advisory Agreement will remain subject to the shareholder approval requirements of section 15(a) and rule 18f-2. 8. Applicants assert that some Sub-Advisers use a “posted” fee schedule to set their fees. Applicants state that while Sub-Advisers are willing to negotiate fees that are lower than those posted on the schedule, they are reluctant to do so where the fees are disclosed to other prospective and existing customers. Applicants submit that the requested relief will better enable the Adviser to negotiate lower advisory fees with the Sub-Advisers, the benefits of which would be passed on to the shareholders of the Funds. Applicants' Conditions Applicants agree that any order granting the requested relief will be subject to the following conditions: 1. Before a Fund may rely on the order requested in the application, the operation of the Fund in the manner described in the application will be approved by a majority of the Fund's outstanding voting securities, as defined in the Act, or, in the case of a Fund whose public shareholders purchase shares on the basis of a prospectus containing the disclosure contemplated by condition 2 below, by the sole initial shareholder before offering the Fund's shares to the public. 2. The prospectus for each Fund will disclose the existence, substance and effect of any order granted pursuant to the application. In addition, each Fund will hold itself out to the public as employing the management structure described in the application. The prospectus will prominently disclose that the Adviser has ultimate responsibility (subject to oversight by the Board) to oversee Sub-Advisers and to recommend their hiring, termination and replacement. 3. At all times, at least a majority of the Board will be Independent Trustees, and the nomination of new or additional Independent Trustees will be placed at the discretion of the then-existing Independent Trustees. 4. The Adviser will not enter into a Sub-Advisory Agreement with any Affiliated Sub-Adviser without that agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Fund. 5. When a change of Sub-Adviser is proposed for a Fund with an Affiliated Sub-Adviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the Board minutes, that such change is in the best interests of the Fund and its shareholders and does not involve a conflict of interest from which the Adviser or an Affiliated Sub-Adviser derives an inappropriate advantage. 6. Within 90 days of the hiring of any new Sub-Adviser, shareholders will be furnished all information about the new Sub-Adviser that would be contained in a proxy statement, except as modified to permit Aggregate Fee Disclosure. This information will include Aggregate Fee Disclosure and any change in such disclosure caused by the addition of a new Sub-Adviser. The applicable Trust or the Adviser will meet this condition by providing shareholders, within 90 days of the hiring of a new Sub-Adviser, an information statement meeting the requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the 1934 Act, except as modified to permit Aggregate Fee Disclosure. 7. The Adviser will provide general investment advisory services to the Funds, including overall supervisory responsibility for the general management and investment of each Fund's assets, and, subject to review and approval by the Board, the Adviser will:
(i)Set the Fund's overall investment strategies;
(ii)Evaluate, select and recommend Sub-Advisers to manage all or part of each Fund's assets;
(iii)when appropriate, allocate and reallocate each applicable Fund's assets among multiple Sub-Advisers;
(iv)monitor and evaluate the investment performance of the Sub-Advisers; and
(v)ensure that the Sub-Advisers comply with each Fund's investment objectives, policies and restrictions, by among other things, implementing procedures reasonably designed to ensure compliance. 8. No trustee or officer of a Trust, or director or officer of the Adviser will own directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person) any interest in a Sub-Adviser except for:
(i)Ownership of interests in the Adviser or any entity that controls, is controlled by, or is under common control with the Adviser; or
(ii)ownership of less than 1% of the outstanding securities of any class of equity or debt of a publicly traded company that is either a Sub-Adviser or an entity that controls, is controlled by, or is under common control with a Sub-Adviser. 9. Independent legal counsel, as defined in rule 0-1(a)(6) under the Act, will be engaged to represent the Independent Trustees. The selection of such counsel will be within the discretion of the then existing Independent Trustees. 10. Each Trust will include in its registration statement the Aggregate Fee Disclosure for each Fund. 11. Whenever a Sub-Adviser is hired or terminated, the Adviser will provide the Board with information showing the expected impact on the Adviser's profitability. 12. The Adviser will provide the Board, no less frequently than quarterly, with information about the Adviser's profitability on a per-Fund basis. The information will reflect the impact on profitability of the hiring or termination of any Sub-Adviser during the applicable quarter. 13. The requested order will expire on the effective date of rule 15a-5 under the Act, if adopted. For the Commission, by the Division of Investment Management, under delegated authority. Nancy M. Morris, Secretary. [FR Doc. E6-17082 Filed 10-13-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27511; 812-12993] SSgA Funds Management, Inc., et al.; Notice of Application October 6, 2006. AGENCY: Securities and Exchange Commission. ACTION: Notice of an application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (“Act”) for an exemption from sections 12(d)(1)(A) and (B), under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 6(c) of the Act to amend a previous order. *Summary of the Application:* The order would permit certain management investment companies and unit investment trusts (“UITs”) registered under the Act to acquire shares (“Shares”) of certain open-end management investment companies and UITs registered under the Act that operate as exchange-traded funds and are outside of the same group of investment companies as the acquiring investment companies. The order also would amend a prior order (the “Prior Order”) 1 to permit:
(a)Dealers to sell Shares to purchasers in the secondary market unaccompanied by a prospectus when prospectus delivery is not required by the Securities Act of 1933 (“Securities Act”);
(b)under certain circumstances, exchange-traded funds that track certain foreign equity securities indexes to pay redemption proceeds more than seven days after the tender of Shares (in large aggregations called “Creation Units”) for redemption; and
(c)additional exchange-traded funds that track certain foreign equity securities indexes to rely on the Prior Order. Further, the order would add certain representations and terms concerning the operations of exchange-traded funds that track certain foreign equity securities indexes, replace certain conditions, and add a condition, to the Prior Order. 1 State Street Bank and Trust Company, *et al.* , Investment Company Act Release Nos. 24631 (Sept. 1, 2000) (notice) and 24666 (Sept. 25, 2000) (“Prior Order”), superseding The Select Sector SPDR Trust, *et al.* , Investment Company Act Release Nos. 23492 (Oct. 20, 1998) (notice) and 23534 (Nov. 13, 1998) (order). *Applicants:* SSgA Funds Management, Inc. (the “Adviser”), ALPS Distributors, Inc., and State Street Global Markets, LLC (each, a “Distributor” and together, the “Distributors”), The Select Sector SPDR ® Trust (“Select Sector Trust”), streetTRACKS ® Series Trust (“Series Trust”), and streetTRACKS ® Index Shares Funds (“Index Shares Funds”) (each of Select Sector Trust, Series Trust, and Index Shares Funds, a “Trust” and collectively, the “Trusts”). DATES: The application was filed on July 29, 2003 and amended on August 3, 2006. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in the 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 October 31, 2006, 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 Scott M. Zoltowski, Esq., State Street Bank and Trust Company, Two Avenue de Lafayette-6th Floor, Boston, Massachusetts 02111. FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202)551-6873, or Michael W. Mundt, Senior Special Counsel, at
(202)551-6821 (Office of Investment Company Regulation, Division of Investment Management). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Public Reference Branch, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-0102 (tel. 202-551-5850). Applicants' Representations 1. The Trusts are open-end management investment companies registered under the Act, each of which consists of separate series that seek to provide investment results that correspond generally to the price and yield performance or total return of, its specified equity securities index (an “Index”) and operate as exchange-traded funds. Index Shares Funds is the only Trust that currently offers series based on Indexes comprised of foreign equity securities (“Foreign Indexes”). 2 The Adviser is registered as an investment adviser under the Investment Advisers Act of 1940 (“Advisers Act”) and serves as investment adviser to each Trust. ALPS Distributors, Inc., a broker-dealer registered under the Securities Exchange Act of 1934 (the “Exchange Act”) serves as the principal underwriter for each series of Select Sector Trust. State Street Global Markets, LLC, a broker-dealer registered under the Exchange Act, serves as the principal underwriter for each series of Series Trust and Index Shares Funds. 2 These series, streetTRACKS ® Dow Jones STOXX 50 Fund and streetTRACKS ® Dow Jones EURO STOXX 50 Fund, currently operate in reliance on an order that is not the Prior Order. If the requested order is granted, those series will operate in reliance on the Prior Order, as amended. 2. Applicants request an exemption under section 12(d)(1)(J) of the Act to permit certain management investment companies and UITs registered under the Act to acquire Shares beyond the limitations in sections 12(d)(1)(A) and (B). Applicants request that the relief apply to
(a)each open-end management investment company or UIT registered under the Act that operates as an exchange-traded fund, is currently or subsequently part of the same “group of investment companies” as the Trusts within the meaning of section 12(d)(1)(G)(ii) of the Act, and is advised or sponsored by the Adviser or an entity controlling, controlled by or under common control with the Adviser (such registered management investment companies are referred to as “Open-End ETFs”; such registered UITs are referred to as “UIT ETFs”; Open-End ETFs and UIT ETFs are collectively referred to as “ETFs”), 3 as well as any principal underwriter of an Open-End ETF or broker or dealer registered under the Exchange Act (“Broker”) selling Shares of an ETF to an Investing Fund (as defined below); and
(b)each management investment company or UIT registered under the Act that is not part of the same “group of investment companies” as the ETFs within the meaning of section 12(d)(1)(G)(ii) of the Act and that enters into a participation agreement with an ETF (such management investment companies are referred to as “Investing Management Companies”; such UITs are referred to as “Investing Trusts,” and Investing Management Companies and Investing Trusts are collectively referred to as “Investing Funds”). 4 Each Investing Trust will have a sponsor (“Sponsor”). Each Investing Management Company will be advised by an investment adviser within the meaning of section 2(a)(20)(A) of the Act (“Investing Fund Adviser”) and may be advised by investment adviser(s) within the meaning of section 2(a)(20)(B) of the Act (“Investing Fund Subadviser”). Any investment adviser to any Investing Management Company will be registered as an investment adviser under the Advisers Act or exempt from registration. In addition, applicants request relief from sections 17(a)(1) and 17(a)(2) of the Act to permit the ETFs that are or become affiliated persons of an Investing Fund to sell Shares to, and redeem Shares from the Investing Fund. 3 Investing Funds do not include the ETFs. All existing ETFs are open-end management investment companies. 4 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. An Investing Fund may rely on the requested order only to invest in ETFs and not in any other registered investment company. 3. Applicants also request relief under section 6(c) of the Act to amend the Prior Order to:
(a)Add exemptions from sections 22(e) and 24(d) of the Act;
(b)replace certain conditions and add a new condition, to the Prior Order;
(c)add certain terms and representations concerning the creation and redemption of Creation Units of ETFs that track Foreign Indexes (“Foreign ETFs”), as described in the application;
(d)permit Foreign ETFs to invest in depositary receipts as component securities and/or alternatives to component securities of the relevant Foreign Index 5 ; and
(e)permit additional series of Index Shares Funds that would track Foreign Indexes (“New Foreign ETFs”; included in the term “Foreign ETFs”) 6 to rely on the Prior Order. Applicants assert that the New Foreign ETFs will operate in a manner substantially similar to the existing Foreign ETFs and will comply with all of the terms and conditions of the Prior Order, as amended. 5 Any depositary receipts held by a Foreign ETF will be negotiable securities that represent ownership of a non-U.S. company's publicly traded stock. Depositary receipts will typically be American depositary receipts, but may include Global depositary receipts, and Euro depositary receipts. The Adviser may include depositary receipts on the list of deposit securities of an ETF when holding the depositary receipt will improve liquidity, tradability, or settlement for a Foreign ETF and may treat the depositary receipt of a component security of the Foreign Index as a component security for purposes of applicants' representations related to the percentage of assets of a Foreign ETF that will be invested in component securities. 6 The Foreign Indexes for the New Foreign ETFs are S&P/Citigroup BMI World ex-US Index, S&P/Citigroup BMI EPAC Index, S&P/Citigroup BMI Europe Index, S&P/Citigroup BMI Asia Pacific Index, S&P/Citigroup BMI Emerging Markets Index, S&P/Citigroup BMI Latin America Index, S&P/Citigroup BMI Middle-East & Africa Index, S&P/Citigroup BMI European Emerging Index, S&P/Citigroup BMI Asia Pacific Emerging Index, S&P/Citigroup BMI China Index, S&P/Citigroup BMI World ex-US Cap Range < 2 Billion USD Index, MSCI ACWI ex-US Index, Russell/Nomura PRIME TM Index, Russell/Nomura Small Cap TM Index, Dow Jones Wilshire ex-US Real Estate Securities Index, and Macquarie Global Infrastructure 100 Index. Applicants' Legal Analysis 1. Section 6(c) of the Act provides that the Commission may exempt any person, security or transaction, or any class of persons, securities or transactions, from any provision of the Act, if and to the extent that 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. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security or transaction, or any class or classes thereof, from any of the provisions of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Section 17(b) of the Act authorizes the Commission to exempt a proposed transaction from section 17(a) if evidence establishes that the terms of the transaction, including the consideration to be paid or received, are fair and reasonable and do not involve overreaching on the part of any person concerned, and the proposed transaction is consistent with the policies of the registered investment company and the general provisions of the Act. Section 12(d)(1) of the Act 2. 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, or any broker or dealer registered under the Exchange Act, 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. Applicants seek an exemption under section 12(d)(1)(J) to permit the Investing Funds to acquire Shares in an ETF beyond the limits of section 12(d)(1)(A) and Open-end ETFs and any principal underwriter of an Open-end ETF or Broker to sell Shares of Open-end ETFs to the Investing Funds beyond the limits set forth in sections 12(d)(1)(B). 3. Applicants state that the proposed arrangement and conditions 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 the Investing Funds nor an Investing Fund Affiliate would be able to exert undue influence over the ETFs. 7 To limit the control that an Investing Fund may have over an ETF, applicants propose a condition prohibiting the Investing Fund Adviser or Sponsor, any person controlling, controlled by, or under common control with the Investing Fund Adviser or Sponsor, and any investment company or issuer that would be an investment company but for sections 3(c)(1) or 3(c)(7) of the Act that is advised or sponsored by the Investing Fund Adviser or Sponsor, or any person controlling, controlled by, or under common control with the Investing Fund Adviser or Sponsor (“Investing Fund Adviser Group”) from controlling (individually or in the aggregate) an ETF within the meaning of section 2(a)(9) of the Act. The same prohibition would apply to the Investing Fund Subadviser, any person controlling, controlled by or under common control with the Investing Fund 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 Investing Fund Subadviser or any person controlling, controlled by or under common control with the Investing Fund Subadviser (“Investing Fund Subadviser Group”). Applicants propose other conditions to limit the potential for undue influence over the ETFs, including that no Investing Fund or Investing Fund Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Open-end ETF or sponsor to a UIT ETF) will cause an ETF to purchase a security in any 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, Investing Fund Adviser, Investing Fund Subadviser, employee or Sponsor of the Investing Fund, or a person which any such officer, director, member of an advisory board, Investing Fund Adviser, Investing Fund Subadviser, employee or Sponsor is an affiliated person (except any person whose relationship to the ETF is covered by section 10(f) of the Act is not an Underwriting Affiliate). 7 An “Investing Fund Affiliate” is an Investing Fund Adviser, Investing Fund Subadviser, Sponsor, promoter, principal underwriter of an Investing Fund, and any person controlling, controlled by, or under common control with any of those entities. An “ETF Affiliate” is the investment adviser(s), promoter, sponsor, and principal underwriter of an ETF, and any person controlling, controlled by, or under common control with any of those entities. 5. Applicants do not believe 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 disinterested directors or 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, services provided under the advisory contract(s) of any Open-end ETF in which the Investing Management Company may invest. In addition, an Investing Fund Adviser or trustee (“Trustee”) or Sponsor of an Investing Trust will waive fees otherwise payable to it by the Investing Management Company or Investing Trust, as applicable, in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Open-end ETF under rule 12b-1 under the Act) received from an ETF by the Investing Fund Adviser, Trustee or Sponsor or an affiliated person of the Investing Fund Adviser, Trustee or Sponsor, other than advisory fees paid to the Adviser or its affiliated person by an ETF, in connection with the investment by the Investing Management Company or Investing Trust, as applicable, in the ETF. Applicants state that any sales charges or service fees charged with respect to shares of an Investing Fund will not exceed the limits applicable to a fund of funds set forth in Conduct Rule 2830 of the NASD. 6. Applicants submit that the proposed arrangement will not create an overly complex fund structure. Applicants note that no ETF may 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. Applicants also represent that to ensure that Investing Funds comply with the terms and conditions of the requested relief from section 12(d)(1), any Investing Fund that intends to invest in an ETF in reliance on the requested order will be required to enter into a participation agreement between the relevant Trust on behalf of the ETF(s) and the Investing Fund. The participation agreement will require the Investing Fund to adhere to the terms and conditions of the requested order. The participation agreement also will include an acknowledgement from the Investing Fund that it may rely on the order only to invest in the ETFs and not in any other investment company. The participation agreement will further require any Investing Fund that exceeds the 5% or 10% limitations in sections 12(d)(1)(A)(ii) and
(iii)to disclose in its prospectus that it may invest in ETFs, and to disclose, in “plain English,” in its prospectus the unique characteristics of the Investing Fund investing in ETFs, including but not limited to the expense structure and any additional expenses of investing in ETFs. Section 17(a) of the Act 7. 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. 8. Applicants seek relief from section 17(a) to permit an ETF that is an affiliated person of an Investing Fund because the Investing Fund holds 5% or more of the ETF's Shares to sell its Shares to and redeem its Shares from an Investing Fund (and to engage in in-kind transactions in conjunction with those sales and redemptions). 8 Applicants believe that any proposed transactions directly between ETFs and Investing Funds will be consistent with the policies of each ETF and Investing Fund. The participation agreement will require any Investing Fund that purchases Creation Units directly from an ETF to represent that the purchase of Creation Units from an ETF by an Investing Fund will be accomplished in compliance with the investment restrictions of the Investing Fund and will be consistent with the investment policies set forth in the Investing Fund's registration statement. 9 8 Applicants acknowledge that receipt of any compensation by
(a)an affiliated person of an Investing Fund, or an affiliated person of such person, for the purchase by the Investing Fund of shares of an ETF or
(b)an affiliated person of an ETF, or an affiliated person of such person, for the sale by the ETF of its shares to an Investing Fund is subject to section 17(e) of the Act. The participation agreement also will include this acknowledgment. 9 Applicants believe that an Investing Fund will purchase Shares in the secondary market and will not purchase or redeem Creation Units directly from an ETF. Nonetheless, an Investing Fund that owns 5% or more of an ETF could seek to transact in Creation Units directly with an ETF pursuant to the section 17(a) relief requested. Section 22(e) of the Act 9. Applicants seek to amend the Prior Order to add relief from section 22(e) of the Act. Section 22(e) generally prohibits a registered investment company from suspending the right of redemption or postponing the date of payment of redemption proceeds for more than seven days after the tender of a security for redemption. The principal reason for the requested exemption is that settlement of redemptions for the Foreign ETFs is contingent not only on the settlement cycle of the United States market, but also on currently practicable delivery cycles in local markets for underlying foreign securities held by the Foreign ETFs. Applicants state that local market delivery cycles for transferring certain foreign securities to investors redeeming Creation Units, together with local market holiday schedules, will under certain circumstances require a delivery process in excess of seven calendar days for the Foreign ETFs. Applicants request relief under section 6(c) from section 22(e) in such circumstances to allow the Foreign ETFs to pay redemption proceeds up to 14 calendar days after the tender of a Creation Unit for redemption. At all other times and except as disclosed in the relevant prospectus and/or statement of additional information (“SAI”), applicants expect that each Foreign ETF will be able to deliver redemption proceeds within seven days. 10 With respect to future Foreign ETFs, applicants seek the same relief from section 22(e) only to the extent that circumstances similar to those described in the application exist. 10 Rule 15c6-1 under the Exchange Act requires that most securities transactions be settled within three business days of the trade. Applicants acknowledge that no relief obtained from the requirements of section 22(e) will affect any obligations applicants may have under rule 15c6-1. 10. Applicants state that section 22(e) was designed to prevent unreasonable, undisclosed and unforeseen delays in the payment of redemption proceeds. Applicants assert that the requested relief will not lead to the problems that section 22(e) was designed to prevent. Applicants state that the SAI will disclose those local holidays (over the period of at least one year following the date of the SAI), if any, that are expected to prevent the delivery of redemption proceeds in seven calendar days, and the maximum number of days needed to deliver the proceeds for the relevant Foreign ETF. Section 24(d) of the Act 11. Applicants seek to amend the Prior Order to add relief from section 24(d) of the Act. Section 24(d) provides, in relevant part, that the prospectus delivery exemption provided to dealer transactions by section 4(3) of the Securities Act does not apply to any transaction in a redeemable security issued by an open-end investment company. Applicants request relief under section 6(c) from section 24(d) to permit dealers selling Shares to rely on the prospectus delivery exemption provided by section 4(3) of the Securities Act. 11 11 Applicants state that they are not seeking seek relief from the prospectus delivery requirement for non-secondary market transactions, such as when an investor purchases Shares from the relevant Trust or an underwriter. Applicants state that the prospectus will caution broker-dealers and others purchasing Creation Units that some activities on their part, depending on the circumstances, may result in their being deemed statutory underwriters and subject them to the prospectus delivery and liability provisions of the Securities Act. For example, a broker-dealer firm and/or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with the relevant Distributor, breaks them down into the constituent Shares and sells them directly to its customers, or if it chooses to couple the creation of new Shares with an active selling effort involving solicitation of secondary market demand for Shares. The prospectus will state that whether a person is an underwriter depends upon all the facts and circumstances pertaining to that person's activities. The prospectus also will state that dealers who are not “underwriters” but are participating in a distribution (as contrasted to ordinary secondary market trading transactions), and thus dealing with Shares that are part of an “unsold allotment” within the meaning of section 4(3)(C) of the Securities Act, would be unable to take advantage of the prospectus delivery exemption provided by section 4(3) of the Securities Act. 12. Applicants state that Shares are bought and sold in the secondary market in the same manner as closed-end fund shares. Applicants note that transactions in closed-end fund shares are not subject to section 24(d), and thus closed-end fund shares are sold in the secondary market without a prospectus. Applicants contend that Shares likewise merit a reduction in the unnecessary compliance costs and regulatory burdens resulting from the imposition of the prospectus delivery obligations in the secondary market. Because Shares will be listed on the American Stock Exchange, the New York Stock Exchange or another national securities exchange as defined in section 2(a)(26) of the Act (each, a “Stock Exchange”), prospective investors will have access to information about the product over and above what is normally available about an open-end security. Applicants state that information regarding market price and volume is available on a real time basis throughout the day on brokers' computer screens and other electronic services. The previous day's price and volume information is published daily in the financial section of newspapers. In addition, the ETFs' websites will include a downloadable form of the prospectus for each ETF and additional quantitative information that is updated on a daily basis, including daily trading volume, closing price, the net asset value (“NAV”) for each ETF and information about the premiums and discounts at which the Shares have traded. 13. Applicants will arrange for broker-dealers selling Shares in the secondary market to provide purchasers with a product description (“Product Description”) that describes, in plain English, the relevant Trust and the Shares it issues. Applicants state that a Product Description is not intended to substitute for a full prospectus. Applicants state that the Product Description will be tailored to meet the information needs of investors purchasing Shares in the secondary market. Conditions to Prior Order 14. Applicants also seek to amend the Prior Order by replacing existing conditions 2, 5, and 6 to the Prior Order and adding a new condition.. Existing condition 2 to the Prior Order currently provides that each ETF's prospectus will clearly disclose that, for purposes of the Act, shares are issued by the ETF and that the acquisition of Shares by investment companies is subject to the restrictions of section 12(d)(1) of the Act. In light of the requested order to permit Investing Funds to invest in ETFs in excess of the limits of section 12(d)(1), applicants wish to replace this condition in the Prior Order with condition 13, as stated below. 15. Existing condition 5 to the Prior Order provides that the website for each Trust, which will be publicly available at no charge, will contain the following information, on a per Share basis, for each ETF:
(a)the prior business day's NAV and the reported closing price, and a calculation of the premium or discount of such price against such NAV; and
(b)data in chart format displaying the frequency distribution of discounts and premiums of the daily closing price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. 16. Existing condition 6 to the Prior Order provides that the prospectus and annual report for each ETF will also include:
(a)The information listed in existing condition 5(b),
(i)in the case of the prospectus, for the most recently completed year (and the most recently completed quarter or quarters as applicable) and
(ii)in the case of the annual report, for the immediately preceding five years, as applicable; and
(b)the following data, calculated on a per Share basis for one, five and ten year periods (or life of the ETFs):
(i)The cumulative total return and the average annual total return based on NAV and market price, and
(ii)the cumulative total return of the relevant Index. 17. Conditions 14 and 15, as stated below, would replace conditions 5 and 6 to the Prior Order, respectively. Under the new conditions, each ETF would use the mid-point of the bid/ask spread at the time of calculation of its NAV (the “Bid/Ask Price”) instead of the Shares” closing price for certain aspects of the data presentation required by the conditions. 12 12 The Bid/Ask Price of an ETF is determined using the highest bid and the lowest offer on the Stock Exchange as of the time of the calculation of such ETF's NAV. The records relating to Bid/Ask Prices will be retained by the ETFs and their service providers. Applicants' Conditions Applicants agree that any order of the Commission granting the requested relief from sections 12(d)(1)(A) and
(B)will be subject to the following conditions: 1. The members of the Investing Fund Adviser Group will not control (individually or in the aggregate) an ETF within the meaning of section 2(a)(9) of the Act. The members of an Investing Fund Subadviser Group will not control (individually or in the aggregate) an ETF 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 ETF, the Investing Fund Adviser Group or the Investing Fund Subadviser Group, each in the aggregate, becomes a holder of more than 25 percent of the outstanding voting securities of an ETF, it will vote its shares of the ETF in the same proportion as the vote of all other holders of the ETF's shares. This condition does not apply to the Investing Fund Subadviser Group with respect to an ETF for which the Investing Fund Subadviser or a person controlling, controlled by, or under common control with the Investing Fund 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 ETF) or as the sponsor (in the case of a UIT ETF). 2. No Investing Fund or Investing Fund Affiliate will cause any existing or potential investment by the Investing Fund in an ETF to influence the terms of any services or transactions between the Investing Fund or an Investing Fund Affiliate and the ETF or an ETF Affiliate. 3. The board of directors or trustees of an Investing Management Company, including a majority of the disinterested directors or trustees, will adopt procedures reasonably designed to assure that the Investing Fund Adviser and any Investing Fund Subadviser are conducting the investment program of the Investing Management Company without taking into account any consideration received by the Investing Management Company or an Investing Fund Affiliate from an ETF or an ETF Affiliate in connection with any services or transactions. 4. Once an investment by an Investing Fund in the securities of an ETF exceeds the limits in section 12(d)(1)(A)(i) of the Act, the board of directors/trustees of an Open-end ETF, including a majority of the disinterested board members, will determine that any consideration paid by an Open-end ETF to an Investing Fund or an Investing Fund Affiliate in connection with any services or transactions:
(i)Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Open-end ETF;
(ii)is within the range of consideration that the Open-end ETF would be required to pay to another unaffiliated entity in connection with the same services or transactions; and
(iii)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 ETF and its investment adviser(s), or any person controlling, controlled by or under common control with such investment adviser(s). 5. The Investing Fund Adviser, or Trustee or Sponsor of an Investing Trust, will waive fees otherwise payable to it by the Investing Management Company or Investing Trust, as applicable, in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Open-end ETF under rule 12b-1 under the Act) received from an ETF by the Investing Fund Adviser, Trustee or Sponsor, or an affiliated person of the Investing Fund Adviser, Trustee or Sponsor, other than any advisory fees paid to the Investing Fund Adviser, Trustee or Sponsor, or its affiliated person by the ETF, in connection with the investment by the Investing Management Company or Investing Trust, as applicable, in the ETF. Any Investing Fund Subadviser will waive fees otherwise payable to the Investing Fund Subadviser, directly or indirectly, by the Investing Management Company in an amount at least equal to any compensation received from an ETF by the Investing Fund Subadviser, or an affiliated person of the Investing Fund Subadviser, other than any advisory fees paid to the Investing Fund Subadviser or its affiliated person by the ETF, in connection with any investment by the Investing Management Company in the ETF made at the direction of the Investing Fund Subadviser. In the event that the Investing Fund Subadviser waives fees, the benefit of the waiver will be passed through to the Investing Management Company. 6. No Investing Fund or Investing Fund Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Open-end ETF or sponsor to a UIT ETF) will cause an ETF to purchase a security in any Affiliated Underwriting. 7. The board of an Open-end ETF, including a majority of the disinterested board members, will adopt procedures reasonably designed to monitor any purchases of securities by the Open-end ETF in an Affiliated Underwriting, once an investment by an Investing Fund in the securities of the Open-end ETF 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 Open-end ETF will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Investing Fund in the Open-end ETF. The board of the Open-end ETF will consider, among other things:
(i)Whether the purchases were consistent with the investment objectives and policies of the Open-end ETF;
(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-ETF in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The board of the Open-end ETF 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. 8. Each Open-end ETF 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 an Investing Fund in the securities of the Open-end ETF exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were acquired, the identity of the underwriting syndicate's members, the terms of the purchase, and the information or materials upon which the determinations of the board of the Open-end ETF were made. 9. Before investing in an ETF in excess of the limit in section 12(d)(1)(A), each Investing Fund and the ETF will execute an agreement stating, without limitation, that their boards of directors or trustees and their investment adviser(s), or their sponsors or 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 a Open-end ETF in excess of the limit in section 12(d)(1)(A)(i), an Investing Fund will notify the Open-end ETF of the investment. At such time, the Investing Fund will also transmit to the Open-end ETF a list of the names of each Investing Fund Affiliate and Underwriting Affiliate. The Investing Fund will notify the Open-end ETF of any changes to the list of the names as soon as reasonably practicable after a change occurs. The ETF and the Investing Fund will maintain and preserve a copy of the order, the agreement, and, in the case of an Open-end ETF, 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. 10. 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 independent directors or 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 ETF 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. 11. Any sales charges and/or service fees charged with respect to shares of an Investing Fund will not exceed the limits applicable to a fund of funds as set forth in Conduct Rule 2830 of the NASD. 12. No ETF 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. Applicants agree that conditions 2, 5 and 6 to the Prior Order, respectively, will be replaced with the following conditions: 13. Each ETF's prospectus and Product Description will clearly disclose that, for purposes of the Act, Shares are issued by the ETF, which is a registered investment company, and the acquisition of Shares by investment companies is subject to the restrictions of section 12(d)(1) of the Act, except as permitted by an exemptive order that permits registered investment companies to invest in an ETF beyond the limits of section 12(d)(1), subject to certain terms and conditions, including that the registered investment company enter into an agreement with the ETF regarding the terms of the investment. 14. The Web site for each ETF, which is and will be publicly accessible at no charge, will contain the following information, on a per Share basis, for each ETF:
(a)The prior business day's NAV and the Bid/Ask Price, and a calculation of the premium or discount of the Bid/Ask Price against such NAV; and
(b)data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. In addition, the Product Description for each ETF will state that the Web site for the ETF has information about the premiums and discounts at which the ETF's Shares have traded. 15. The prospectus and annual report for each ETF will also include:
(a)Data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges,
(i)in the case of the prospectus, for the most recently completed year (and the most recently completed quarter or quarters, as applicable) and
(ii)in the case of the annual report, for the immediately preceding five years, as applicable; and
(b)the following data, calculated on a per Share basis for one, five and ten year periods (or life of the ETF):
(i)The cumulative total return and the average annual total return based on NAV and Bid/Ask Price, and
(ii)the cumulative total return of the relevant Index. Applicants agree to add the following condition to the Prior Order: 16. Before an ETF may rely on the order, the Commission will have approved, pursuant to rule 19b-4 under the Exchange Act, a Stock Exchange rule requiring Stock Exchange members and member organizations effecting transactions in Shares of such ETF to deliver a Product Description to purchasers of Shares. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jill M. Peterson, Assistant Secretary. [FR Doc. E6-17060 Filed 10-13-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission will hold the following meeting during the week of October 16, 2006: An Open Meeting will be held on Wednesday, October 18, 2006 at 10 a.m. in Room L-002, the Auditorium. The subject matter of the Open Meeting scheduled for Wednesday, October 18, 2006, will be: The Commission will consider whether to adopt amendments to the best-price rule for issuer and third-party tender offers under the Securities Exchange Act of 1934. The amendments would clarify that the best-price rule applies only with respect to the consideration offered and paid for securities tendered in a tender offer and should not apply to consideration offered and paid according to employment compensation, severance or other employee benefit arrangements entered into with security holders of the issuer or subject company. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at
(202)551-5400. Dated: October 11, 2006. Nancy M. Morris, Secretary. [FR Doc. 06-8718 Filed 10-12-06; 10:55 am]
Connectionstraces to 6
6 references not yet in our index
  • Pub. L. 92-463
  • 10 CFR 51
  • 10 CFR 40
  • 10 CFR 20
  • Pub. L. 107-347
  • Pub. L. 94-409
Citation graph
cites case law
Notices
Issuance of Environmental Assessment and Finding of No Significant Impact for License Amendment
U.S.C.§ 552b
C.F.R.§ 20.1402
C.F.R.§ 20.1003
U.S.C.§ 1104
U.S.C.§ 3504
U.S.C.§ 3501
Pub. L.Pub. L. 92-463
Cite10 CFR 51
Cite10 CFR 40
Cite10 CFR 20
Pub. L.Pub. L. 107-347
Cites 12 · showing 11Cited by 0 across 0 sources
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