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Federal Register / Vol. 71, No.

249 / Thursday, December 28, 2006 / Notices 78237

continues to meet the necessary ability of a Future Fund to be listed on ranges, for each of the four previous
exemptive standards. an Exchange without the need for a rule calendar quarters. In addition, the
19b–4 filing under the Exchange Act is Product Description for each Fund will
Future Relief
not necessary to meet the standards state that the Web site for the Trust or
7. Applicants also seek to amend the under sections 6(c) and 17(b) of the Act. the Corporation, as applicable, has
Prior Orders to modify the terms under information about the premiums and
which the Companies may offer Applicants’ Conditions
discounts at which that Fund’s iShares
additional series in the future based on Applicants agree that the Prior Orders have traded.
other securities indices (‘‘Future will be subject to the following 5. The Prospectus and annual report
Funds’’). The Prior Fixed Income Order conditions: for each Fund will also include: (a) The
is currently subject to a condition that 1. Each Fund’s prospectus information listed in condition 4(b), (i)
does not permit applicants to register (‘‘Prospectus’’) and product description in the case of the Prospectus, for the
any Future Fund by means of filing a (‘‘Product Description’’) will clearly most recently completed year (and the
post-effective amendment to a Fund’s disclose that, for purposes of the Act, most recently completed quarter or
registration statement or by any other the shares of each Fund (‘‘iShares’’) are quarters, as applicable) and (ii) in the
means, unless applicants have requested issued by the Fund, which is an case of the annual report, for the
and received with respect to such investment company, and that the immediately preceding five years, as
Future Fund, either exemptive relief acquisition of iShares by investment applicable; and (b) the following data,
from the Commission or a no-action companies is subject to the restrictions calculated on a per iShare basis for one,
letter from the Division of Investment of section 12(d)(1) of the Act, except as five and ten year periods (or life of the
Management of the Commission. The permitted by an exemptive order that Fund), (i) the cumulative total return
Prior Equity Orders are currently subject permits investment companies to invest and the average annual total return
to a similar condition related to future in a Fund beyond the limits in section based on NAV and Bid/Ask Price, and
relief, although the condition to the 12(d)(1), subject to certain terms and (ii) the cumulative total return of the
Prior Equity Orders permits Future conditions, including that the relevant Underlying Index.
Funds to register with the Commission investment company enter into an 6. Before a Fund may rely on the
by means of filing a post-effective agreement with the Fund regarding the Prospectus Delivery Order, the
amendment to the Trust’s or terms of the investment. Commission will have approved,
Corporation’s registration statement if 2. As long as a Fund operates in pursuant to rule 19b-4 under the
the Future Fund could be listed on a reliance on the requested order, the Exchange Act, an Exchange rule
national securities exchange iShares will be listed on an Exchange. requiring Exchange members and
(‘‘Exchange’’) without the need for a 3. Neither the Trust, the Corporation,
member organizations effecting
filing pursuant to rule 19b–4 under the nor any Fund will be advertised or
transactions in iShares of such Fund to
Exchange Act. marketed as an open-end fund or a
8. The order would amend the Prior deliver a Product Description to
mutual fund. Each Fund’s Prospectus
Orders to delete these conditions. Any purchasers of iShares.
will prominently disclose that iShares
Future Funds will (a) be advised by the are not individually redeemable shares For the Commission, by the Division of
Adviser or an entity controlled by or and will disclose that the owners of Investment Management, pursuant to
under common control with the delegated authority.
iShares may acquire those iShares from
Adviser; (b) track Underlying Indices the Fund and tender those iShares for Florence E. Harmon,
that are created, compiled, sponsored or redemption to the Fund in Creation Unit Deputy Secretary.
maintained by an entity that is not an Aggregations 5 only. Any advertising [FR Doc. E6–22262 Filed 12–27–06; 8:45 am]
affiliated person, as defined in section material that describes the purchase or BILLING CODE 8011–01–P
2(a)(3) of the Act, or an affiliated person sale of Creation Unit Aggregations or
of an affiliated person, of the Adviser, refers to redeemability will prominently
the Distributor, the Trust or any disclose that iShares are not SECURITIES AND EXCHANGE
subadviser or promoter of a Future individually redeemable and that COMMISSION
Fund, and (c) comply with the owners of iShares may acquire those [Investment Company Act Release No.
respective terms and conditions of the iShares from the Fund and tender those 27605; 812–13265]
Prior Orders, as amended by the present iShares for redemption to the Fund in
application. Creation Unit Aggregations only. Forum Funds, et al.; Notice of
9. Applicants believe that the 4. The Web site(s) for the Trust and Application
modification of the future relief the Corporation, which will be publicly
available under the Prior Orders would accessible at no charge, will contain the December 20, 2006.
be consistent with sections 6(c) and following information, on a per iShare AGENCY: Securities and Exchange
17(b) of the Act and that granting the basis, for each Fund: (a) The prior Commission (‘‘Commission’’).
requested relief will facilitate the timely business day’s net asset value (‘‘NAV’’) ACTION: Notice of an application for an
creation of Future Funds and the and the midpoint of the bid-ask spread order under section 6(c) of the
commencement of secondary market at the time of calculation of such NAV Investment Company Act of 1940
trading of such Future Funds by (‘‘Bid/Ask Price’’), and a calculation of (‘‘Act’’) for an exemption from section
removing the need to seek additional the premium or discount of such Bid/ 15(a) of the Act and rule 18f–2 under
exemptive relief. Applicants submit that Ask Price against such NAV; and (b) the Act, as well as from certain
the terms and conditions of the Prior data in chart format displaying the disclosure requirements.
Orders have been appropriate for the
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frequency distribution of discounts and

exchange-traded funds advised by the premiums of the daily Bid/Ask Price SUMMARY OF THE APPLICATION:
Adviser (‘‘Funds’’) and would remain against the NAV, within appropriate Applicants request an order that would
appropriate for Future Funds. permit them to enter into and materially
Applicants also submit that tying 5 A ‘‘Creation Unit Aggregation’’ is a group of amend subadvisory agreements without
exemptive relief under the Act to the 50,000 or more iShares. shareholder approval and would grant

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78238 Federal Register / Vol. 71, No. 249 / Thursday, December 28, 2006 / Notices

relief from certain disclosure as an investment adviser under the to Sub-Advisors other than Affiliated
requirements. Investment Advisers Act of 1940 Sub-Advisors (‘‘Aggregate Fee
Applicants: Forum Funds (‘‘Trust’’) (‘‘Advisers Act’’) and serves as Disclosure’’). For any Fund that
and Absolute Investment Advisers LLC investment adviser to the one existing employs an Affiliated Sub-Advisor, the
(‘‘Advisor’’). Fund pursuant to an investment Fund will provide separate disclosure of
Filing Dates: The application was advisory agreement (‘‘Advisory any fees paid to such Affiliated Sub-
filed on March 8, 2006, and amended on Agreement’’). The Advisory Agreement Advisor.
August 23, 2006. Applicants have has been approved by the Trust’s board
Applicants’ Legal Analysis
agreed to file an amendment during the of trustees (the ‘‘Board’’), including a
notice period, the substance of which is majority of the trustees who are not 1. Section 15(a) of the Act provides,
reflected in this notice. ‘‘interested persons,’’ as defined in in relevant part, that it is unlawful for
Hearing or Notification of Hearing: An section 2(a)(19) of the Act, of the Trust any person to act as an investment
order granting the application will be or the Advisor (‘‘Independent adviser to a registered investment
issued unless the Commission orders a Trustees’’), as well as by the company except under a written
hearing. Interested persons may request shareholders of the Fund. contract that has been approved by the
a hearing by writing to the 2. The Advisor, in its capacity as vote of a majority of the company’s
Commission’s Secretary and serving investment adviser to the Fund, outstanding voting securities. Rule 18f–
applicants with a copy of the request, oversees the portfolio management of 2 under the Act provides that each
personally or by mail. Hearing requests the Fund by its subadvisers (each, a series or class of stock in a series
should be received by the Commission ‘‘Sub-Advisor’’). The Advisor will company affected by a matter must
by 5:30 p.m. on January 16, 2007 and provide overall investment management approve such matter if the Act requires
should be accompanied by proof of services to each Fund, including Sub- shareholder approval.
advisor monitoring and evaluation and 2. Form N–1A is the registration
service on applicants, in the form of an
would be responsible for recommending statement used by open-end investment
affidavit or, for lawyers, a certificate of
the hiring, termination and replacement companies. Item 14(a)(3) of Form N–1A
service. Hearing requests should state
of Sub-Advisors to the Board. All requires disclosure of the method and
the nature of the writer’s interest, the
subadvisory agreements (‘‘Sub-Advisory amount of the investment adviser’s
reason for the request, and the issues
Agreements’’) will be approved by the compensation.
contested. Persons who wish to be 3. Rule 20a–1 under the Act requires
notified of a hearing may request Board, including a majority of the
Independent Trustees. Under each Sub- proxies solicited with respect to an
notification by writing to the investment company to comply with
Commission’s Secretary. Advisory Agreement, the Sub-Advisor
would determine which securities will Schedule 14A under the Securities
ADDRESSES: Secretary, U.S. Securities Exchange Act of 1934 (‘‘1934 Act’’).
be purchased and sold for a Fund’
and Exchange Commission, 100 F investment portfolio or for a portion of Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8)
Street, NE., Washington, DC 20549– the portfolio. Each Sub-Advisor will be and 22(c)(9) of Schedule 14A, taken
1090. Applicants: Anthony C.J. Nuland, registered under the Advisers Act and together, require a proxy statement for a
Esq., Seward & Kissel LLP, 1200 G paid by the Advisor out of the fee it shareholder meeting at which the
Street, NW., Washington, DC 20005. receives from the Fund under its advisory contract will be voted upon to
FOR FURTHER INFORMATION CONTACT: Advisory Agreement. Applicants include the ‘‘rate of compensation of the
Emerson S. Davis, Sr., Senior Counsel, request an order to permit the Advisor, investment adviser,’’ the ‘‘aggregate
at (202) 551–6868, or Nadya B. Roytblat, subject to Board approval, to enter into amount of the investment adviser’s
Assistant Director, at (202) 551–6821 and materially amend Sub-Advisory fees,’’ a description of the ‘‘terms of the
(Office of Investment Company Agreements without obtaining contract to be acted upon,’’ and, if a
Regulation, Division of Investment shareholder approval. The requested change in the advisory fee is proposed,
Management). relief will not extend to any Sub- the existing and proposed fees and the
SUPPLEMENTARY INFORMATION: The Advisor that is an affiliated person, as difference between the two fees.
following is a summary of the defined in section 2(a)(3) of the Act, of 4. Form N–SAR is the semi-annual
application. The complete application a Fund or of the Advisor, other than by report filed with the Commission by
may be obtained for a fee at the reason of serving as a Sub-Advisor to registered investment companies. Item
Commission’s Public Reference Branch, one or more of the Funds (‘‘Affiliated 48 of Form N–SAR requires investment
100 F Street, NE., Washington, DC Sub-Advisor’’). companies to disclose the rate schedule
20549–0104 (telephone (202) 551–8090). 3. Applicants also request an for fees paid to their investment
exemption from the various disclosure advisers, including the Sub-Advisers.
Applicants’ Representations provisions described below that may 5. Regulation S–X sets forth the
1. The Trust, a Delaware statutory require a Fund to disclose fees paid by requirements for financial statements
trust, is registered under the Act as an the Advisor to each Sub-Advisor. An required to be included as part of
open-end management investment exemption is requested to permit each investment company registration
company. The Trust is comprised of Fund to disclose (both as a dollar statements and shareholder reports filed
multiple series, each with separate amount and as a percentage of the with the Commission. Sections 6–
investment objective, policies, and Fund’s net assets): (a) The aggregate fees 07(2)(a), (b), and (c) of Regulation S–X
restrictions.1 The Advisor is registered paid to the Advisor and Affiliated Sub- require that investment companies
Advisors; and (b) the aggregate fees paid include in their financial statements
1 Applicants request relief with respect to existing information about investment advisory
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and future series of the Trust and any other existing the terms and conditions of the application
or future registered open-end management (‘‘Funds’’). The Trust is the only existing registered 6. Section 6(c) of the Act provides that
investment company or series thereof that: (a) is open-end management investment company that the Commission may exempt any
advised by the Advisor or an entity controlling, currently intends to rely on the requested order. If
controlled by, or under common control with the the name of any Fund contains the name of a Sub-
person, security, or transaction or any
Advisor; (b) uses the multi-manager structure, as Advisor (as defined below), the name of the Advisor class or classes of persons, securities, or
described in the application; and (c) complies with will precede the name of the Sub-Advisor. transactions from any provisions of the

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Federal Register / Vol. 71, No. 249 / Thursday, December 28, 2006 / Notices 78239

Act, or from any rule thereunder, if such the relevant Fund’s investment within the discretion of the then-
exemption is necessary or appropriate objective, policies and restrictions. existing Independent Trustees.
in the public interest and consistent 2. Before a Fund may rely on the 7. Whenever a Sub-Advisor change is
with the protection of investors and the order requested herein, the operation of
proposed for a Fund with an Affiliated
purposes fairly intended by the policy the Fund in the manner described in
this application will be approved by a Sub-Advisor, the Fund’s Board,
and provisions of the Act. Applicants
majority of the Fund’s outstanding including a majority of the Independent
state that their requested relief meets
this standard for the reasons discussed voting securities as defined in the Act, Trustees, will make a separate finding,
below. or, in the case of a Fund whose public reflected in the applicable Board
7. Applicants assert that by investing shareholders purchase shares on the minutes, that such change is in the best
in a Fund, shareholders are in effect basis of a prospectus containing the interests of the Fund and its
hiring the Advisor to manage the Fund’ disclosure contemplated by condition 3 shareholders and does not involve a
assets through monitoring and below, by the initial shareholder before conflict of interest from which the
evaluation of Sub-Advisors rather than such Fund’s shares are offered to the Advisor or the Affiliated Sub-Advisor
by hiring the Advisor’s own employees public. derives an inappropriate advantage.
to directly manage assets, and that 3. The prospectus for each Fund will 8. Each Fund in its registration
shareholders will expect that the disclose the existence, substance and
statement will disclose the Aggregate
Advisor, under the overall authority of effect of any order granted pursuant to
Fee Disclosure.
the Board, will oversee the Sub- this application. In addition, each Fund
Advisors and recommend to the Board will hold itself out to the public as 9. Independent legal counsel, as
whether to hire, terminate or replace employing the manager of managers defined in rule 0–1(a)(6) under the Act,
Sub-Advisors. Applicants believe that structure described in this application. will be engaged to represent the
permitting Sub-Advisors to be hired The prospectus will prominently Independent Trustees. The selection of
without incurring the delay and expense disclose that the Advisor has ultimate such counsel will be within the
of obtaining shareholder approval of responsibility, subject to oversight by discretion of the then-existing
each Sub-Advisory Agreement is the Board, to oversee the Sub-Advisors Independent Trustees.
appropriate in the interest of the Fund’s and recommend their hiring,
10. The Advisor will provide the
shareholders and will allow each Fund termination, and replacement.
4. Within 90 days of the hiring of any Board, no less frequently than quarterly,
to potentially operate more efficiently.
new Sub-Advisor, shareholders of the with information about the Advisor’s
Applicants note that the Advisory
Agreements will continue to be subject relevant Fund will be furnished all profitability on a per Fund basis. This
to section 15(a) of the Act and rule 18f– information about the new Sub-Advisor information will reflect the impact on
2 under the Act. that would be included in a proxy profitability of the hiring or termination
8. Applicants further assert that many statement, except as modified to permit of any Sub-Advisor during the
Sub-Advisors use a ‘‘posted’’ rate Aggregate Fee Disclosure. This applicable quarter.
schedule to set their fees. Applicants information will include Aggregate Fee 11. Whenever a Sub-Advisor is hired
state that while investment advisers are Disclosure and any change in such or terminated, the Advisor will provide
willing to negotiate fees that are lower disclosure caused by the addition of a the Board with information showing the
than those posted on the schedule, they new Sub-Advisor. To meet this expected impact on the Advisor’s
are reluctant to do so where the fees are obligation, the Advisor will provide profitability.
disclosed to other prospective and shareholders of the applicable Fund,
existing customers. Applicants submit within 90 days of the hiring of a new 12. The Advisor will not enter into a
that the requested relief will encourage Sub-Advisor, with an information Sub-Advisory Agreement with any
potential Sub-Advisors to negotiate statement meeting the requirements of Affiliated Sub-Advisor, without such
lower subadvisory fees with the Regulation 14C, Schedule 14C and Item agreement, including the compensation
Advisor, the benefits of which may be 22 of Schedule 14A under the 1934 Act, to be paid thereunder, being approved
passed on to Fund shareholders. except as modified by the order to by the shareholders of the applicable
permit Aggregate Fee Disclosure. Fund.
Applicants’ Conditions 5. No trustee/director or officer of a 13. The requested order will expire on
Applicants agree that any order Fund or director or officer of the
the effective date of rule 15a-5 under the
granting the requested relief will be Advisor will own directly or indirectly
Act, if adopted.
subject to the following conditions: (other than through a pooled investment
1. The Advisor will provide general vehicle that is not controlled by such For the Commission, by the Division of
investment management services to person) any interest in a Sub-Advisor, Investment Management, under delegated
each Fund, including overall except for: (i) Ownership of interests in authority.
supervisory responsibility for the the Advisor or any entity that controls, Nancy M. Morris,
general management and investment of is controlled by, or is under common Secretary.
the Fund’s assets and, subject to review control with the Advisor; or (ii) [FR Doc. E6–22200 Filed 12–27–06; 8:45 am]
and approval of the Board, will: (i) Set ownership of less than 1% of the
the Fund’s overall investment strategies; outstanding securities of any class of
(ii) evaluate, select and recommend equity or debt of a publicly traded
Sub-Advisors to manage all or a portion company that is either a Sub-Advisor or
of a Fund’s assets; (iii) allocate and, an entity that controls, is controlled by
when appropriate, reallocate a Fund’s or is under common control with a Sub-
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assets among multiple Sub-Advisors; Advisor.

(iv) monitor and evaluate Sub-Advisor 6. At all times, at least a majority of
performance; and (v) implement the Board will be Independent Trustees,
procedures reasonably designed to and the nomination of new or additional
ensure that Sub-Advisors comply with Independent Trustees will be placed

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